Research article

Housing high on the political priority list

Government initiatives can be seen in all areas of the housing industry, but the fundamentals of land, money and product need to be considered.

Rarely has housing ascended the political priority list so rapidly. Since the coalition government took power in 2010, we have seen many initiatives and interventions in diverse areas: planning, funding and finance, private renting, housebuilding and mortgages.

It is the contribution of construction to the economy, estimated at around 8% of GDP, that has focused political minds so sharply in this age of austerity. Any chance of growing the economy and jobs is embraced with open arms.

The housing industry has made its case well, stating that every £1 invested adds £2.84 to GDP. There is a compelling macro economic case for increasing housing supply that goes beyond the previous cases made on social and affordability grounds.

Having said this, construction covers many diverse activities, including public works and infrastructure, commercial property and repairs and maintenance of existing buildings. Private housebuilding only contributed about 13% of all construction GDP in 2008, or around 100th of all GDP output.

Nevertheless, the volume housebuilders have won the biggest prize from government recently. The new mortgage guarantees and equity loans announced in the budget aim to stimulate demand. Housebuilders are expected to respond to this with additional supply. Critics of the scheme say it will only swell developer profits. Some have even suggested it will create a mini housing boom.

We see little evidence for this. We are more positive on the implications for supply but remain concerned as to whether there will be sufficient funds for lending available to achieve the scheme’s objectives.

As with many other housing market initiatives, the current slew of interventions depend for their success on many other factors in the housing market and economy, some of which are outside policy control. This has made housing market policies particularly fraught with unintended consequences in the past and they may be so again.

The delivery of built environment has always depended on three principal elements: land, money, and product. The great city builders such as Nash and Cubitt were not only good at delivering product but also had access to land and development finance. These elements have to be considered together in an integrated way to make good policy. Few organisations in the property industry have a complete picture of all areas in this jigsaw but a complete understanding is needed if unintended consequences are to be avoided.

A secure and diverse supply of land, possible initiatives to encourage landowners into housing production and more routes for diverse funding, including private capital into development will be needed to match initiatives aimed at increasing product numbers and demand.

The concurrent initiatives around public land, investment in market renting and planning are therefore critical components. Only if current government policies can truly integrate these factors will we see the significant uplift in housing delivery that the UK needs, for social, environmental and economic reasons.

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