UK Housing Crisis: Does the Government Actually Want Any New Homes Built?
By Shane Croucher
Updated July 1, 2014 22:46 BST
Output from UK construction sector has fallen 10% since the coalition government took control (Reuters)
With a limp-wristed tearing of the reams of planning law and a hit-and-hope punt at helping the consumer mortgage market - does the government actually want any new homes to be built?
Housing demand means we need to build about 250,000 new homes a year just to keep up.
In 2012, not even 100,000 housing starts were made.
This is one of the reasons the UK's housing costs are the third highest in Europe as families' earnings are drained just on shelter.
Reform to planning law is sluggish, despite the government's promises.
Mortgage market stimulus from the Help to Buy scheme is counterbalanced by declining pay and disposable income in the comatose economy.
There are £10bn of housing guarantees announced by the government, to support the finances of those building new rental properties and affordable homes. It should make borrowing cheaper for the firms supported by the guarantees, but there is no certainty at all that houses will be built.
Decisive action needs to be taken in the housing market as soon as possible, but the Conservative-led coalition government is simply not able to prescribe the patient its fiscal medicine.
The only option Chancellor George Osborne has - which he has already ruled out - is capital investment.
If the government wants more housing to be built, from social to affordable, it must put its hand in the Treasury's pocket.
Planning law reform
Planning regulations remain a tangle for construction firms and little progress has been made by the government in this area under its "Red Tape Challenge."
The "Red Tape Challenge" is a so-called review of the stringent rules that must be carefully navigated when embarking on a new building project.
In January, planning minister Nick Boles boasted that he was "streamlining the building system and removing and improving regulations to lift unnecessary burdens". Just 100 of the 212 housing and construction rules being looked at were amended or scrapped.
Most of those scrapped were from the Thatcher era.
The word "scrapped" probably adds undue weight to what has happened so far. It has mostly been the removal of approved bodies, such as housing trusts, from the Housing Act 1980.
It is not the removal of obstructive laws that prevent new homes being built, it is measly tinkering.
The Centre for Policy Studies, a right-leaning think tank, described the 118 Acts of Parliament harbouring the country's complex planning red tape as a "lawyer's banquet", on which the suited legal men and woman can feast, at a cost to the rest of the economy.
Its report, called Simplified Planning, criticised the government for making "only modest gains" in the government's purported bonfire of red tape.
This skinflint government should have made more progress on stimulus that costs them nothing.
More effort and resources must go into simplifying the planning process for builders if the ministers want to reverse the near-terminal decline of the construction sector, which has shrunk 10% since Osborne sat down in the Treasury, though this alone will not be enough.
Help to Buy and housing guarantees
Chancellor George Osborne's Help to Buy scheme is also inadequate and will fail in what it is trying to achieve - a dramatic increase in housing supply.
Additional help for mortgage seekers is all well and good. It will likely lift a handful of people onto the property ladder by bringing down borrowing and deposit costs. Will it stimulate enough of a swell in demand that will lead to a dramatic and much-needed rise in supply?
When real pay is being cut, the cost of living is rising, and jobs are on the line, how can anyone expect to save enough for even a reduced deposit? Disposable income has been eroded over the past few years, leaving little room for saving.
One of Help to Buy's predecessors, the NewBuy scheme, offers a glum prophecy. In its first nine months, just 1,500 people were helped through NewBuy. The government's target was 100,000. What makes it think the little extra it offers under Help to Buy will make any meaningful difference?
The mortgage demand will not materialise at the levels Osborne is hoping for. It is yet more worthless fiddling in the housing market that fails to address directly the supply shortage.
Housing needs public investment
Austerity is king with the government.
It stubbornly refuses to borrow to invest, insisting that it is earning "fiscal credibility" by slashing public spending to get rid of the structural deficit in government finances.
It can and must borrow to invest in building homes. The talk of fiscal crisis if Britain borrows more is self-serving politics for a government that has staked its reputation on a discredited "Plan A" of austerity.
To admit that part of the reason the economy is so flat, on top of weak global demand, is its own fiscal policy would be to risk handing the next election to the Labour party.
It would also, on a personal level, mean Osborne and possibly Cameron losing their jobs. Giant egos, bloated by vanity and ideological dogma, are the biggest blockade to the public investment Britain desperately needs.
The economic case for investing in housing is compelling. On a social level, it would improve the lives of many people who can move into new and more suitable accommodation for them and their families. Homelessness, a problem which gets worse by the year in the UK, will be reduced
On an economic level, the benefits are clear.
Rents will come down, easing pressures on household finances and naturally reducing the government's housing benefit bill.
Inflated house prices will ease. Stamp duty tax receipts will rise. Construction firms' output will grow again, providing yet more tax to the Treasury. Jobs will be created.
The miserly government cannot keep fiddling about around the edges of the housing market in the faint hope that brick will meet mortar. It must take decisive and comprehensive action to tackle the problems and that will require doing something Osborne cannot - spending.
This article was first published on May 7, 2013
Related topics : Mortgage