As is traditional, a new Prime Minister brings a new cabinet and (yet another) new Housing Minister (or, more accurately, Secretary of State for Housing, Communities and Local Government) in the form of the Rt Hon Robert Jenrick MP.
It also brings a new strategy for addressing the UK’s housing issues.
Prioritising young people
In a recent interview, Boris Johnson commented that he felt young people needed the prospect of homeownership, which he referred to as a “stake in society”.
While it is, of course, very early days in Johnson’s premiership and it is always important to be cautious before reading too much into remarks politicians make in interviews, it would arguably make a lot of sense (both practical and political) for Johnson to focus on young people.
Not only are these the people most likely to be renters or (potential) first-time buyers, but enabling young adults to fly the nest is a prerequisite for allowing their parents to downsize and thus free up accommodation for adults who wish to start a family.
Brownfield sites and shared ownership may be Johnson’s way forward
There is absolutely nothing new about the idea of repurposing old properties and developed land which is currently unused (or underused).
What can, however, be new, is how, exactly, this is done.
In basic terms, construction tends to proceed on a combination of what is technically possible at the time (which is always changing, even if these changes go unnoticed by people outside the industry), what construction companies perceive to be market demand (which they tend to be in a very good position to notice) and what politicians perceive to be public demand.
In blunt terms, the difference between market demand and public demand is that market demand reflects the availability of private financing, whereas public demand may only be satisfied if government funds are used.
At this point in time, there is clearly very strong demand for homes for younger people; the issue is one of affordability and, in particular, of saving for a deposit while paying rent.
Astutely-managed shared-ownership schemes could help to square this circle by making it possible for younger people to buy property at market rates, but pay for it in stages, hence eliminating the need to save for massive deposits.
If there is to be a significant push towards making shared ownership work on a large scale, then there will probably need to be a strong degree of partnership between the government and the private sector.
Developing the concept of shared ownership
At this point in time, shared ownership is still a fairly niche area of the UK property investment market and it’s understandable why. Home builders build homes; they do not necessarily want to manage them afterwards.
Property-rental companies rent homes, they want to maximise the income they can achieve from their properties, not sell on assets which are performing well.
The concept of shared ownership, therefore, falls in between two common (and well-understood) property sectors.
In the short term, therefore, the government may need to work closely with the industry to develop a business model which works for everyone and which could then be carried on by the private sector essentially on its own, albeit with government oversight.
For more information on buy-to-let property investments or the UK property market, please contact Hopwood House.