Why housebuilding is at its worst level since World War 2

Updated on 09 January 2019 | 5 Comments

House prices will continue to be pushed higher as we fail to increase housebuilding levels.

While Brexit has undoubtedly  and unsurprisingly  been the biggest priority of the Government over the last couple of years, it has at times had some competition from housing.

Indeed, in the week in which Theresa May first took over as Prime Minister, she gave a speech talking about the fact that unless the housing deficit was dealt with, “we will see house prices keep on rising.

"Young people will find it even harder to afford their own home. The divide between those who inherit wealth and those who don't will become more pronounced."

However, despite this apparent focus and big talk from the Government about ramping up housing production the truth appears to be that we are as far away from tackling the crisis as ever.

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The housebuilding crisis

Analysis from the Centre for Policy Studies (CPS) has suggested that the decade from 2010 to 2019 is on course to be the worst for housebuilding for any decade since the second world war.

The think tank said that new-build housing completions in England are set to average £130,000 per year.

By comparison, the 2000s saw 147,000 completions on average, the 1990s saw 150,000 new homes on average, while the 60s and 70s saw completions at DOUBLE the current levels.

The CPS points out this is even worse when you take population size into account. Back in the 1960s, the new-build construction rate was the equivalent of one home for every 14 people over the decade.

Today that ratio is a dreadful one to every 43.

Bear in mind that the Government has talked about hitting 300,000 new homes a year, and it’s clear that despite plenty of good intentions, we are still some way off making any real dent in the underlying demand for homes.

And until that happens, house prices will continue to rise, even when the market is relatively subdued as it is now.

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How many housing ministers does it take to change a lightbulb?

The housing shortage isn’t something that’s happened overnight. It’s the result of years - decades - of underinvestment, of failing to prioritise building enough homes to meet demand. As a result, it’s not something that can be fixed quickly, but will instead require a long-term strategy.

The trouble is, it’s really difficult to take a long-term approach when you change your housing minister every five minutes.

Kit Malthouse was named housing minister last summer, after his predecessor Dominic Raab took on the Brexit Secretary role (for a short while anyway).

Malthouse is the 17th Housing Minister since 1997, with seven separate MPs taking on the role in the last eight years.

This rotating door approach is a farce and massively undermines any efforts to actually increase the rate at which we build homes.

Until the post is treated as a worthwhile role, rather than a stepping stone onto something bigger in the Cabinet, then there is little chance of making any real progress on the shortage.

Giving developers a nudge

If we are to crank up the number of homes built, then clearly private developers need to do a lot more than they currently are. There are problems here though.

Brexit is, of course, a big one.

Not only because it risks making construction shortages even worse, but because demand from buyers has slowed enough that developers are increasingly nervy about actually starting their projects.

There’s also the fact that for far too long we have relied on the big housebuilders. Decades ago, back when the nation built enough homes to meet demand, a significant number of the homes built were produced by small builders.

They all but disappeared in the 1990s, and there are still far too many hurdles preventing them from doing more, such as poor access to land and a lack of tax incentives compared to small businesses operating in other sectors.

If we have more sources of housing, both the housing behemoths and the small one-man-band developers, then the total number of homes being produced will go up.

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Councils are missing the mark

Private developers aren’t the only ones responsible for delivering more homes. However, councils are also significantly underperforming.

Research from Project Etopia last year found that local authorities are on average more than six years behind the rate of building needed in order to meet the Government’s 10-year building plan, which concludes in 2026.

A couple of years ago, the Ministry of Housing, Communities and Local Government set out annual housing targets with local authorities. But the study found that, if the glacial pace continues, councils will miss their targets by more than a million new homes.

Southend on Sea was pinpointed as the worst town or city outside London for meeting its targets. If it doesn’t speed up it will take another 34 years in order to build the required level of stock, according to Project Etopia.

As Joseph Daniels, the chief executive of the firm, points out if the pace isn’t rapidly picked up, the nation will be in an even deeper black hole in 10 years’ time than we already are.


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