“Supply, supply, supply” – the key housing policy message from the CML annual lunch

The Council of Mortgage Lenders today welcomed 700 guests to the CML Annual Lunch in London, where the main topic of conversation was how a future government could deliver the housing of all tenures that the country needs, supported by a vibrant lending sector.

Dame Kate Barker, the author of two influential reports on housing supply and planning, and a leading authority on these issues, was the guest speaker. She told delegates that although the planning system had improved, and political parties are all vying to announce higher targets for housing supply, one crucial influence continues to depress the ability to supply new homes. This is the sheer scale of local opposition to development, despite the aspirations for higher supply at a national level:

“Despite measures such as the New Homes Bonus, the costs of new supply remain largely local and are perceived as large, whereas the benefits are small in the short term and geographically dispersed.”

As a result, a key step that would be needed to gain early traction in getting new annual housing supply up over 200,000 by 2020 would be a determined approach to bringing forward public land:

“It may depress you to hear a plea for greater reliance on the State to act – but the planning system suppresses the market mechanism so much that it is hard for it to deliver”.

To mortgage lenders, she observed that over the next five years the housing market ought to be supported by increased demand to renewed income growth, and continuation of housing undersupply relative to unconstrained household formation, but that there were additional factors at work, including potential higher Bank Rate levels of 2-3%:

“The issue will be whether the income growth prices more people back into the market than are priced out by the higher Bank Rate. If we get productivity growth back – this would be unexpected good news”.

CML chairman Moray McDonald of the Royal Bank of Scotland said that getting the supply side sorted “once and for all” needed to be the key priority of housing policy:

“Dealing with the supply side, in my view, has to be our new “North Star” which everyone aims for. To get there, we need a housing strategy that commands all-party support with a three-line whip from national government down to the parish council to ensure it’s implemented. That strategy should come from us, the industry, in partnership with government. Fix this, and the market itself will address affordability.”