£150 million extra for construction mildly welcome – but housing crisis set to continue
The Chancellor today announced another £150 million for the Get Britain Building Fund*, which aims to get builders back on housing sites with planning permission that have been shut down because of difficulties in accessing development finance. This takes the total fund to £570 million. The UK has an entrenched housing shortage so this measure is broadly welcome as far as it goes, as is the previously announced New Buy initiative for first time buyers.
The problem is that the Government’s cuts agenda is still depressing the economy. This is generating uncertainty about employment which feeds into a reluctance to buy which is reinforced by the difficulty in obtaining affordable finance and the continued slow fall of house prices (down 1 per cent in England and Wales since last year according to the official Land Registry**) . Furthermore, recent changes to Right to Buy are likely to accelerate the decline of the social housing stock.
Home ownership in the UK started to decline slightly from 2009 onwards, whilst private sector renting has risen to meet the shortfall (Source: DCLG Housing Statistics).
Local authorities enjoyed a very modest revival in 2010/2011 – up from just a few hundred to a still-modest 3,000 starts across the whole UK. This is nowhere near what is needed. Between the private sector crisis and the long-running social housing famine, local authority waiting lists have now now stand at a record 1.8 million for England alone (DCLG).
Unfortunately, we also estimate that the Governments “reinvigorated Right To Buy” , which was re-announced in the budget, will lead to about 10,000 more social homes being sold off before the next election and only around 1,500 being replaced.
We don’t think that the claim that the receipts “will be used to ….. replace, on a one-for-one basis, the additional properties sold with new affordable homes for rent” (Budget Report, p40) is worth the paper that it is written on.
The reason is simply that the government will continue to take 75 per cent of the money from sales. This is much too high, and effectively militates against local authorities replacing homes lost through RTB sales. In addition, local authorities also have to assume an income stream from social housing sales that they have to fulfil before they can begin to think about building replacement homes. This leaves 15 per cent of recipts on average.
The Government’s own analysis suggests that sales of 8 or 12 social homes per year for each authority would lead to the provision of between zero and 3 replacements, which also points to the replacement rate being around 15 per cent.
As well as stabilising the private sector housing market and helping first time buyers, what is also urgently needed is sufficient funding from central government and more access to affordable finance so that local authorities and social landlords can build the new social homes that are required to ensure that everybody can be decently housed.
Of course, construction is also a very efficient motor of economic growth. Unfortunately, the current budget leaves the housing motor just crawling, and social housing stuck in reverse.