Let’s do the good stuff first. Once again there is clear recognition from the Chancellor that building new homes is a major component of any strategy designed to get the economy moving. This belief is shared by both parties in government and the official opposition. There may not be much new money but every little helps. Additional support for people trying to get their hands on cost effective mortgages is also very welcome.
Anything that can help first time buyers to buy creates activity across the market and allows the developers to feel more confident about building new homes for sale. It’s a bold step – but is it in the right direction and will it deliver the step change in building and supply we need? If it doesn’t, risks are we’ll create another housing bubble that will continue to push house prices up and out of reach of the majority.
Our housing market has long been weakened by the lack of new houses being built, which are forcing up rental and house prices – leaving millions of people struggling to get on the property ladder or pay their rent. And whilst there were welcome measures to support new supply in the Budget they were very small scale. The government should be focusing on unlocking investment to build more new homes as a way of managing down the housing benefit bill and boosting the economy.
Lest anyone should forget, the government reduced capital investment in new homes by 63% in 2010. This was far too big a reduction. It meant that new home building by housing associations almost stopped as new systems were put in place to build under the new, still misnamed, affordable rents programme. The transition from Regional Spatial Strategies to the National Planning Policy Framework meant that hundreds of thousands of new planning consents dropped out of the system. And a transfer from capital subsidy to revenue subsidy through higher rents and higher housing benefit payments has precisely the same effect as PFI. It reduces up front cost now but pushes much greater cost overall into the future, making it even more difficult to reduce overall levels of debt.
Then there’s the technical stuff. New home building takes time and requires a degree of financial certainty. We don’t have that. Government still wishes to set rents – but has failed to say what the policy will be from 31 March 2015. They have at least promised that the policy, details of which won’t be unveiled until June, will provide ten years of income certainty. That policy must protect the financial capacity of the sector and enable the building of new homes with the knock on contribution to the country’s economic growth, not just in year one, but all the way through to year 10.
The commitment to new home building may be there but the measures to ensure it are not. My office has a Crossrail tunnel being bored under it. New Street station in Birmingham is being rebuilt. A new tram line is being constructed in Manchester. And of course HS2 is out there somewhere. All of these things may take time to get started but when the decision is made, nothing gets in the way. Why is this not true for housing? As infrastructure goes, it delivers huge benefit very quickly. There’s plenty of land out there, whatever the deniers may say. Yes to Homes has thousands of people signing up and making it clear that they do indeed want to see new homes built, even in their own back yard.
The problem is a form of stasis in government. The housing part, CLG, wants to see rents rise to fund new supply. The welfare part, DWP, wants rents to fall to reduce housing benefit costs. The Treasury wants both of these mutually exclusive things simultaneously. Aesop’s donkey died because it couldn’t decide whether to head for the water or the carrots first.
There is a way out of this mess. All commentators now agree that capital investment is good for economic growth. The government could put back perhaps a third of the capital it cut so brutally in 2010. It could make it a national priority to get publicly owned land released for new homes. It could confirm there will be a programme after the drop dead date and it could finally make a decision about social rents. All of that is possible, quite straightforward (at least compared to Crossrail or HS2) and deliverable quickly. And then we really could get going, to make a profound difference to peoples’ lives and to get the economy moving.
