Which key areas should the housing industry and government focus on in 2022?

The Intermediary Mortgage Lenders Association (IMLA) has released its 2022 Mortgage Market Manifesto, outlining the key areas it believes Government and the industry should focus on in order to ensure the UK’s housing market remains both buoyant and accessible.

Related topics:  Finance News,  Mortgages
Rozi Jones
17th January 2022
colour row houses doors street
"Our housing market needs a long-term vision, and one which is co-ordinated across Government and the wider industry."

The manifesto sets out a list of priorities for 2022, including addressing the imbalance of housing supply, reassessing the current affordability and stress testing criteria and incentivising the Green agenda.

The key areas IMLA is urging the market to prioritise are:

Housing supply and affordability

The imbalance between supply and demand in the UK housing market continues to keep property prices high. The British Social Attitudes Survey of 2018 reported that 87% of those surveyed would prefer to buy rather than rent – a proportion which has changed little over the previous 30 years.

The First Homes scheme was announced in May 2021 and Phase 1 of the pilot projects is about to go live. IMLA has expressed some concerns about how borrowers using the scheme to buy their first property would be able to trade up in the future, given the requirement to sell at a 30% discount.

IMLA added that the current approach to affordability means that "borrowers are often being tested at completely unrealistic rates". It has consistently argued that the combination of the FCA’s affordability rules and the Financial Policy Committee’s additional stress test of 3% above SVR has prevented numerous prospective borrowers from stepping onto or up the housing ladder. IMLA therefore welcome the news (announced on 13th December) that the Bank of England is to consult on removing the 3% stress test.

The Green agenda – improving domestic energy efficiency

IMLA says domestic property market must play its part in helping to achieve net-zero carbon emissions by 2050, but proposals for obliging property owners to carry out improvement works must be carefully thought-through and subject to strict quality controls if limited resources – both materials and cash – are not to be wasted.

The Association has warned there is a danger that "piecemeal policy will lead to confusion and a variety of unintended consequences", adding that the "task is immense" but the Government must lead in co-ordinating a strategy for planning, incentivising and funding work to improve the energy efficiency of Britain’s housing stock.

The buy-to-let market

The sector has remained vibrant despite a ‘layering’ of policy changes introduced by previous administrations, but there could be more unwelcome measures in store, such as proposals to increase Capital Gains Tax rates to mirror income tax. IMLA has consistently argued that the Government should resist making additional changes that may deter landlords from further investing in the buy-to-let market, as this could lead to significant numbers exiting the sector. This would only push rents up – making the tenure more expensive for all tenants, and leaving those who are trying to save for deposits with less disposable income and thus less able to do so.

Finding a solution to the cladding crisis

Funding cladding remediation work on buildings following the tragic Grenfell fire remains a critical issue that the Government and housing sector must find a solution to.

The costs of remediation work on existing structures are estimated to be anywhere between £15bn and £50bn. Yet, so far, the Government has promised just £5bn of funding to support the removal or replacement of dangerous cladding. Michael Gove’s announcement on 10th January of a proposal to require property developers to come up with £4bn to fund removal of cladding, and new statutory protections for leaseholders, is welcome – but may still leave leaseholders facing large bills for remediation work to address other defects. IMLA says legislation must clearly identify where responsibility lies for defective construction and create a fair and proportionate system for funding ongoing maintenance of properties so that leaseholders are better protected in future.

Kate Davies, executive director of IMLA, said: “Despite – and in some cases as a result of – the continuing Covid-19 pandemic, 2021 remained a very busy year for the housing market. Amid this ongoing demand, there are still plenty of areas we need to focus on to support the market, and ensure it is accessible to borrowers across the country from a range of backgrounds.

“Our housing market needs a long-term vision, and one which is co-ordinated across Government and the wider industry. And it is paramount that this vision is underpinned by a strategy to address the pressing issues we are facing. For example, we don’t just need more homes – we need more homes of the right design, which are energy efficient and serviced by appropriate infrastructure such as roads, schools and hospitals.

“Our latest manifesto identifies the key areas that we believe should be a focus for the mortgage market and the Government in the year ahead.”

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