BDO: UK failing to meet Government building targets

31 March 2015 Consultancy.uk

The UK is unsuccessful in meeting the building target set up by its Government, with nine out of ten decision makers from housing developers and housing associations feeling the target set is unrealistic, a survey by BDO shows. According to the consulting firm, the lack of houses built needs to be addressed by the Government to prevent a continued squeeze for first time buyers and to allow for a correction in the housing market.

Accountancy and consulting firm BDO recently released its ‘Homes For All 2015: Building Britain’ report, for which the firm surveyed decision makers from private residential housing developers and housing associations about the UK homes shortage. The main conclusion of the report: the UK is failing the Government’s building target.

BDO - Homes For All 2015

The report indicates that the number of households in the UK is expected to grow to 24.3 million by 2021, which is an increase of 10% over 2011. To start addressing the increased housing demand, the UK Government has set a target of 240,000 new homes per annum in the next two years. Recently released figures by the National Housing Federation show that, so far, that target has not been reached. In 2014, 118,760 new homes were built, which is a shortfall of more than 125,000. When asked about their optimism concerning the viability of the target, as much as 94% say the target is unrealistic, which 54% saying to be ‘not optimistic’ and 40% even ‘pessimistic’. One in four (26%) respondents doubt the target will ever be reached.

Optimism over number of homes built in the next two years

Excess red tape surrounding the planning process is seen as the main barrier to meeting the Government’s housing target, with 61% of respondents citing the speed of the planning process as the biggest barrier to development. The second biggest challenge is the lack of suitable/available land, followed by skills shortages and construction costs.

Key challenges facing builders

Mandatory response times for planners is cited by both house builders and housing associations as the initiative most likely to help overcome the challenges, with this delays in building being reduced. Releasing surplus land by the Government is also cited by many as a key initiative, as well as providing alternative sources for lending.

Initiatives most likely to overcome challenges

When these initiatives are implemented, the majority of house builders feel this will increase their output significantly. Almost all of the house builders (96%) believe they can increase the number of houses by more than 10%, with 32% believing to increase by more than 50% and 16% by more than 76%. This positivism is partly share by the housing associations, which believe the initiatives will most likely lead to an increase in built homes of 11%-25% (cited by 56%), 22% feels that an increase of less than 10% is foreseeable and the same percentage believes an increase of 26%-50% is possible.

More houses build annually

BDO states that the lack of new houses being built means a continued squeeze for first time buyers and little chance of a significant correction in the housing market as demand continues to outstrip supply. To address this, balancing the housing supply and demand needs to be a priority for the next Government as it will Philip Rego, National Head of Social Housing at BDO, explains: “Housing continues to be an unaffordable prospect for many. As this survey demonstrates, bringing housing supply and demand into balance has to be a priority for the next Government. More housing of all types is needed, especially affordable housing, and the social housing sector is well positioned to play its part but only in an environment where planning and the release of surplus land by government are no longer the common barriers.”

Edward Goodworth, Real Estate Partner at BDO, adds: “We know that the UK is failing to meet its building targets year after year, and we know that a lot more needs to be done to close the gap in supply and demand for housing. This report shows that there is a clear call to Government from both housing associations and private residential developers to put in place mandatory response times for planning and increase land availability, among other initiatives.”

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