By Michael Dall, Lead Economist – Construction, Barbour ABI
The desire to get on the property ladder has been instilled in Britons for as long as I can remember. But the ease with which one can get on the ladder has diminished at a dramatic rate making the debate on housing a hotly contested one.
I recently attended a conference in London with speakers from across the spectrum. I heard views from politicians, house builders, economists, bankers and trade bodies. All offered good insight into the problems facing the housing market yet the elephant in the room still remained: How do you build the necessary 300,000 units per annum when the most optimistic forecast suggests around 150,000 per annum can/will be built?
What surprised me most was that for a significant problem for so many in the UK the response from the political parties was broadly similar: – give powers to local authorities and communities to unlock land that could be used to create significant numbers of residential units. Labour even hinted that they would keep the controversial National Planning Policy Framework which central tenet is locals making decisions about the development that occurs in their area. Perhaps the much maligned Localism ideology espoused by David Cameron has been embraced by Ed Miliband?
Danny Alexander talked of a Right to Contest initiative which would allow local communities and trade bodies to challenge the government to release public land which could be better utilised for housing or business uses. Hilary Benn addressed the issue of land that stretches across local authority boundaries that cannot be built out due to the conflicting policies of the respective Councils. He said Labour would introduce powers to intervene and ensure that this land is used for residential development.
House builders focussed on the planning regime and its role in stymieing development, bankers asked for greater visibility of future house building rates and economists warned that building more homes doesn’t necessarily mean an end to house price rises. And what of Help to Buy? This received almost unanimous approval as a short term measure to boost house building but not the long term answer.
So what is the answer to addressing the shortfall in house building and bridging the affordability gap? No one mentioned it but surely the Government has to intervene in this clearly dysfunctional market to boost the levels of supply by launching a major house building programme. The focus of (any) Government investment seems to be on major transport infrastructure programmes but surely housing is a more deserving recipient? When you consider the economic impact this could have on job creation, tax receipts and GDP levels it is surely an option that must be seriously discussed. This could be Britain’s Hoover Dam moment and considering the depth of the economic decline it is something that this country badly needs.
Of course the idea of large public spending programmes is anathema to most commentators but since property is viewed as a sound investment why not speculate to accumulate? The attractiveness of the London residential market, where the majority of investors are foreign, suggests real opportunities for public private partnerships to administer such a scheme. Why not use the value created by the London market for London and the rest of the UK’s benefit?
This was the one solution that was not suggested by any of the experts but it strikes me as the most obvious. With politicians struggling to differentiate themselves on housing it is time to get serious and start debating an appropriately scaled response to this ever worsening problem. Tinkering around the edges by allowing local communities to lobby for residential development is not the answer.