Rishi Sunak’s Autumn Budget announcement of 180,000 new affordable homes is welcome news for first-time buyers. But we’re used to smoke and mirrors from politicians, so is the announcement all it seems?
Can 180,000 new homes really make much of a difference to the UK housing market? Will they reduce house prices? And what can they help first-time buyers?
What has been announced in the Autumn Budget?
Rishi Sunak used his Autumn Budget to announce that 180,000 new affordable homes will be built over the next few years. The government will spend £11.5 billion building these affordable homes. This is part of a total housing programme of £24 billion, £1.8billion of which will be spent on recommissioning 1,500 hectares of brownfield land. The plan is 20% more generous than the previous housing programme.
But this plan may not be as generous as it seems. This announcement refers to a multi-year programme, so the cash injection will be spent over several years. And it’s not nearly enough to meet the shortage of UK houses overall.
What are affordable homes?
Affordable homes are properties available for sale or rent for less than their market value, often as part of a government scheme. According to government rules, affordable housing includes rental properties with affordable rents. It also includes homes bought through rent-to-buy or shared ownership schemes.
Shared ownership housing schemes work by allowing you to buy part of the house (often between 25% and 75%) and rent the rest. This could be a good option if you can’t get a mortgage for a larger sum. Rent-to-buy schemes work by letting tenants rent a home and have the option to buy it later on.
Is it enough?
Experts estimate that the UK needs an extra 345,000 houses per year simply to keep pace with demand. During 2019-20, house-builders built 245,000 houses in the UK, an improvement on previous years but still far below the number needed to prevent housing shortages.
The government’s Autumn Budget announcement of 180,000 affordable homes will be spread over several years. It’s simply not enough to keep up with existing housing demand. UK house building has been lagging behind demand for many years, so a huge boost in house building is needed to keep up with demand.
Where will the new homes be built?
At least 160,000 of the new affordable homes announced in the Autumn Budget will be built on brownfield sites. That means sites that have been previously used for development and are often derelict and disused. Planning rules can be complicated, and it can take years to get brownfield sites ready for development.
This means that the new affordable homes may not be built in areas where there are no available brownfield sites.
Will house prices be reduced?
The shortage of housing in the UK is a big factor in house price growth. That’s because if there is more demand than supply, then house prices are pushed up.
But the UK needs at least 345,000 new houses per year to have enough houses to meet demand. This means the proposed 180,000 affordable homes over several years is a drop in the ocean and is unlikely to help lower house prices.
What does the Autumn Budget announcement mean for first-time buyers?
For most first-time buyers, today’s Autumn Budget announcement will probably not make much practical difference. If you live in an area where new affordable homes are to be built, then you may be lucky and secure one for your family.
But for most first-time buyers, there will be little impact. Even if new affordable homes are planned in your area, there is often stiff competition for the limited number available.
The house building programme isn’t ambitious enough to significantly affect house prices. And if you or your partner earns over the average wage, then you won’t be eligible to apply for an affordable home anyway.
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