Is Social Housing the answer to the ‘Housing Crisis’ in Derby?

The Chartered Institute of Housing has recently carried out a survey on the state of housing in Britain.

Here are some of the headline findings:

Almost 75% of people across Britain think there is a housing crisis.

Over 50% think politicians are not doing enough about it, and most people believe that more social housing would be an important part of the solution as more than 75% believe social housing is important because it helps people on lower incomes.

57% believe that the rising cost of housing will impact them personally – and significantly – over the next five years.

Overall, 52% support new homes being built locally, up from 40% five years ago and suggesting that ‘Nimbyism’ (Not In My Back Yard) is not quite the factor it was.

The survey also found that 45% of private renters are worried about their ability to pay their rent, while 38% of tenants think they might have to leave the area where they are living because of the cost.

Terrie Alafat, chief executive of  the Chartered Institute of Housing  said: “These results send a very clear message to the new government. The housing crisis is real, and we are simply not doing enough. It’s clear that the British public supports more social housing.”

This prompted me to delve a little bit deeper into the issue of new homes being built in Derby…

You can see from the graph below the long-term trend of new homes building in Derby (the yellow dotted line) has been going in a downward direction. Although, the 2018 new homes build stats for Derby are 15.5% above the post Millennium average.

According to the Office of National Statistics, in 2018, 787 new dwellings were created in the Derby Council area and of those 787; interestingly 80 were Council and Housing Association homes.

The Council CAN afford to build more…

So, if our local authority had a more ambitious annual target of say an additional 500 homes on top of those figures, where could they be built and how would they be paid for? Of course, there are the normal apprehensions about infrastructure issues such as roads, schools, hospital capacity and doctors’ surgeries but our local authority has a Local Plan and that has the locations of where they envisage the new housing will be built and the infrastructure that goes with it.

The Tories lifted the cap on what local authorities could borrow to build Council houses in late 2018 meaning Councils could borrow more money to build more Council houses.

Let’s say we built those 500 homes a year for the next 5 years in Derby… that would cost the local authority an estimated £375 million to build, which would produce, in total, approximately £17.4 million in rent. At current interest rates, the interest would be £9.5m per year leaving a surplus of £7.9m for property maintenance and management – meaning the Council houses pay for themselves!

What does all this mean for homeowners and landlords in Derby?

Well, the chances of our local authority getting the full funding for an extra 500 homes a year is slim as there is only so much money to borrow. If every UK local authority got funding for 500 additional homes a year for the next 5 years, an impressive 867,500 homes would be built in those 5 years but that would require the councils to borrow £130.1bn – and Central Government doesn’t have that kind of money for Councils to borrow.. it’s more like £10bn to £15bn.

It is estimated, by the Chartered Institute of Housing, that the current national backlog of new homes required is in the order of 4.7 million. This long term housing shortage means house prices will remain strong in the long term, despite Brexit!

Demand for private rental properties will continue to grow and this can only be good news for Derby landlords.

This attention on the housing crisis by the Government is good news for all Derby homeowners and Derby buy-to-let landlords, as it will encourage more fluidity in the market in the longer term, sharing the wealth and benefits of homeownership for all. However, in the short term, demand still outstrips supply for homes and that will mean continued upward pressures on rents for tenants and stability on house prices.