By Charles Haresnape, Managing Director, Mortgages and Commercial Lending, Aldermore

Seldom does one open a newspaper or turn on the television and find the public opinion all going the same way, but if there ever was an issue that seems to have everyone onside, it is the UK’s housing supply.

Rarely will you find anyone arguing that the quantity and type of housing in the UK is satisfactory and that construction levels are on target to meet demand. But recently there have been several encouraging signs that the wheels of change are in motion.
New figures by the House Builders Federation show that planning permission for 56,647 homes was granted in England in the second quarter of this year, the highest number for over six years, maintaining a trend of steady increase in total permissions granted, and raising the annual total to 197,325 permissions in the 12 months to Q2. This marks a level not seen since 2008.

The figures, positive enough by themselves, are part of a wider set of encouraging signs resulting from the better-than-expected economic news this year. The housing and construction industries tend to be a good yardstick for the economy as a whole, as the sector tends to be one of the first ones in/last ones out of any recession.

However, while the number of plots gaining planning permission is back to 2008 levels, the number of actual sites being granted planning permission is falling behind. While 715 new sites were granted permission in Q2, this compares to over 1,000 per quarter in 2008. The reason this is occurring is because larger strategic sites are being put forward. In fact, the Home Builders Federation says it is “imperative” to have work continuing on more sites, saying this is as important as the total number of housing permissions granted.

This is particularly important for SME builders who will be putting forward smaller sites, as opposed to the larger strategic sites that the main housebuilders develop. In the 1990s, the SME and regional sectors (those building fewer than 2,000 homes per annum) built as much as 80 per cent of new homes in the UK, a figure which has has fallen to under 50 per cent over the last five years.

With steady numbers from large developers, but a huge fall in the contribution from SMEs, housing supply has not kept sufficient pace with demand in recent years. This is an issue for both policymakers and SME developers to tackle together. The government needs to streamline the planning permission process to help developers take advantage of the improving economy, providing a much-needed boost to the UK’s property supply.

It is true that steps are being taken. The Department for Communities and Local Government recently opened a consultation on a series of proposed changes to the existing system of housing standards, which seeks to reduce and simplify the rules housebuilders must comply with. New initiatives to encourage development are being explored at both the local and the national level, including the Community Right to Build scheme, which allows local communities to undertake small-scale, site-specific, community-led developments. The government have also created a £500 million Builders Finance Fund to provide loans to developers.

The UK, as the best performing European economy, is in a good position to take advantage of the positive outlook, and there are currently a number of opportunities for the construction industry. In fact, new research by Arcadis says the UK is now the tenth most attractive economy in the world for infrastructure investment. Let’s get building.