Think of a number. Announce it on a TV programme with a fanfare. Realise it is a hostage to fortune. Then hope that in a few years’ time no-one will remember that it was ever said. So it seems with Housing Minister Brandon Lewis’s newly-announced success measure for housebuilding – One million homes by the end of this Parliament (in England).
Whatever happens, Lewis has made a rod for his own back. One million new homes by 2020 is unachievable from where we are now. He told BBC’s Inside Out: “By the end of this parliament, success I think would mean that we have seen a build in total of something like a million homes.” He may think he has ambiguity on his side, but his use of words implies that the homes will be built, that is, completed and ready for occupation by 2020. Lewis knows the confusion that can be achieved by switching between ‘starts’ and ‘completions’. If he means completions, and the context suggest he does, then the homes have to be started much earlier as it take anything between one and 3 years, and sometimes more, to get a house ‘built’ from start to completion.
To put his statement in context, Labour, with the detailed work of the Lyons Commission behind them, only committed at the general election to reach 200,000 a year by 2020, not in every year up to then.
Lewis’s pursuit of one million homes hasn’t got off to a good start, as the Government’s own quarterly housing statistics show. Very broadly speaking, up until the global financial crisis, housing starts and completions hovered between the 160,000 and 200,000 a year marks. The credit crisis and the recession led to a collapse, from which the recovery has been very slow, with some doubting that it would ever get back to the historic trend figure.
In the latest quarter, (June, July, August), housing starts were estimated at 33,280, 14% down on the previous quarter and 6% down on the same quarter in the previous year. By sector, starts by private sector companies declined 12% from the previous quarter and housing associations by 23%. In a single quarter, Lewis fell 17,000 homes behind his success measure.
The best broad conclusion that can be made is that the figure is stuck somewhere around 140,000 a year, with considerable variation between quarters. Unless there is a dramatic change, output is therefore nowhere near sufficient to reach 1,000,000 by 2020. And it must be mentioned that even 200,000 a year is nowhere near enough – 240,000 a year is the most commonly-quoted estimate of the minimum that is needed. So, the target is nowhere near high enough and performance is nowhere near the target. And after 5 years out of Government, Labour can no longer be blamed.
The Government has already tried many things to up the number, including changing the planning system and bringing in huge demand subsidies. But the fundamentals have not changed. The output of the private sector has been remarkable consistent over many decades. Their aim is to maximise profits not to meet social goals by building as many homes as possible. Housing associations, despite the hype, have also been fairly consistent in output, with ‘affordable rent’ (ie high rent) replacing social rent as grant has been removed. Councils continue to produce new homes at tiny levels.
Lewis has to come up with some dramatic new ideas if he is to get anywhere near his figure. Long term policies like New Towns will have little impact before 2020. It may be that private sector output can be edged up by policy, but nowhere near enough. His only hope is to turn away from the ideology that homes have to be built for private ownership (to rent or to buy).
The public sector and the quasi-public sector could lead the charge. Councils have land and many have the willingness to build – an early decision to offer grant for new homes could produce a few thousand more homes a year. Similarly, housing associations could produce significantly more, especially where they work in real partnership with local councils. Lewis and his boss, David Cameron, would seem to prefer to lecture housing associations about their performance rather than to help them produce more homes: recent policies, notably the reduction in rental income, have threatened housing association programmes and made them more wary about committing to new schemes.
Building homes necessitates borrowing. Housing associations are able to borrow and councils could be enabled to borrow more. But the viability of new schemes depends either on high rents, which push up the requirement for housing benefit, or an element of subsidy in the form of grant. The Tories cut grant by 60% in their first year of Government. In my view the only serious hope of achieving a step change in housebuilding would be to reverse this decision.
If Lewis is avoid looking like a complete fool, he will have to secure a relaxation of borrowing and an increase in grant from the imminent spending review. Neither is likely, and so my money is going on Lewis looking the fool.
*Bob Dylan lyric, track ‘God Knows’, album ‘Under the Blue Sky’ 1990.
God knows it’s terrifying
God sees it all unfold
There’s a million reasons for you to be crying
You been so bold and so cold