Radical change needed to address underlying issues on housing supply shortage
IN my discussions with those that build private housing and the housing associations that build social housing, it's clear that whilst in some ways they think differently about building new homes, they have a lot in common when they talk about the challenges they face in building the housing that we need.
We need to build more houses in Northern Ireland and we are at least 2,000 short each year of what we should be building. The last major initiative to try to address this was the Housing Supply Forum which made a number of recommendations in 2016 to improve housing supply.
The challenges the Forum identified were land availability, the slowness of the planning system, a lack of infrastructure in some places, access to finance, and the capacity of the local construction sector. The Forum made a number of recommendations, which if implemented, should help but there is growing consensus that there are more fundamental issues to be addressed.
Arguably the most critical issue is land. The planning system is meant to ensure that sufficient land is zoned for housing and that a proportion of this housing is affordable. Councils putting local development plans in place here is therefore critical and these plans must ensure that an appropriate area is zoned for affordable housing.
Better use of surplus public sector land and more support on infrastructure would also help. But these things are already in place in GB and have proved insufficient to address the housing shortage. Increasingly more radical ideas are being proposed and interestingly similar ideas about land use are coming from all areas of the political spectrum.
Land in the right place for housing is a finite resource. Its supply depends primarily on private land owners who are perversely incentivised to hold on to sites until the value has been maximised. Arguably therefore the main beneficiaries from house price growth since the 1990s have been land owners and it is the case that over that house price inflation is almost entirely caused by land price inflation, supported by easy access to credit. This not only impacts on private developers, but it has also made social housing much more expensive to develop and has therefore reduced the amount of social housing that has been built.
There is increasingly a view that what is needed is a fundamental change to how the land market operates. This is not a new issue. New towns in the 1950s were developed when local authorities had compulsory purchase powers to acquire land at its agricultural value. More recently making developers contribute a proportion of affordable homes in private housing developments has in effect been a way of the public sector capturing some the land owners' windfall. It is worth noting that unlike GB and Ireland we in Northern Ireland have never implemented a developers' contribution policy.
In Co-Ownership our role is to help more people afford home ownership. In an economist's language we stimulate demand, but if house supply remains constrained and as a result property prices rise the reality is that with a finite amount of money available we will be able to help fewer people.
Radical change is needed to address the underlying issues that constrain supply, especially the issue of land. It will be interesting to see if government here (I am ever optimistic) regards housing as a sufficient priority to consider radical proposals.
:: Mark Graham is chief executive of Co-Ownership, Northern Ireland's main provider of shared ownership and which has helped over 27,000 people on to the property ladder since 1978.