Covid-19 has had a knock-on on effect on housing supply

Covid-19 has had a knock-on on effect on housing supply
Chris Ratcliffe/Bloomberg

We are not building enough homes in England.

In the year to March 2020 we delivered 255,000 homes.That is more than double the housing supply we’ve had back in 2012-13 but still falls some way short of the government’s target of building 300,000 homes a year by the middle of the decade.

There were signs that a slowdown was coming even before the pandemic struck.

Completions crept up 4 per cent year on year, but the number of new homes starting construction fell by 13 per cent in the year to March 2020, according to government figures.

Slowdown during lockdown

Then, of course, everything changed. While construction was exempt from the national lockdown imposed at the end of March, many housebuilders opted to close down sites anyway to reorganise their working practices to respect social distancing.

Data from construction market analysis company Glenigan suggests as many as 42 per cent of residential construction sites had shut down by the first week of April.

Key points

  • Housebuilding was slowing before the pandemic
  • Construction has restarted, but not on new plots
  • Using Help to Buy will be the only option for those with no deposit

The focus in those early months was on completing homes in progress and those already reserved by buyers. 

Private new homes starts fell to just 5,000 across the UK according to the National House-Building Council, just 5 per cent of the number started the same time last year. And just 25 per cent of pre-Covid levels of housing delivery were completed in April. 

The recovery

New home reservations could continue virtually during lockdown, but the easing of restrictions to allow property viewings from May 13 kickstarted sales in both the new and second-hand market, giving confidence to builders.

Adapting to social distancing practices on site and being able to work extended hours also helped builders get back to delivering homes faster, albeit supply chain issues such as the shortage of plaster and plasterboard restricted the rate of recovery. 

The number of new homes completed increased significantly from April and May, reaching 79 per cent and 97 per cent of pre-Covid levels in June and July, respectively.

Net reservations for new homes improved significantly too. A net balance of 33 per cent of housebuilders reported more sales in August compared with the same time last year, up from a balance of -79 per cent in April, according to the Home Builders Federation survey.

A sustainable recovery?

The latest data suggests housebuilders and developers are prioritising existing plots on their sites, rather than committing to starting work on new sites.

This means delivery can recover quickly for now, but that recovery will only last until those sites are finished. Housebuilders started work on just 15 per cent fewer plots in July than the average for Q1, according to the NHBC, but the number of new sites started was almost 50 per cent below pre-lockdown levels, according to Glenigan.

Despite limited site starts, activity in the land market is promising for future supply.