What is the Council of Mortgage Lenders’ UK Housing Strategy Recommendation?

Members of the CML want to bring more people into homeownership – for the sake of working people as well as for overall economic stability.

 

It’s all about the housing supply.

 

That’s the position of the Council of Mortgage Lenders (CML), an organisation that obviously benefits when more people are able to buy more homes. And in agreement with them are housing advocates, social scientists and just about every national politician. They argue that there are multiple factors that contribute to the UK’s housing supply inadequacies. Investors, too, believe that increasing supply is important to their own returns on assets, such as when they are investing in UK land to be developed into housing.

 

It might be noted that housing inventories affect British citizens and the economy in a variety of ways. The youngest generation of working adults, those who might be forming households through marriages and children, are either slow to do that or are doing it as renters – with dim hopes for buying homes any time soon. Over time, that might mean inadequate wealth accumulation that will make that generation poorer as they age.

 

A flipside argument is sometimes made that renters are by nature more geographically flexible, enabling them to more easily move to accommodate job changes and career mobility. Indeed, with the high costs of housing in London more companies are establishing workplaces in cities far away from the capital and successfully luring valuable workers to places as disparate as Peterborough, Bristol, Allerdale, Birmingham, Leeds, Manchester and Southampton.

 

This is why UK property fund managers endeavour to identify parcels of raw land where homes can be built. The unused land can be turned into productive property and help grow local economies.

 

At the April 2015 annual lunch of the Council of Mortgage Lenders, Dame Kate Barker continued her advocacy campaign for increasing the housing supply. The renowned economist first sounded the alarm in 2004 when she issued an independent report, “Review of UK Housing Supply,” which argued that the upward trends in house prices were unsustainable and that several key measures by the central Government were needed to bring supply up to meet the demands of a growing population.

 

Barker’s report (as well as her subsequent book in 2014, “Housing: Where’s the Plan?”) was well regarded and has been effective in many ways. A key resultant initiative was the National Planning Policy Framework, which sought to decentralise planning to allow and encourage local councils to create their development plans. But as Barker told the CML gathering, there needs to be greater efforts from London to achieve national housing goals. “It may depress you to hear a plea for greater reliance on the State to act,” she said. “But the planning system suppresses the market mechanism so much that it is hard to deliver.” In other words, she strongly indicated that to achieve delivery of 200,000 homes per year by 2020, there needs to be a concerted effort to bring forward public land.

 

The CML also takes a sometimes-unpopular stand in support of buy-to-let ownership. This is not simply to generate more mortgages, as only a third of the approximately 1.3 million properties in the private rented sector (2007-2012) are financed by loans. The CML argues that this is an important source of capital that feeds into homebuilding and thus increases overall inventory.

 

CML chairman Moray McDonald (Royal Bank of Scotland) emphasized this point at the 2015 meeting. “Dealing with the supply side, in my view, has to be our new "North Star" which everyone aims for,” he said. “To get there, we need a housing strategy that commands all-party support with a three-line whip from national government down to the parish council to ensure it's implemented. That strategy should come from us, the industry, in partnership with government. Fix this, and the market itself will address affordability."

 

Whether you invest as a buy-to-let landlord, through a REIT or a land fund, speak with an independent financial advisor. Real estate is historically a sound investment but needs to be weighted against other wealth accumulation strategies.