The housing crisis is affecting the UK’s competitiveness, so urgent measures must be taken to tackle it, British business group CBI said in a report.
New research carried out by the Centre for Economic and Business Research for the CBI showed that, if housing and commuting costs were to rise only at the same rate as consumer price inflation, households would have an additional £4 billion a year in spending and saving power.
Of this, higher housing costs are responsible for £3.2 billion and higher transport costs for £770 million.
“People have to pay for our failure to build enough new homes, whether facing longer and longer commutes or struggling with rising housing costs,” Katja Hall, CBI deputy director-general, said in a statement.
“We need a stronger response from politicians who must be ready to take bold decisions from building on low-quality green belt land to overhauling Stamp Duty.”
The report said that 240,000 new homes need to be built every year to meet current demand but only 200,000 homes were delivered in four of the last 14 years.
There is an acute difference between annual demand and completions of new homes in London and the south-east of England, but the picture is bleak in many other areas.
In 2010, there were fewer houses built than in any year since the Second World War. House prices increased by 56% across the UK in the past decade and by 90% in London, the report said. This drove the average age of unassisted first-time house buyers to 33.
A separate survey released previously by the CBI with accountancy firm KPMG showed housing costs as the second biggest threat to competitiveness in London.
More than 80% of the firms surveyed said there was a lack of good quality, affordable housing in London, and only 5% said the current situation was acceptable.
Housing costs and availability were listed as having a negative impact on the recruitment of entry level staff by 61% of respondents, with half of them saying the same for middle management staff and 23% saying this was a problem when recruiting senior staff, too.
The CBI recommended measures such as the development of 10 new towns and garden cities by 2025, reforming Stamp Duty so that buyers pay the higher level only on the proportion of the price in the higher bracket, reviewing the property and land tax regime, revealing the true scale of taxpayer-owned land, giving local authorities greater incentives to build on low-quality green belt.
The CBI noted that the current government’s focus is on spending on housing through welfare payments, with £24 billion spent on housing benefits while capital investment in housing is just under £6.5 billion.
“There is plenty of private finance available for new homes but not enough is being done to attract investors,” it said. “While progress has been made on encouraging institutional investors to channel funds into build-to-rent schemes, the scale of that investment needs to be increased drastically to meet demand.”