Government needs to build 340,000 new homes annually to meet current demand as Sunak softens homebuilding commitment


The UK housing market is currently facing an overwhelming supply and demand imbalance. Figures from the National Housing Federation show that 340,000 new homes need to be built annually to meet the current demand as the past pledges of 300,000 new homes being built each year by the mid-2020s have yet to come to fruition. A further indication of the unlikelihood of supply keeping up with demand in 2023, is the Prime Minister’s softening of this commitment – introduced in 2017 by then-chancellor Phillip Hammond – from ‘mandatory’ to ‘advisory’ to build this level of new housing. Group Chairman of Cornerstone Tax, David Hannah, gives his opinion on what this will mean for the future of the UK housing market.

The lack of housing supply in the UK is the result of two decades of failed pledges from previous governments. According to the government’s Affordable Homes Programme, figures reveal that 9,000 fewer houses were built in 2016 than the government had planned. By 2021, government figures show that this has increased to 32,000 homes. As a result, nearly half of England’s local authorities have not built enough homes to keep in line with population growth since 2011. Consequently, this has pushed property prices to new heights with the average house price sitting at £281,272, according to Halifax.

Britain’s chronic lack of supply is affecting the rental market too, as the increase of mortgage rates has made being a buy-to-let landlord an increasingly less desirable investment option, coupled with lack of support from the government whilst they continue to debate the renters reform bill. The continued lack of supply of homes for Brits has now been further exacerbated by the increase in mortgage rates, leaving many unable to afford new mortgages, forcing them to rethink their living situation. This has increased pressure on the rental market during a time when stock is limited. Hannah believes that the government changing its building pledges, coupled with the increase in government red tape on rental properties, has caused a mass exodus of landlords from the rental market – a time when landlords could offer the government welcomed relief in providing homes for its citizens.

David Hannah, Group Chairman at Cornerstone Tax, discusses:

“We are currently experiencing a chronic undersupply of housing in the UK, and the government’s recentannouncement that it is softening its commitment from mandatory to advisory on building new homes suggests that the property market will become even more unaffordable, affecting those across the spectrum of the housing market. This comes amidst the fluctuation of mortgage rates, and now, first-time buyers will struggle even further to find an available property they can afford. Those renting or looking to rent will enter a highly competitive market, as many are willing to compete and outbid on rent prices.

“Despite housing market specialists calling for a total collapse of the UK market, I believe that in 2023, prices will remain at their inflated levels, and we will even see growth between 5-8%. The only way to tackle current housing market inflation is to build more homes.”