The majority of Britons view the shortage of affordable housing to be one of the most pressing social issues in the UK, as reflected by a recent study carried out by Market Financial Solutions which found 69% of respondents view it as a priority. After all, ONS analysis indicates that England alone is currently short of 2.5 million homes.

So, it wasn’t surprising to see that one of the key policies in the Labour Party’s election-winning manifesto was to build 1.5 million homes in its first five years in office – some 300,000 properties per year.

However, while similar pledges have been made in the past, very rarely have they been met by previous governments. In 2019, for example, Boris Johnson’s manifesto laid out plans to build the same number (300,000) of properties a year by the mid-2020s, only for his successor Rishi Sunak to drop the government’s housing targets in September 2021.

As a result, both the sales and rental market are growing increasingly tight, making it difficult for renters, first-time buyers and seasoned investors alike to get onto or climb the property ladder.

So, will the new government’s pledge finally start to address the problem? Will new builds make a difference?

The fact that the government has made this pledge is an important initial step in recognising that the housing crisis must be addressed, especially given the role the property sector plays in the health of the UK economy more widely. New builds will naturally be required to help address the housing crisis, but whether they will solve it effectively is dependent on a number of factors.

Building new homes can help alleviate supply shortages in high-demand areas by increasing the availability of properties, thereby offering more opportunities for both buyers and renters. This, in turn, can stimulate activity across all segments of the housing market, benefiting a wide range of stakeholders.

However, the impact of the properties may be limited if the new supply does not reflect the demand in the market. For example, if luxury buildings are constructed in an area that requires higher levels of affordable housing, little impact will be made on the broader affordability issues that many prospective buyers are grappling with.

To be effective, therefore, new developments must accomplish two things.

They must be the types of homes that meet the demand in that area; in many areas of the UK, this means focusing on affordable homes that cater to first-time buyers and those with lower incomes.

But they must also be built in locations where people actually want to live. It is not enough to build a large volume of houses if they are located in places that people don’t want to, as it will compound the problems that many places – particularly in desirable areas – are facing. As such, building more homes could in fact exacerbate the affordability crisis, making homes in areas grappling with high demand even more expensive.

Another issue to consider is timing. Delivering major housing projects – and particularly those that are of good quality – takes a long time. From bureaucratic delays to local opposition (NIMBYism) and a dated planning system, successfully building 300,000 homes a year will be extremely difficult. What’s more, the time it takes to construct and complete developments means that it’s unlikely that the market would experience a significant difference in supply in the next 5 years.

The policy will also require a major overhaul of the planning system. Some plans have been laid out to achieve this, but there are concerns within the industry that they will have a limited impact.

Therefore, it would be foolish to rely on the government’s proposed housebuilding regime to address the crisis on its own. The private sector can and must look for ways to make the market more equitable, and fortunately there are a vast number of other ways to boost supply.

For example, government statistics show that there were more than 260,000 long-term empty properties in England alone in November 2023, up 12,556 homes compared to 2022. What’s more its estimated that there are 165,000 commercial and business properties currently sitting empty. With this in mind, converting or returning these properties to the market could contribute to boosting the supply homes in the UK, and could boost supply at a much higher speed than brand new developments.

In addition, in 2022, it was found that terraced (41%) and semi-detached (40%) of homes were the most in demand among buyers. While that data may be a couple of years old, it reflects the fact that Britons typically want larger homes. Therefore, a push to refurbish or extend existing properties to increase square footage could help to ease the demand for larger homes without needing to build them outright.

From new builds to homes, the push to rebalance the UK property market will require a significant amount of capital. As such, the specialist finance industry has an important role to play.

For developers, for example, a major issue they face is running out of money mid-build. Therefore, it’s important that lenders prioritise their development exit finance offerings in the years ahead, helping projects get over the line and onto the market.

Elsewhere, for landlords looking to refurbish their properties, ‘flip’ a derelict home, or convert a commercial unit into residential one, refurbishment or conversion bridging loans can provide the capital that many landlords will need. What’s more, bridging loans can be used to complete auction purchases, which are often where many empty homes are sold.

To briefly conclude, the government’s focus on housebuilding is encouraging, and – if successful – will contribute to a much more equitable market in the long-term future. However, we are already amid a crisis, and alternative ways of easing demand must be prioritised as well. This will require a collaboration between the public and private sectors, and the work must start now.

Paresh Raja is CEO of Market Financial Solutions