Before the days of the financial credit crisis of 2007, prior to record low interest rates, and even six months or so before FSA mortgage regulation – the FCA’s predecessor – economist, Kate Barker’s housing report was published.
For those that can remember, it might come as a shock to hear 2024 marks twenty years since she released her landmark review of the housing market. At the time, the housing crisis we find ourselves in now was in its early days, but it was still evident something needed to be done.
In 2002, only 37% of new households in England could afford to buy a house, compared to 46% in the late 1980s. While in 2001, the UK had seen the lowest level of houses built – 175,000 – since the Second World War.
To help tackle this, in April 2003, Barker was appointed by Tony Blair’s Government to conduct an independent review of the UK’s housing supply, with her findings released in March 2004. At the time, the report was optimistically received, and there was every hope it would be a watershed moment in the Government’s bid to increase housing supply.
In some ways, there was nothing groundbreaking about her report in terms of its recommendations, yet as the then Chancellor, Gordon Brown, noted it offered, ‘the most detailed analysis of the housing market in 50 years.’
Perhaps a little less jaded by years of non-action, there was hope that it would guide planning policy and boost housing production in the years to come.
Her report set out a series of policy recommendations to address the lack of supply – many of which are still relevant today, with reform of the planning system at the heart of her recommendations.
For instance, she recommended an additional 70,000 private sector homes in England each year would need to be built in order to reduce annual house price increases to 1.8%, instead of the 2.4% they had been over the previous 30 years. This was based on 140,000 gross starts and 125,000 gross completions of private sector homes in 2002/03.
While in order to go one step further and achieve the then EU average of 1.1% annual house price increase, she recommended an additional 120,000 private sector homes per year. In both scenarios she said an additional 23,000 social homes per year would also be needed.
A missed opportunity
The Home Builders Federation – never one to hide its views and frustrations about the damage a lack of planning reform and disjointed Government thinking is doing to the housing supply –
has marked twenty years since the Barker Review with its own report – ‘Beyond Barker’ – offering its analysis of how the market would look if Barker’s recommendations had been implemented.
The report shows just 11 of Barker’s 36 recommendations are currently in place, with a further 10 having only been partially implemented and five recommendations having been implemented and then reversed. The HBF says recent changes to the planning system, announced by Michael Gove to appease NIMBY backbenchers, have on their own led to the rolling back of three measures Barker identified to improve the housing market for First-Time Buyers (FTBs).
By its estimate, the nation is two million homes short of the report’s most ambitious scenario – a shortfall equal to the entire housing stock of Ireland. It argues that Barker’s most ambitious scenario – for 297,000 homes a year to be built – has not been achieved in a single year since 2002.
In the meantime, over the past twenty years, we have seen the average age of FTBs rise from 31 to 34, with home ownership levels falling from 71% to 65%. Housing affordability has also worsened in every single local authority in England, and the ratio of median house prices to earnings has increased from 5.1 to 8.3.
Little has changed
Speaking to The Guardian newspaper to mark twenty years of the report, Barker was quoted as saying one of her biggest disappointments was the lack of social rent homes which had been built over the years.
She was also disappointed by Government Ministers’ failure to drive through changes that would allow for planning decisions to be made at the regional level, rather than by local authorities. She also criticised the trend for politicians to focus on reforms such as new mortgage initiatives which are designed to boost demand when the supply of new homes was often the key issue.
“Demand-side reforms are sort of an easy route for politicians to make it sound like they are doing something about the housing market, while actually not doing something that’s very effective,” she said.
As a General Election looms, we continue to hear promises from politicians to meet the 300,000 new homes a year target with very little in the way of new thinking to support this. Given that, who is to say we won’t be marketing 30 years of the Barker Report in 2034, in an even worse predicament than we are today?
When asked by The Guardian about her target of 297,000 new homes a year, Barker replied that the target was ‘as far off today as it was in 2004,’ and sadly, she is right. To say, whoever forms the next Government needs to grasp the nettle on this issue and quickly, would be an understatement. Let’s hope that finally we have an administration prepared to do what is necessary, and then some.
Simon Jackson is Managing Director of SDL Surveying
First Published with The Intermediary
References:
https://www.theguardian.com/society/2024/ap