il can function as a dummy pronoun, with impersonal verbs such as falloir (elsewhere translated as to be necessary), pleuvoir and other verbs related to the weather, sembler, etc. In other words, il is used to provide the clause with a subject but does not provide it with any additional meaning. (There are dissenting interpretations of dummy pronouns, but they are irrelevant here.) You can see a parallel to the use of the English it:

• It was necessary that he die.
• It seemed that she could not improve.
• It rained yesterday and will snow today.

If a construction that did not use impersonal verbs and dummy pronouns were desired, a phrase such as avoir besoin de (to need) could be used.

falloir can sometimes take an object pronoun, to, as you might imagine, indicate that something is necessary for the antecedent of the pronoun. Further discussion of that specific aspect is in the link provided in the comments.

"Il [me/te/lui/nous/vous/leur] faut" is a group of 6 idiomatic locutions that you choose according to the person and number of the complement. Here it means "must have" or "to need". "Il" is called a "pronom impersonnel", which means that it stands for nobody and Nothing at all; the turns in which "il" is used that way are idiomatic French, however, in English you find something similar in "It is raining." ("it" is nothing in particular and specially not the rain; this is impersonal "it".). Afew basic notions are found here.

In English, what is the complement in French (me/te/lui/…) becomes the subject (I/you/he…).

• First singular :     me (I must (have)

• Second:               te (You must have)

• third singular:      lui (He/she/itImust have)

• First plural:          nous (We must have)

• Second plural:    vous (You must have)

• Third plural:        leur (They must have)

   

• Il me faut une nouvelle maison. (I must have a new house.)

• Il te faut une nouvelle maison. (You must have a new house.)

• Il lui faut une nouvelle maison. (He/she must have a new house.)

• etc.

Impersonal "il" is found in quite a few constructions.

• Il faut que …
• Il y a …
• Il pleut, Il neige, Il bruine, …
• Il fait du vent, Il fait froid, …