Despite builder’s profits, not enough new homes are being built.

Despite housebuilder’s results  last week reporting an average  16% increase in the number of homes they had built during 2013, house building output is actually 11.3% below pre financial crisis levels. The number of new homes started in 2013 was 122,590, the highest since 2007. But this is still HALF the number experts say are needed each year to meet housing demand, let alone addressing the shortages from previous years. 

P1000442However, the number of new homes completed last year actually fell by 5% to 109,370. The Government’s schemes have not helped either, creating easier access to borrowed money  resulting in boosted demand rather than increased supply,  sending house prices soaring,  especially in the south. 

Home ownership has now fallen to its lowest level in 25 years. The number of people sleeping rough in England has increased by over 30% since 2010. The proportion of working households claiming housing benefit is now higher than 2010.  Hardly a success story Mr Cameron!  At the same time, the large plc housebuilder’s are returning cash piles generated from the record profit increases, to their shareholders.

Clearly large housebuilders are looking after their own interests.  Even last week, whilst announcing a 107% increase in their pre tax profits, Redrow’s chief Steve Morgan yet again took the opportunity to bang on about even further relaxation of the planning process commenting:    “The planning system is still failing to deliver implementable planning permissions at a fast enough rate to meet demand for housing.”   

What incentive do large housebuilders have to build more new homes?   They are financially motivated to build fewer homes,  depleting their rising asset landbank at a slower rate, whilst still being able to report obscene increases in profit for shareholders. 

Yes by all means change the planning process, by making it a requirement that for developments seeking approval for say 20 or more homes, to hand over 50% of the plots granted planning permission to local authorities. Then local authorities and central government can start building houses on a large scale, rather than waiting for housebuilders to increase supply. This would not only mean more affordable homes, but could encourage private housebuilding at the same time. With local authorities building new homes, housebuilders would be forced to make money mainly from building new homes, rather than speculating on land values and relying on rising house prices. 

Councils should become housebuilders again. George Osborne would do well to ditch the cap on limits on borrowing to finance building altogether. This would enable councils to build around 60,000 homes a year.

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