What role can PropTech play in solving the UK’s housing crisis?


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The UK is in the middle of a housing crisis. Everyone agrees on this. Yet, when it comes to working out why, as well as how the problem can best be addressed, there are conflicting viewpoints. Ahead of our roundtable discussion on this very topic on 4th September, we wanted to start exploring the ways in which PropTech could help solve this seemingly endless crisis. Will Darbyshire from The Digital Marketing Bureau, an agency that has its routes deep in PropTech, has taken a look at the current situation.

What’s the problem?

This crisis has been brewing for decades, and even though the government has long been making pledges to address the problem, plans rarely seem to come to fruition. There are numerous conflicting theories as to why.

Some say that the severity of the problem has gone unrecognised and therefore been ignored for too long. Any problem or infection left unattended for too long will, inevitably, spread and intensify.

The UK also has an exponentially growing population and a current societal trend for smaller households, falling from an average of 4 people per home at the beginning of the 20th Century to just over 2 people at the start of the 21st.

The Financial Times has reported that these two factors combined mean that the UK housing market needs to increase its supply by 1% each year. With roughly 28 million houses and flats in the UK, 1% equates to 280,000 new homes every year, save for the small exception of existing properties which can be renovated and made fit for purpose.

There is also the issue of high house prices to consider, meaning that those most in need of quality, affordable housing cannot gain access to them. Increased demand and stagnant supply means that price inevitably goes up. According to figures published by Shelter, house prices are now, on average, almost seven times our annual income.

The same is even true for the rental industry. Generation Rent means that more and more people are renting for longer and rent values, as a result, are rising. This has resulted in many people being people priced out of renting, let alone buying, a quality home. 

 

What’s the government solution?

The housing crisis is firmly rooted in the UK consciousness; it’s politics, it’s economics, it’s social consciousness. It is an albatross around the nation’s neck. For decades now, ruling parties have come, pledged an earnest solution to a burguerning problem, and then lost power before delivering on their promise. The pattern repeats.

Partially responsible is, according to many, government flapping; a continued failure to act with purpose. However, given that the Conservatives see themselves as the party of the homeowner, it’s hard to believe that they would not prioritise this issue. If they find themselves at another general election having failed to meet pledged targets, it will actively work against their wider manifesto. We can assume that the housing crisis is very high on their list of priorities, and yet the problem persists.

A more likely catalyst is the apparent disagreement on how to best attack the crisis. The go-to answer, or at least certainly the one which is presented to the general public with most gusto, is to build more houses.

London Mayor, Sadiq Khan certainly believes that more new builds is the answer, pledging as recently as May 2018 to build 10,000 new council homes by 2022, securing £1.67bn from the government to do so.

Secretary of State for Housing, James Brokenshire, agrees with the Labour Mayor’s tactic, saying that “the challenge is how to get things built and how to build the affordable homes that the country desperately needs… I have to continue to listen to new ideas.”

However, there are others who say that building more homes will do little to help. Their theory, instead, places blame on the high price of existing homes. According to Ann Pettifor, writing in the Guardian:

“It’s speculation in the property market that is fuelling stratospheric house price rises, not shortage of supply. When the “fuel” of private capital, mortgage credit and cash from the bank of mum and dad is supplemented by government subsidies and tax breaks, house prices rise. Moreover, wealthy global and non-resident buyers have funnelled more than £100bn into London property over recent years, making the problem even worse.”

Pettifor goes on to say that “house prices won’t fall until the tide of cash flowing into the market abates, for example by tightening mortgage credit, or shrinking the pool of buy-to-let investors”.

With no agreed solution, government attempts to address the housing crisis have either fallen short or been met with severe public backlash. In 2013, for example, David Cameron introduced the Help To Buy scheme, but according to the housing charity Shelter, “Help to Buy has “barely helped the first-time buyers it is targeted at“, and that since its launch, just “9.6% of first-time buyers used a Help to Buy equity loan”.

Another tactic put into action by the government is based entirely on relocation: Identify those who are most in need of a safe and secure place to live, often those with young families, and find them an appropriate property elsewhere in the country where houses are either more readily available or affordable.

In practice, this has seen families told that if they want a home, they must relocate from, for example,  London to Birmingham. This has been met with anger from the public. Forcing people to move away from their hometowns also forces them to move away from their friends, families, support units and, vitally, jobs.

The most recent government plan, one yet to be put into full motion, is to start assigning house-building money to individual local authorities and empowering them to spend it as they see best. However, councils have warned that the proposed £2bn funding pot made available to them will not be enough to deliver the new generation of council homes promised by Theresa May.

It is clear that the government is struggling to solve the housing crisis. It is increasingly seen as an impossible task, one which can be addressed, but never solved. So, if the government can’t do it, could the solution be found in technology? Can the PropTech industry do what all the King’s horses and all the King’s men cannot?

