JRF calls on government to buy up stalled sites

Housebuilding rates could collapse unless the government intervenes to get the market moving, the Joseph Rowntree Foundation said today. 

A report from the charity said the government should keep build rates up by funding councils, housing associations and others to buy stalled sites from developers and repurpose the schemes as social housing.

The report says the purchases could be funded from expected Homes England underspend on its social housing grant programme.

The housing market faces a “worst of all worlds situation”, the report’s authors said, with rising interest rates and high inflation, and housebuilders could start mothballing sites. 

The plan to buy up homes from developers is the first of a series of measures that report authors Rose Grayston, Toby Lloyd and Neal Hudson propose that the government could introduce with the budget on 15 March [see below], alongside other structural changes. 

They point out that developers including Bellway, Barratt and Taylor Wimpey have all reported lower reservation rates for new build homes and higher cancellation rates. 

The report also calls for an “ambitious” new programme of powerful development corporations to boost housing supply and diversify the development sector. Measures used in previous housing crashes will not work now because of the economic conditions today, the authors said.  

Darren Baxter, principal policy adviser at JRF, stated: “We are facing a housing downturn that will put vulnerable families and our country’s economic prospects into serious difficulty.

“The government must confront this head on and recognise that past approaches will not work this time.” 

The short-term fall out from the housing downturn - brought on by the disastrous mini-budget in September last year - needs to be addressed as well as “the deeper problems within our housing system”, Baxter said. 

Toby Lloyd said: “House prices have been far too high for decades – pushing homeownership out of reach, distorting our economy, and making it harder to provide affordable homes to rent. As we enter another downturn, we must not waste the opportunity to lower house prices to a much more affordable level – and keep them there.” 

The report suggested that as well as building stopping, transactions could stall and cash rich investors would buy up properties and rents would spiral. 

Recent house price indices have showed the housing market is stalling. Rightmove said the average price in the UK had only gone up £14 from January to February. The surveyors body RICS recorded the ninth successive month of negative buyer demand in its January residential survey.

JRF suggested first-time buyers relying on mortgage finance could be frozen out of the market. First-time buyers will be particularly hit by the end of the mortgage equity scheme Help to Buy ending next month. Bank of England figures last month showed mortgage approvals dropped 50% year-on-year in December. 

The government must “put right the problems which are excluding younger generations from owning their own home or finding genuinely affordable homes to rent”, the JRF said.