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Will the Government address the housing crisis in the 2020 Budget?

Jamie Johnson - FJP Investment

The housing crisis is one of the most intractable problems in British society today. Past governments of all stripes have made promises to revolutionise housebuilding and provide the millions of new homes the country needs. These promises, still, have yet to be realised.

Boris Johnson’s government is no different. During the last election campaign, his party promised to deliver a million new homes by the middle of the decade.

This sounds like a huge number. However, there has been criticism that this aim is actually not ambitious enough. Research shows that the country needs as many as 300,000 new dwellings each year by the middle of this decade, which would be considerably higher than the Government’s current promise.

Nonetheless, it’s clear the Government does broadly have the right kind of aim. Where questions do arise, however, is around how it will deliver on its promise.

The National Infrastructure Strategy

Former chancellor Sajid Javid, during his election campaign, committed £100 billion to a National Infrastructure Strategy (NIS) that would aim to transform the UK’s infrastructural landscape with a slate of investment, assisting in the broader housebuilding goal.

There could be many benefits from that kind of investment, extending outside of the capital to many regional hubs. These areas have experienced positive growth over the recent years; according to data from Zoopla, house prices in the West Midlands grew by, on average, £36 each day per house in 2019. However, much more needs to be done to ensure these communities are well-connected and have the utilities needed to support their growing populations. The Infrastructure Strategy is likely to include spending to help all of this become a reality and will likely include projects like HS2 or the Northern Powerhouse Rail.

Of course, there are various weaknesses that could befall the National Infrastructure Strategy. A lack of focus is the primary concern. Tackling the housing crisis will likely require a joined-up approach of its own that goes beyond just construction. Whilst the £250 million committed for 20,000 new homes is encouraging, it will still only be delivered as one small aspect of the NIS. Further, the Government has not yet fully elucidated what the plans will look like in detail.

So, whilst this infrastructure spending will be a crucial plank in addressing the housing crisis, there is much more the Government still needs to do in the property space.

What else can the government do?

The Conservatives have previously touted policies that would act as a good starting point.

During the election campaign, for example, Boris Johnson promised to create a stamp duty surcharge for foreign buyers – which may help increase the housing stock available to UK buyers. This kind of policy gained widespread support from property investors. According to recent research conducted by FJP Investment, a huge proportion of them (70%) supported the idea.

The Government’s plan to increase community engagement with new build planning has also received similar support. This policy would allow those who live near new builds to have input on the development, massively increasing stakeholder influence. Research shows that integrating local understanding into developments makes for more appealing homes, so this could be an important starting point for creating the kind of marketable dwellings needed to tackle the housing crisis. FJP’s aforementioned research shows that 68% of UK property investors support this approach.

Whilst a lot of change rests on campaign promises, the Government has already gone some way to reassuring the sector. The passing of the EU Withdrawal Bill in early January now provides a clear passageway to an orderly Brexit. Whatever your personal views, this shall likely be a benefit to the entire economy; 2019 saw unprecedented levels of political hostility that spooked the business world and led to a dampened property sector.

The upcoming budget next week will also provide ample opportunity for Boris Johnson et al to commit to the expansive investment needed to reignite housebuilding and tackle the housing crisis. Their construction plans are encouraging — £100 billion over the course of the parliament for infrastructure will have a positive knock-on effect for the rest of the construction economy.

However, the housing crisis is its own problem with its potential solutions. Therefore, the Conservatives must also follow through on their other promises mentioned in their election campaign. Doing so will go some way to providing the kind of joined-up policy approach that is required to spark the much-needed new-build revolution.

Jamie Johnson is CEO of FJP Investment