What could PropTech’s role be?

This is exactly what the roundtable on 4th September will be about, so I will avoid going into too much detail because I’m looking forward to writing more after the event when I’ve had the benefit of listening to a lot of clever people talk about it. This is just a brief top-line of how PropTech might contribute to solving the housing crisis.

 

 

Modular Homes

For this one, let’s pretend we all agree that the best solution is to build more homes. Can PropTech  help facilitate that process?

The main obstacles to building more homes are cost, space, and time. If PropTech can help, it’s going to be by creating a way to eliminate one or more of those obstacles.

Modular homes is one innovation which is often cited as a potential saviour. The speed and affordability of building structures off-site before transporting them in flat-pack style has real promise.  Even as far back as 2016, which is a long time ago in PropTech-years, modular builds were being hyped as a key part of the government’s hope to build one million new homes by 2020. They even went so far as to release a white paper in the following months in which they raised hopes that big banks might increase their lending to off-site home builders (I am unable to find a good link to said white paper. As soon as I do, I will add it in).

But then, come summer 2018, in an all too familiar government flip-flop, a group of MPs called for government backing of modular homes to halt because they are “not resilient to heatwaves. Inevitably, a series of architects then tore that argument to shreds, making said MPs look about as clued-up as Larry, the Downing Street cat.

 

 

Credit

With so many people renting for so long, and with rents taking, on average, 49% of our salaries, any hopes of saving for a deposit are, increasingly, pipe dreams.

What’s more, over the course of all of those years renting, people are finding it almost impossible to build up a healthy credit score. Therefore, if they do manage to claw together a deposit, they’re still going to get royally whipped by totally unrealistic mortgage repayments.

PropTech offers a solution, a solution which has garnered recent attention from the government. RentalStep, CreditLadder, and Bud have each won a share of a £2 million prize fund, as part of the government’s Rent Recognition Challenge, a bid to create “a simple way for renters to record and share their rent payment data, to help them improve their credit score”.

If the housing crisis is down to homes being unattainable for so many, perhaps this simple process of making ourselves look better to mortgage providers can promote a step in the right direction.

 

Site Sourcing

Aside from time and cost restraints, both of which we know PropTech can help with, there is also the problem of space. There isn’t enough, especially in popular urban areas.

In truth, however, the development opportunities are there, they’re just so entangled in idiosyncratic nets of law and regulation that sourcing land and then completing all of the requisite processes is incredibly difficult.

PropTech is offering a solution. LandTech, for example, have built brilliant success in recent years by empowering developers. By using data they have allowed developers to source sites, understand their true value and achieve planning.
LandInsight, one of LandTech’s solutions, save developers valuable time during the site sourcing phase. Using its powerful search functionality they can identify sites that fulfil their unique requirements. Developers simply input the site specifics they are looking for such as, location, planning status, site size and use class, and LandInsight feeds them the result in seconds.
Once a developer has identified the right site, LandEnhance, LandTech’s latest solution, helps them get planning on that site. Using Machine Learning, LandEnhance enable deep searching of Planning Applications and Policy Documents, providing developers with the tools to make stronger planning justifications.
These tools allow developers to source sites and realise their true potential in ways previously impossible.

 

And much more…

I’m running over my word count here, so I’m just going to throw a few more PropTech ideas down for further discussion moving forward:

Micro-living – people living in tiny but perfectly efficient homes helps tackle the issue of space. Shared-living and Build to Rent hold similar potential. If we can move away from having so few people in each property, maybe we can get more people into the homes they badly need.

Shared-living, too, is a promising concept, with Lyvly recently pocketing $4.6 million from VC firm, Mosaic Ventures to continue growing their property management platform for shared accomodation.

What about short-term living? Companies such as Lavanda are providing Airbnb-inspired homes with short-term, flexible contracts. Might this be able to help provide shelter for those who are most desperately in need? Even if it’s just a month-or-so, it could help buy some time before a more permanent home is provided?

It’s even worth discussing Virtual and Augmented Realities. If architects and engineers are able to build 3D renderings of proposed developments, which they can then walk around and examine in VR or AR, they are able to to make corrections, tweaks, and general observations which, if discovered too late, could end up being incredibly costly and time-consuming.  

The UKPA Roundtable – 4th September, 2018

Even just scraping the surface, it’s clear that PropTech has great potential to help solve the UK’s housing crisis. So much potential, in fact, that I’m tempted to say we have somewhat of an obligation to get together and discuss what can be done to make life better for everyone. Luckily, that’s exactly what the UKPA is doing with the roundtable discussion on the 4th September. I look forward to seeing some of you there.

If you would like to know more about UKPA and how you can get involved in events like this, please contact UKPA’s Managing Director Sammy Pahal at sammy@ukproptech.com.

 

Special thanks to LandInsight for their contribution to this article.

 


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