Mon 04 March, 2024
Introduction
In this Parliamentary Newsletter, we update you on work to progress the many ongoing and new challenges affecting the home building industry in Wales, including an overview of HBF’s new reports and campaigns.
We hope you find the information useful but if you have any questions or would like to discuss the opportunities and challenges facing the home building sector in more detail, please contact Laurence Thompson, Policy and Campaigns Officer, at laurence.thompson@hbf.co.uk.
About HBF
The Home Builders Federation (HBF) is the representative body of the home building industry in England and Wales. Our members are responsible for providing around 80% of all new private homes built in England and Wales and the membership are mostly small or medium-sized enterprises.
Competition and Markets Authority (CMA) report finds that planning system is responsible for housing shortfall
The Competition and Markets Authority (CMA) has published the final report on the housebuilding market in Great Britain, following a 12-month market study considering the supply of new homes to consumers.
The CMA found that, alongside other issues, the complex and unpredictable planning system is responsible for the persistent under delivery of new homes in Wales.
The report outlines that:
- The number of new build homes in Wales remains well below its pre-2008 level of around 9,000, and below the level of need estimated by the Welsh Government.
- 13 out of 21 LPAs (62%) in Wales achieved housing completions equivalent to 50% or less of their local plan housing requirement over the last 5 years, whilst none achieved completions in excess of 100%.
- The planning system is constraining housebuilding due to a lack of predictability; the length, cost, and complexity of the process; and insufficient clarity, consistency and strength of LPA targets.
- Compared to the English and Scottish planning systems, lower land values and increased groundwork costs (due to a different policy approach in areas such as sustainable drainage) are a particular issue in Wales.
The CMA also outline various recommendations for the Welsh Government including common adoptable standards for public amenities and reforms to the planning system.
View the Wales summary of the CMA report and its recommendations for the Welsh Government here.
‘Housing Pipeline’ report shows planning permission approvals in Wales have fallen to a record low
HBF/Glenigan’s latest 2023 Housing Pipeline report shows that planning permission approvals declined significantly in Wales during the third quarter of 2023 to a record low, undermining the industry’s efforts to tackle the housing crisis.
The report shows that:
- The number of overall housing projects granted planning permission in Q3 2023 was the lowest quarterly figure on record, with 102 housing projects granted planning permission - a decline of 22% from a year ago and 10% down from the second quarter of 2023.
- The number of units approved in Wales during the third quarter of 2023 totalled 1,330 - a 38% decline from the same quarter in 2022, and a 30% fall from the previous quarter.
- The total number of units approved in Wales in the year to September 2023 was 29% down from the previous year, falling to 7,660 from 10,203.
Planning permission approvals are a lead indicator of future housing supply, and the figures suggest that housing supply will continue to fall short of demand in Wales in the months and years ahead.
This follows a period in which Wales has failed to deliver the quantum of housing supply that its growing population requires. Despite the ‘Future Wales: National Plan 2040’ finding that an average of 7,400 homes would be needed from 2019 to 2024 to meet housing demand, the average number of homes completed over the last five years was just 5,673.
View the latest Housing Pipeline report here.
New Welsh Government figures show the home building industry delivered 30% of all new affordable homes in 2022-23
The latest Welsh Government figures show that the home building industry delivered 30% of all new affordable homes in 2022-23, a higher proportion than in previous years.
The figures on affordable housing provision, released at the end of last year, show that:
- 1,024 additional affordable housing units were delivered by the home building industry through Section 106 Agreements in the year to March 2023.
- The proportion of affordable homes delivered by the private sector rose from 27% in 2021-22 to 30% in 2022-23.
- 3,369 additional affordable housing units were delivered in total in 2022-23.
The home building industry is determined to play its part in tackling the housing crisis by increasing the supply of affordable housing. The latest figures confirm that increasing the supply of affordable housing will require a significant uplift in the number of new homes for private market sale, as this will create more opportunities to use the Section 106 mechanism.
