The government has unveiled a new “housing bank” in its latest attempt to boost the property market, but is it tackling the real issues?
One of the Labour government’s key manifesto pledges at the general election was to build 1.5 million homes by the end of its parliamentary term in 2029.
It comes as many buyers have complained that high house prices are restricting them from getting on the property ladder, although recent data shows growth is slowing.
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There is an argument that building more homes will boost supply and bring down house prices, making property more affordable.
The government has reformed the planning system to make it easier to build and has now come up with a way to help fund development.
The Ministry of Housing, Communities and Local Government last night unveiled plans for a National Housing Bank, a subsidiary of Homes England, which it says will build 500,000 new homes.
Deputy prime minister and housing secretary Angela Rayner said: “Our foot is firmly on the accelerator when it comes to making sure a generation is no longer locked out of homeownership – or ensuring children don’t have to grow up in unsuitable temporary accommodation, and instead have the safe and secure home they deserve.”
However, there is already a lot of property on the market and many complain that it is high stamp duty costs that stop them moving, raising questions about who the National Housing Bank will actually benefit.
What is the National Housing Bank?
The National Housing Bank is a publicly owned body that has been backed with £16 billion of financial capacity, on top of £6 billion of existing finance to be allocated this parliament, with an aim to accelerate housebuilding and leverage in £53 billion of additional private investment.
It will offer a range of debt, equity and guarantee products to support small – and medium-sized enterprise (SME) housebuilders with developments.
The body will also provide the low-interest loans announced at the Spending Review to support the delivery of more social and affordable homes.
Will the National Housing Bank help the property market?
Anything that boosts supply and makes property more affordable is welcome but commentators say the key question is execution.
Rob Peters, principal at Simple Fast Mortgage, said: “The idea of a National Housing Bank is promising, especially if it genuinely unlocks funding for SME and regional housebuilders who often struggle with access to finance.
“Supporting supply at scale could gradually ease price pressures, particularly in areas that are chronically undersupplied. But as always, the key question is execution. We’ve seen many idealistic government-backed housing initiatives stall due to red tape, planning logjams and bureaucratic delivery. If this becomes another headline-grabbing scheme that doesn’t get bricks in the ground quickly, it won’t move the needle.”
It may not all be good news though.
New-build homes are often sold at a premium to second-hand stock, so this could actually push up prices.
Justin Moy, managing director of EHF Mortgages, said: “Increasing the supply of property has been a conundrum for the past 20 years or so, with no year reaching more than 250,000 since 2004, so whilst the new approach is commended, in reality is this really going to happen?
“Any increase in housing stock will help throttle prices where demand outstrips supply significantly, allowing developers to finish mothballed sites with cheap finance. The winners? Homebuilders probably, helping fuel increased profits in the same way as Help to Buy improved sales numbers over the past 15 years. But with a shortage of trained and skilled trades, much of this seems more fantasy than fantastic.”
Other critics may also point to recent reports from property websites such as Rightmove and Zoopla that actually show a glut of supply that has fallen behind demand.
Some critics say rather than supply being the issue, it is actually listing prices and purchase costs such as stamp duty that are a problem. This has been compounded by the government recently going ahead with changes to stamp duty thresholds.
Property developer Kundan Bhaduri, entrepreneur at the Kushman Group, said: “Get the government to slash stamp duty, deregulate planning to unleash SME builders not just feed the giants, and let capital flow where genuine demand is, instead of state diktats.
“Otherwise, we're just funding a more expensive version of the same supply constipation.”
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