Why it matters:
England’s obsession with house prices and growing resistance in densely populated areas to new housing developments at the expense of the youth is a hostile and persistent trend. The refusal to approve new housing projects leads to future supply squeezes, impacting affordability and access.
By the numbers:
- 2,456: Approved housing projects in England for the second quarter — the lowest since 2006, representing a 20% drop from the same period a year ago, according to the Home Builders Federation
- 54,200: Homes in England granted approval in the second quarter, marking a 13% YoY decrease.
- 265,223: Homes approved over the past four quarters, reflecting housebuilders’ caution amidst falling sales.
Driving the news:
Planning approval for housing projects in England has reached its lowest quarterly level in over 15 years. While the “not in my backyard” (NIMBY) supporters see this as a local democratic win, the bigger picture suggests horrific housing costs for everyone else.
Experts and observers are skeptical about England meeting (or even wanting to meet) its ambitious goal of constructing 300,000 new homes annually by the mid-2020s. The experts and observers are correct on both counts, given the current trends.
Between the lines:
Several factors contribute to the continued decline in housing approvals:
- Government Subsidies: The UK government’s discontinuation of the “Help to Buy” subsidy for first-time buyers plays a role.
- Lending Rates: Increased lending rates, especially after Liz Truss’s “mini-budget”, deter potential buyers and discourages homebuilders.
- Local Influence: A government proposal last year leaned towards “giving communities more say in local developments”. Though intended to empower localities, it’s faced opposition, especially from environmental groups.
- Opportunism: Sunak tried to push through a deregulation proposal which allows home builders to ignore nutrient regulations, calling it a housing bill despite it not increasing approvals or allowing more housing to be built
The big picture:
Even though the valuations of major UK housebuilders show signs of recovery after the cessation of Help to Buy’s new loan applications, they have yet to reach their peak from the mid-2010s. Investors’ main concerns now revolve around diminishing sales, hoping for a political consensus on housing solutions to replace Help to Buy.
Potentially transformative solutions include zoning/planning reform or implementing a development land tax. However, the political will for such unpopular (with existing homeowners) steps seems lacking, ensuring that a restricted housing supply remains a permeant feature of England’s political landscape.