Latest Help to Buy Wales figures demonstrate success of the scheme for first-time buyers
Last year, the Welsh Government announced a two-year extension to the Help to Buy scheme up to March 2025.
New figures released by the Welsh Government indicate that the Help to Buy scheme in Wales has delivered across all areas. Over the course of the scheme’s operation from April 2014 to 31 December 2023:
- More than 14,000 properties were bought with an equity loan, and first-time buyers accounted for over three quarters of total purchases.
- 48% of those using the scheme had a household income of less than £50,000.
- 65% of all Help to Buy purchasers to date in Wales have purchased with a deposit of just 5%. Almost all purchasers would otherwise have been reliant on accessing high LTV mortgages.
The 13,700 homes purchased through the scheme will have supported or sustained an average of around 4,500 jobs a year and generated a total of £2.4 billion in economic activity.
HBF has welcomed the decision by the Welsh Government to extend the Help to Buy Wales scheme, which is an important part of the Welsh Government’s wider strategy to improve the Welsh housing market and promote economic growth.
However, it is worth noting that with a tightening and more uncertain mortgage market the number of homes delivered by the scheme has reduced significantly over the past year. A further increase in the price cap for properties purchased under the Help to Buy scheme could support greater availability for first-time buyers in certain areas of Wales.
SME home builders in Wales identify delays in planning as the main barrier to housing delivery
The latest SME ‘State of Play’ report, published in January, shows that the overburdened planning system continues to put SME home builders under enormous strain.
The report outlines the results of a comprehensive survey of SME home builders conducted by the Home Builders Federation (HBF), Close Brothers Property Finance and Travis Perkins.
The 2023/24 report shows:
- 100% of respondents in Wales say delays in securing planning permission or discharging conditions as a major barrier to growth.
- Nitrate and phosphate related issues, a lack of resources in LA planning departments, and fiscal challenges such as rising interest rates are also major challenges for SMEs in Wales.
- The vast majority of respondents in Wales said that the costs of obtaining an implementable planning permission had risen by 11% or more in the past 3 years, similar to survey respondents in the UK as a whole.
The survey findings suggest that SME enterprises in the home building industry continue to face a number of significant challenges, with the number of SME developers continuing to decline - continuing a 30-year trend of concentration in the industry.
Measures to remove blockages in the planning process and bring about fairer finance for SMEs would enable smaller home building companies to deliver new housing.
View HBF’s SME State of Play report here.
The UK has some of the oldest housing stock in the developed world, HBF report finds
HBF research released in October has revealed the full extent of the difficulties facing people in Britain trying to find somewhere to live that is decent and affordable - with the UK falling far behind other countries on housing affordability, condition and age.
Using data collated from the OECD, the European Union, and the UK Government, the ‘Housing Horizons’ report finds that:
- House prices in the UK have been growing faster than incomes and this disparity is greater than when compared to the EU benchmark.
- Consequently, British people spend exceptionally high proportions of their post-tax income on housing. For instance, England is home to the second-highest number of people living in households that spend more than 40% of their income on housing in Europe, at 10 million.
- The UK has some of the oldest housing stock in the developed world with only 7% of British homes built after 2001. This is far less than other countries like Spain (18.5%) and Portugal (16%).
As new build homes are built to higher standards, increasing the supply of new homes can help to alleviate issues with affordability and condition highlighted by the report.
View HBF’s ‘Housing Horizons: Examining UK Housing Stock in an International Context’ report.
HBF briefing for Members of the Senedd on housing supply
HBF sent a briefing to MSs ahead of the debate on housing supply on Wednesday 7 February, led by the Welsh Conservatives.
The briefing provides an overview of the following topics:
- Background to housing supply in Wales
- Planning permissions and future supply
- Affordable housing delivery
- Economic and social benefits of new housing in Wales
- Barriers to housing delivery
If of interest, the briefing can be viewed here. If you have any questions or would like to discuss an issue in more detail, please get in touch.