UK has shortfall of 4.3 million homes, UK Finance says #UKFinance

UK Finance published a report, Homes We Needin which it said the “long-term failure” to meet housebuilding targets of 300,000 homes every year in England was a “key policy issue”.

It acknowledged that Labour pledged to build one-and-a-half million homes over five years, but said previous governments had “found tackling housing issues difficult”.

The report added: “The housing sector consists of multiple inter‑connected sub‑markets, each of which is complex. We believe that well‑considered policies, backed by evidence whilst acting on lessons learned from the past, could address the challenges the housing sector faces.”

UK Finance said the number of homes in the UK had been steadily rising by around 0.8% each year since the early 1990s, and by 2023, there were around 30.4 million homes in the country.

It added: “However, this growth rate is slower than in the 1950s and 1960s, when the stock expanded by close to 17% a decade, or 1.6% per year.

“At that time, local authorities played a significant role in building new homes, which partly reflected a strong political will to replace housing destroyed in the Second World War.”

UK Finance said the number of homes in the UK was below the averages in the European Union (EU) by around four million, and the quality of housing “also fares badly by international standards in an assessment of housing quality, particularly in relation to energy efficiency”.

It also said the country had a relatively high level of under-occupied homes compared to countries in the EU.

Its report stated a complete overhaul of the planning system “could worsen market outcomes”, but suggested there needed to be shorter development timescales, certainty for developers and consistency in planning.

Removing barriers to housing affordability

The report found that property prices had risen faster than wages in 19 of the last 25 years, which made it harder for people – particularly first-time buyers – to afford a home.

It recommended the government introduce policy to explore ways to mitigate low affordability and lower the deposit barrier for first-time buyers. UK Finance also advocated for widening the availability of shared ownership, noting that the scheme represented just 1% of the UK’s housing stock.

It said the consumer experience of shared ownership should also be reviewed and suggested more housing associations sign up to the Shared Ownership Council’s Consumer Code to ensure consistency.

The current nil-rate stamp duty bands should be maintained, UK Finance said, instead of reverting to £125,000 for all transactions and £300,000 for first-time buyers in 2025 as planned.

UK Finance also called for more support for last-time buyers, to address barriers to downsizing by building suitable homes and reducing upfront moving costs.

Support for the rental market

UK Finance said landlords had dealt with “increasing marginal costs over the last few years”, as well as administrative burdens.

It said this caused some landlords to exit the market and urged the government to act “quickly to set out and implement the reforms in the forthcoming Renters’ Rights Bill to avoid uncertainty for both landlords and tenants”.

UK Finance said the government needed to clarify the role of the private rental market, as well as consolidate regulatory and administrative tasks.

It called for more support for social and affordable renting, suggesting a review of the Local Housing Allowance to keep pace with rents.

Charles Roe, director of mortgages at UK Finance, said: “Everyone needs a safe, secure, and affordable home, so we welcome the government moving quickly to reduce the UK’s housing shortfall and get more people onto the housing ladder.

“However, the size of the challenge means we need strong action, from both the public and private sectors, right across the UK’s housing market.”

Roe added: “Our new report sets out a range of recommendations to complement the government’s plans. These include making the planning process simpler, removing some of the barriers first-time buyers face and ensuring we’re meeting the housing needs of our ageing population. Improving standards in the private rental sector and supporting the social and affordable rental sectors will also be key.”