Expert asks whether housing supply is holding back Northern Powerhouse

An expert has queried whether developing a Northern Powerhouse is possible without increasing the rate of housebuilding within the region.

Damien Druce from LendInvest highlighted in a recent article that although nearly three years have passed since the creation of a Northern Powerhouse was considered, so many things have changed; one of the most significant being the issue of housing.

During the 1980’s Northern housebuilding largely outpaced that of London, at averages of 30,000 and 15,000 respective homes being built annually.

However, this trend has not continued into recent years, with the figures almost reversing. Druce mentioned that while housebuilding in Northern cities dropped by an average of 28% over the decade ending in 2016, the average in London rose by 28% compared to the 1980’s.

Questioning what has caused the change, Druce looked to the various differences between the regions and suggested factors that are likely to have contributed.

One of the key issues, he stated, was funding. Whilst the financial crisis of 2008 had a major impact on small developers in all regions, much of the development funding afterwards was focussed in Southern areas. This is largely to do with how familiar lenders are with particular areas; if they are less comfortable in a certain region, the investment will appear riskier and they’ll be less inclined to put their money behind a developer. As lenders have more expertise in the south, Druce stated that they are therefore less likely to fund developers in the north.

A related issue, he highlighted, is the planning system. In more rural areas with smaller towns, pressure groups tend to be far more successful when it comes to preventing land being built on, meaning housebuilding has been held back. People are less likely, however, to be against housing production on brownfield sites, which tend to be located on city outskirts.

Likely to positively impact the northern regions, as highlighted by Druce, was the recent introduction of the new ‘metro mayors’, aiming to devolve power and serve as an opportunity to increase housing development. Even before he was elected, Manchester’s new mayor Andy Burnham highlighted the importance of building a range of different types of home as well as improve the infrastructure links of future developments.

He also highlighted the importance of infrastructure in a different sense, namely to improve connectivity between the North and South. Although the planned development of HS2 will eventually increase mobility, it may be some time before the improved accessibility between the regions will significantly impact the housing supply.

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