We've got a serious housing crisis in the UK at the moment and the construction industry would be one of winners if this problem was tackled heads on. The issue is we need to double the amount of houses we’re building every year.


If we are to keep up with the number of households being created every year (around 250,000), we need to increase the 100,000 new homes we’re building, otherwise we’re only going to see the prices of housing and rental costs going up further.


The price of the average house in the UK has increased by around 12% in the year to September according to the Office for National Statistics with a whopping 18% annual rise in London! You might think this would be great news for the construction industry and lead to higher margins and there is something in this, however it means the affordable houses are becoming less affordable and this has a significant knock on impact further down the chain, an impact that is likely not to be beneficial for the industry.


Currently there are around 90,000 people living in temporary accommodation because they are unable to afford private renting due to rising costs.


Peter Jefferys, senior policy officer at Shelter, said while those in temporary accommodation were ‘at the sharp end of the housing crisis’ the lack of affordable housing in the UK was ‘not a problem that just affects the most vulnerable, it is stretching across society’.


‘There are nine million private renters in the UK and they pay on average 40% of their take home pay on rent and that is hard, especially for families who may also be paying child care costs,’


‘In the UK, one in four under-35s live with their parents, we call them the ‘clipped wing generation’. We know that this is impacting on parents too through the bank of mum and dad and last year parents spent £20 billion trying to get their children on the ladder – they are taking money out of their pension savings.


‘We are not building enough homes, and that has been a problem for 30 years. Every year we fail to build enough homes, the pressure ramps up and the harder it is for families to fund a decent home of their own.’
Lack of land


Part of the problem is the lack of land of course, which seems to be ever escalating and has led to developers sitting on parcels of land to wait until they've reached a certain level and which also see developers and builders not wishing to build too many affordable houses to maximise the potential of the plots they own.


Shelter argues that as we work out how much we can sell houses for before building them, which in turn affects the amount builders are prepared to pay for land, we’re looking at an ever upward spiral that contributes not only to the value of the land but also the houses that will be built thereon.


Shelter has called for zoning to be brought in the UK. Zoning operates in a number of countries including Germany and Holland means that land within the “zone” can only be sold at market value with an additional compensation package on top paid out to the original land owner, thus keeping down the cost of the land and the houses that are built on the land.


‘It is a different way of bringing land into the system,’ said Jefferys. ‘The housing stock we build now will be the housing stock in 200 years' time and we need to build good quality homes for the future. We need to build affordable housing, people can’t afford the market as it stands.’


Stephen Teagle, managing director of affordable housing at house builder Galliford Try (GFRD +), argues that councils need to be encouraged to sell or release land which they own for house building.


‘A key aspect of affordable housing delivery is that the housing associations are passive in the land market,’ he said. ‘If you want to encourage supply we need the raw materials. We spend a lot of time sitting down with housing associations and local authorities to work out where that supply [of land] will come from.’


The construction industry is starting to get going again but we’re still not absolutely there yet, the construction industry has shrunk over the past 6 years, something that has coincided with the tightening of lending rules by the banks, all of which has resulted in a contracted industry dominated by fewer house builders. In time more players will emerge in the house building market and this competition will no doubt drive down the prices of houses, however it’s unlikely to be able to reduce it to affordable status.


Jefferys said new entrants in the house building market were needed to meet the 250,000 new homes target with house builders currently only set to build 75,000 new homes a year. He went on to back the Help to Build Scheme advocated by business and backed by the Labour party.


In addition to government and traditional private sector house builders a number of private sector finance operations have started to make steps towards financing housing projects, raising hopes there will be an increase in the number of affordable houses planned in these larger project.