Blog

UK housing sector must meet the rapidly rising demands under an economy the Chancellor predicts will get “significantly worse.”

Last month, Chancellor Rishi Sunak’s Spring Statement served as a reality check for the country, particularly for those most impacted by the cost-of-living crisis.  

The many challenges facing the Chancellor meant the Statement fell short of delivering the support many hoped for and is now expected to have a significant impact on the wider UK housing industry. This is an industry facing the challenge of navigating an uncertain economic landscape, whilst delivering both a level of housing production the country hasn’t seen since the 1970s and a costly energy-efficiency transformation of existing housing stock.  

Undoubtedly, when it comes to housing development initiatives, this Government has ambition. For the past decade, the UK’s development of new houses per year has steadily increased – in 2011/12, 117,870 houses were completed compared to the 243,775 new homes built in 2021. But how many new homes per year are needed to free the UK from what now feels to many like a perpetual housing crisis?  

According to the National Housing Federation (NHF), 340,000 new homes per year need to be delivered to address the crisis, with 145,000 ringfenced as ‘affordable housing’. The PM’s election pledge was largely in line with this goal, aiming to ramp up production to 300,000 homes each year by “the mid-2020s”, an ambition he has recently reiterated. However, as the NHF rightly identified, to solve the housing shortage in the short- to medium-term, there’s a need for a targeted increase in the supply of affordable housing specifically.  

This is a priority at the heart of VIVID and after delivering 226 social rent houses last year, we were ranked in the top 10 associations in the country for building this tenure type. Additionally, through our strategic partnership with BoKlok UK, we’ve embraced modular construction as an innovative solution for quickly increasing the supply of affordable and sustainable homes.  

Considering the extensive nature of demands for change and development facing the housing industry, it’s worth considering the challenging landscape that lies ahead.  

Firstly, the cost-of-living crisis is poised to create an even more significant strain on those seeking to purchase and rent affordable housing. The level of support offered by the Chancellor to those most severely affected by the crisis will lay a financial burden on the shoulders of those most in need of respite. Within VIVID, we’ve witnessed an increasing number of residents now battling with rising energy bills and fuel costs. For many, their allotted £20 per week budget for food and household essentials used to get them 20 items and will now only stretch to 17.  

The limited ability of the Chancellor alone to meet the economic impacts of the war in Ukraine, which has disrupted global supply chains and exasperated the soaring energy prices and record-breaking inflation rates is another challenge for the sector. Supply chain disruptions have quickly led to a shortage of materials, staff and delays in transport, all of which will significantly affect construction costs. Additionally, the squeeze on finances may lessen the broader appetite and ability to buy houses and lead to a plateau in prices. All these factors only create a greater sense of economic uncertainty that might ultimately see less development of new homes when they’re needed the most. 

Alongside the ramping up of development activity, there’s growing support for a ‘National Retrofit Strategy’ backed by government investment to transform existing housing stock into more eco-friendly, energy-efficient homes to support our net zero carbon target. No doubt more energy efficient homes will deliver significant running costs savings for residents, but this transformation is extremely costly for landlords. As an example, VIVID has set aside over £700 million to support our energy-related projects across our existing housing stock.  

While some housing associations like VIVID remain financially strong enough to navigate through uncertain periods and continue to deliver more homes at pace, I’m concerned we could see widespread development hesitancy amongst others which would prove fatal for addressing the shortage of homes.  

If the yearly housing targets are to be met and critical retrofit schemes initiated, there must be an ‘all hands on deck’ approach across the sector between the government, housing associations, and private developers. Each of these parties have a crucial role in this delicate eco-system – an eco-system that would benefit from an injection of economic confidence through continued long-term government investment and forward-looking policy initiatives.  

While some housing associations like VIVID remain financially strong enough to navigate through uncertain periods and continue to deliver more homes at pace, I’m concerned we could see widespread development hesitancy amongst others which would prove fatal for addressing the shortage of homes.

Latest Tweet

Want to know about the steps we’re taking to become a more #sustainable business? As a responsible company we recog… https://t.co/iK4c8V3Yfd

Find out more