Adam Challis, Head of JLL Residential Research, comments:
I’m not really meant to get political. As a former employer once said to me “Challis; that would not be a career-enhancing move!”
Yep I get it, except that the residential market, as ever political, seems to have the spotlights, the floodlights and probably the porch light shining on it at the moment. It’s a bit hard to avoid it, frankly.
The housing market is enjoying the most supportive political environment for a generation. All roads lead to housing and as far as the Government is concerned they are dual carriageways taking the market directly to those aspirational home owners.
That narrow focus provides much clarity for housebuilders, charged with stretching obligations to shareholder return in order to chase Government housebuilding targets instead. That is helpful, but this focus also has its downsides.
The problem is that this road has no speed limit and no exits. The direction of travel for policy has pushed Help to Buy money, and soon Starter Home discounts, towards an artificially supported fringe of hopeful purchasers. As an industry, we have lapped it up and these market props have now become an embedded part of site-level profit and loss statements. At the same time, policy has no real apparent time for the rented sector, with sideswipes taken at the providers of affordable housing and the buy to let investors who hold the vast majority of private rented stock in the UK.
Aspirational homeownership is fine, even laudable to support. But where does this all end? More pressing; what about those who don’t qualify for the dwindling new supplies of (A)ffordable products, and can’t afford even these Government offers of support? Our policy-makers like to roll out the statistic that 86% of people want to own their own home; but frankly what does ‘want’ have to do with the provision of public services. The gap between want and need is simply vast – and growing.
In this context, Lord Kerlake’s stand against the Housing & Planning Bill was heroic. More than a dozen times amendments were made in the Lords, and more than a dozen times amendments were voted against in the Commons. The ‘ping pong’ – amazed that this is the technical term for it - became a spectacle in itself, but it was an important airing of the nation’s conscience. It will count as a defeat for the Lords, with the housing minister perhaps rightly arguing that Government’s election manifesto commitments deserve to be upheld, but I think an important moment to have checked the map and make sure we’re headed in the right direction. Unelected he may be, but it was a defence of principle that any elected representative should admire.
The other big political news for housing markets, at least in the South of England, is of course the election of Sadiq Khan as London’s new Mayor. Khan has inherited a market which, from a consumer perspective is in deep crisis, but from an industry perspective has enjoyed an extraordinary run of form for several years. This imbalance is unsettling and raises concerns that ‘the system is broken’. The question for many, after some bold and at times not obviously practical ideas in his manifesto, is whether Mr Khan can unlock the solution.
These two separate political events are in fact highly intertwined, and therein lies a further dimension to the housing supply challenge. A Labour Mayor, who has directly and publicly opposed elements of the Housing & Planning Act, is in a key position in effect to deliver on Conservative Party commitments. The recipe is set for an uncomfortable period of posturing that could help nobody.
I think perhaps another outcome is possible. Despite the stoic position from Government to push through the Act, the Housing Minister deserves a lot of credit for the pragmatism shown in other areas to drive forward housing supply solutions. It will be for Mr Khan to show that he can be equally pragmatic, balancing successfully the difference between his best campaign ideas and the ones that will actually count. Many of these will in fact be adopted from his predecessor, Boris Johnson.
Ultimately, to even conceive of getting close to target housing delivery levels, we will be relying on some pretty heroic acts, of sorts, from our elected representatives. Compromise, posturing and pragmatism will all have a role to play. In the end, I suspect a bit of bloody mindedness too. And in that respect Lord Kerslake has laid down the gauntlet with his impassioned stance on delivering the right housing for Britain. Where he leads, may others follow.