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Wednesday, November 22, 2017

Relaxing The Green Belt Could Halt The Housing Crisis

Higher interest rates will exacerbate the housing crisis if the government fails to act

With the announcement of the first rise in interest rates in 10 years earlier this month, came speculation about how the news would affect housing markets, homeowners, housebuilders and the wider economy. Uncertainty is endemic.  Beyond this, it is predicted that interest rates will continue to rise throughout 2018, making those in the planning and property industry edgy.

Instinctively, with the rise of interest rates, we expect to see house prices fall and mortgage rates rise. This provides those who build property with an incentive to hold off on building. For a nation in the midst of an acute housing crisis, this could spell disaster.
Councils are already failing to meet social housing targets and have large waiting lists for social housing – reluctant house-builders will only promote the dithering of local councils torn between appeasing residents, developers and government policy.

In reality, the only thing we can expect with any certainty is uncertainty, particularly with the ever-present figure of Brexit looming on the horizon. Uncertainty makes buyers nervous, which in turn will make developers nervous. This will slow down the rate at which housing is being built. Regardless of interest rates, if there isn’t enough property, housing and rent prices will remain high. Those looking to become homeowners or tenants will be faced with even fewer options and this is surely the last outcome the Government wants to achieve.

What can be done?

Those in power still have the ability to prevent the rate of building slowing down. The answer isn’t more borrowing – it’s a serious investigation and emendation of current planning and housing policies. 

As it stands now, housing and planning policies benefit the asset rich and penalise the cash poor. The current restrictions allow developers and councils to avoid providing sufficient social housing. They restrict progress and growth – the repercussions will have knock-on effects for issues such as social mobility and homelessness.

The limiting nature of the policies has been noted, with housing associations imploring the Chancellor and indeed the planning minister to relax planning laws regarding the height of properties; allowing developers to build ‘up not out’. The implication is clear – developers urgently need more space. But it is not as though this space doesn’t exist in the UK; these demands beg the question: why not re-think the principles of the green-belt and at least consider the prospect of building sensibly on greenfield sites?

The rise in interest rates has the potential to bring the housing crisis to head, but the Government are yet to exhaust their options when it comes to changing planning policy – they are yet to come even close. If developers have reason to become more reluctant to build, they don’t need to be faced with policy that allows them to limit the amount of housing – particularly social housing – they need to be encouraged to build.

We are faced with uncertainty in vast quantities. The Government has actions it can take and it is time that it took them. The Government need to fully addresses the flaws in its current planning and housing policies urgently, before its starts borrowing yet more money to address the issue.

We owe it to the future generations to sort this chaotic mess out.

By Monika Juneja, Director of Fortitude Dynamics.

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