Today sees the launch of a pro-housebuilding lobby document called Mind The Gap. It’s authors are David Pretty, once MD at Barratt, and Paul Hackett, acting head of the Smith Institute, a left leaning think tank set up in honour of John Smith.
It’s a concise 30 page review of the UK housing scene, well thought out and covering most of the topical areas for discussion. Including a paragraph promoting self build:
The Government could also offer more support (perhaps in the form of tax breaks and subsidised land) to the self-build market, which is much less developed than in earlier decades or in Northern Europe. The average loan-to-value ratio for self-builders is low and there are few defaults, which should make the sector attractive to lenders. Self-build production has steadily risen, according to unofficial estimates, to around 10% of the UK housing market, with the strongest growth in rural areas. Although the recession has reduced activity, organisations like the National Self Build Association believe that, with the right mix of incentives, production of self-build could be increased to over 40,000 homes (mostly detached).
There is also an insightful little table showing Government housing initiatives since 2008. I don’t know why I find this stuff fascinating, but it is, and it’s great to see it all in one place. There are ten initiatives here, all designed to prop up the housing market and at least six of them are specifically aimed at keeping house prices high, or at least to stop them falling through the floor.
●National Affordable Housing Programme –£8.4billion to increase the supply of all affordable homes (2008-11).
●Housing Pledge –£1.5billion to support existing programmes, including £350million to buy unsold stock and £400million brought forward for affordable housing.
●Kickstart –£1.06billion package to deliver 22,000 homes over two years, of which 8,600 will be directly supported affordable homes. 270 bids shortlisted.
●Community Infrastructure Fund –£100million for the Thames Gateway and £200million for the Growth Areas and Growth Points to support housing developments.
●HomeBuy Direct –£300million shared-equity scheme to help first-time buyers purchase their newly built properties.
●Housing Private Finance Initiative (Round 6) – £1.7billion PFI credits for ten councils to deliver 4,500 new or improved council homes as well as 1,600 new affordable rented homes.
●Housing Market Renewal Pathfinder Areas – £35million extra funding.
●Eco-towns – four new settlements to provide 10,000 new homes by 2016, of which 30% are to be affordable homes.
●Mortgage support –includes the £44million Homeowners Mortgage
Support scheme and the £280million Mortgage Rescue Scheme.
●Stamp Duty holiday –on properties costing less than £175,000 (until the end of 2009).
The Gap in question in the title is the old chestnut of rising demand versus falling supply. It’s funny how 95% of the analysis goes into the supply side and only 5% into the demand. That’s because the demand figures are so flakey that no one dare really look into them. All they really do is to project past trends into the future; because we have lots more single households forming and lots of immigration over the past twenty years, it is just assumed that this will carry on. It’s all so very Soviet: five, or in this case, 15 year plans for population growth and household formation.
Where this disconnects from reality is that we have a little problem with carbon emissions and resource depletion. Common sense tells us that one of the prime ways to solve this problem is to stop adding to it and start repairing what we already have. And to admit that we cannot go on building endless new homes until everyone lives in one on their own, or half of Eastern Europe has moved to the UK.
If we want to make houses more affordable, then it’s time we started taxing the profits people make on them. But let’s give up this pretence that the answer lies in having another building boom.
The foreword of the report states: Few would now argue that the prospect of a large and growing shortfall in housing supply can be ignored any longer. To look away is not a realistic option. The evidence of a widening gap between housing production and demand is undeniable.
Well, I hereby nail my colours to the mast and say I am one of the few. I think that what has happened to the housing market in the past two years makes a mockery of these statements. If there really was a large and growing shortfall in housing supply, then it would be impossible for house prices to drop. Yet drop they have. I would say that this is evidence that demand for housing has very little to do with production levels, and an awful lot to do with possible investment returns.