Blogs and Briefings
House of Cards?
Connect’s Tom Denney argues that yesterday’s housing starts figures are a sign of significant trouble ahead.
17 February
The Department for Communities and Local Government’s publication of new figures on housing starts yesterday highlighted a worrying trend in the housing market; housing starts are falling as demand grows and housing waiting lists lengthen.
But should these figures come as a surprise?
Cuts in central government funding for new housing development, whilst on their own a simplistic explanation on the current predicament, are nevertheless the key driver of this current stagnation in the construction of new housing. At the Spending Review in 2010, the social housing budget was cut dramatically, from £8.4bn over the previous three year period to £4.4bn over the next four years. On top of this we have also seen the complete scrapping of the Housing Market Renewal programme, a scheme specifically designed to build new housing in areas of demand.
In London too, the budget for housing and regeneration has been heavily reduced. Just this month, under the auspices of devolving powers from the now defunct London Development Agency to the Mayor, the Department for Communities and Local Government announced just over £1.9 billion for housing in the capital - a 60% cut on the amount given to London in 2008 by the previous Labour government.
Government attempts to soften the blow of these cuts has been limited at best. The £420million Get Britain Building fund, launched two months ago and a key tenet of the Housing Strategy, has already seen 176 expressions of interest - meaning the programme is already three times oversubscribed, and unable to help two thirds of applicants keen to kick-start developments.
On top of this, the Government has yet to solve existing problems in the mortgage market. There is the New Build Indemnity Scheme, which although rather stand-offish should make some inroads, but its success in helping up to 100,000 people to buy their own home is wholly reliant on the lenders and builders, who by the Department’s own admission have only “agreed in principle to participate in the scheme”. Herein lies a key problem, and major issue if the Government is to crack this problem; lenders are notoriously risk averse at the moment (one only has to look at the problems faced by small businesses and the abject failure of Project Merlin), and their commitment to financing mortgages on new build homes that can easily slip into negative equity remains to be seen.
In other areas too the government has seemed equally timid. Think-tanks including Policy Exchange and Localis have eagerly waded in to offer possible solutions to accelerate the provision of new housing; for Policy Exchange it was the speedy transfer of former industrial units into residential dwellings, for Localis opening up neighbourhood planning. The TCPA even published an entire prospectus on the development of new garden towns and cities, championing comprehensive planned new communities.
Yet despite these innovative ideas (none of which have been taken up with any conviction), the government has so far appeared unable to break the inertia, and these latest housing figures will make disappointing reading for all in the Department. With changes in the welfare system to come, the current situation simply cannot continue.
Follow Tom on Twitter @tom_denney
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Housing Voice is the campaign alliance established to champion the need for more affordable homes to buy or rent. Housing Voice is holding national inquiry hearings across the UK throughout February and March. For more information visit http://www.housingvoice.co.uk/
