Targets are worthless unless the target-setter has the means to meet them. In setting that million homes by 2020 target the then Housing Minister Brandon Lewis was recognising the pressing need to address the housing shortage and clearly thought that the Government’s initiatives to stimulate private sector housebuilding were going to do the job.
So far, the most effective Government stimuli have all focused on private ownership. Help To Buy Mortgage Guarantees and the younger siblings Help to Buy Equity Loans and ISAs certainly gave the housebuilding sector a much-needed boost. The volume housebuilders rose to the challenge: housebuilding numbers jumped in 2013 and have been rising steadily since that time.
But the natural consequence of making money – loaned money, that is – available in a market where supply is short is a steep price rise: and commercial organisations can have no interest in increasing supply to the point where prices fall.
Not surprisingly, therefore, housebuilding numbers are up significantly but are still nowhere near the levels needed to meet demand. And when the cost of buying a new house goes up so, inevitably, does the cost of renting, increasing the pressure on wage inflation and exacerbating a shortage of essential keyworkers in city centres.
Boosting supply through a single delivery mechanism – private sector housebuilders – seems a risky proposition.
We can already see inflation starting to creep back into the economy. At some point the Bank of England is going to react and interest rates will have to rise. Just see how quickly building sites close down if those new house buyers can’t afford higher interest rates on their staggeringly large mortgages.
What we need is a genuine commitment to a varied housing supply so that buying a home, while it will probably always be an objective, is not a necessity.
It would be a significant change of direction for this Conservative Government to announce a radical programme of public sector housebuilding but we live in curious times. Keen to encourage what is largely a self-contained domestic market as well as to address the economic and social consequences of ever-increasing housing costs, my bet is that the Government, in its much-promised Housing White Paper, will start a move in that direction.
And it could do so much to change the picture of housebuilding: it owns 40% of the land, it is the only organisation that can ease planning constraints and, most significantly, development funded by public sector money can be relied upon. You don’t see those sites shutting down when the first phase isn’t completely sold and you don’t see housing associations constraining supply to maintain a high price.
We need a readjustment in the housing market and now is the time to do it. I think the private sector housebuilding market is looking very positive for 2017 and we certainly anticipate strong sales and high volumes. But as the saying goes; the wise don’t wait until it rains to fix the roof – a consistent high volume of new housing can only be assured if public sector housebuilding is allowed to get going.
See the volume of public sector housebuilding return to where it was 20 years ago, maintain that volume in a reasonably predictable way and not only will we actually start to make inroads into the housing deficit, but we might also see more employers and manufacturers able to make the long term investment decisions needed to train more site workers and increase our own manufacturing provision once again.
A pipe dream? Maybe – but there is a lot riding on that million homes target and without some move in this direction those million homes are just not going to get built.