House building falls again, but don’t tell me there isn’t any money

This article by Steve Hilditch was published on the Guardian Housing Network blog this morning. 

Tinkering around the edges won’t invigorate the construction industry – new housing needs political will.

Concern about house building is rising as fast as actual house building is falling. A new report from BNP Paribas Real Estate shows that English councils have reduced their housing targets to 160,000 a year – down 13% from the now defunct Regional Spatial Strategies, and a whopping 70,000 below the number of new households formed each year – a gap equivalent to a town like Bournemouth.

Real delivery is different again: only 110,000 homes were completed in England in 2011 and completions are down 18% in the first quarter of 2012. Commentators are gloomy; key indicators – from construction employment to new orders — are pointing down, and from a very low base.

Housing minister Grant Shapps will no doubt find a statistic somewhere that gives grounds for optimism, but the finger of blame for the double dip recession can be pointed firmly at the housing construction sector.

Fiddling at the edges, as Shapps has already been doing, is not enough. Targets reflect our hopes and desires, but in real markets people only build what they can sell and make a profit on.

It will take many years of economic recovery to re-establish a self- assured housebuilding sector. Even then, there is no economic reason why the output from profitable housebuilders should coincide with our national aspiration to build homes. When you look over the long term, the private sector has never built the number of homes that the nation requires.

It is not an ideological statement to observe that we have only built enough homes when there has been very active intervention by the public sector. We won the numbers game when councils were building a lot of homes and their contribution, ended by Margaret Thatcher, was never replaced by housing associations despite all the hype.

We need to think big, in billions of pounds. We need to put the public sector to work, with councils commissioning new homes for all tenures, but especially shared ownership, intermediate renting and social renting, deploying their underused capacity to borrow prudentially.

Most councils are itching to act. The private sector would do most of the work.

Borrowing and debt have become dirty words but it is the sensible way to achieve long-term investment. There is nothing wrong with borrowing if it creates real physical assets and you can pay it back. It is a lot better than borrowing to fund unemployment.

Please don’t tell me there is no money: with a wave of a hand, last week the governor of the Bank of England marginally adjusted quantitative easing, but it was enough to finance the current housing programme for a generation.

It is a question of political will to get that money working for housing rather than rebuilding bank balance sheets for no wider social purpose. An emergency public sector housebuilding programme would kick-start the economy, reinvigorate the private construction sector, and create real jobs. If you work through the multiplier effects, by reducing benefit payments and increasing the tax take, in Treasury terms it will pay for itself. What’s not to like about that?

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5 Responses to House building falls again, but don’t tell me there isn’t any money

  1. Pingback: Quantitative easing and housing investment | Red Brick

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  3. Pingback: What if the housebuilding market can never produce the homes? | Red Brick

  4. Graham Facks-Martin says:

    The biggest problem is finding the money. I agree that the private sector will only build when they think that they can sell what they build, a healthier housing finance market would help and so would more planning aprovals in areas of highest demand but the major part of the shortfall is not in the private sector. If the social housing sector both LA and HA is to come anywhere near building what is needed at genuinely affordable rents then it needs a lot more money and there is little prospect of that hapening. As the IFS have indicated in a couple of recent reports the proportion of public expenditure being taken by Health and Social Care has been increasing for a long period and despite the best endeavours of Ministers is , for a number of reasons, likely to go on increasing for the forseeable future. If an overall increase in taxation is ruled out that means that the current squeeze on all other areas of public expenditure not just housing, flood defences, police,defence and a myriad of other programmes will continue. In my opinion there is only one way out of this dilemma which is to alter the way in which both the NHS and Social Care are funded. They must be funded in the future on a means tested basis the rich must pay 100 % of the cost themselves, the not so rich a proportion and the poor nothing, this the only way that we will unlock more money for other essential areas of public expenditure like housing, you may disagree with me but I regard it as inevitable at some date in the future so we might as well start now !!
    Graham Facks-Martin

  5. Beth says:

    It’s social housing and its occupiers are more likely to vote labour than conservative. That is what’s wrong with it in a nutshell. Other than that it is a very logical and intelligent response.

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