Boris says build – but where are the missing houses?

    1 July 2020

    Build, build, build, read the message on the Prime Minister’s lectern as he announced a £5 billion Roosevelt-style new deal of infrastructure projects, housing included. Boris Johnson entered Downing Street nearly a year ago with the promise – like so many Prime Ministers before him – promising to solve the housing crisis.     He was going to give “millions of young people the chance to own their own home”.    By the mid 2020s, Britain was going to be building 300,000 new homes a year.

    How he hopes to achieve this is less clear. Communities and Local Government secretary Robert Jenrick has taken great steps to increase the supply of apartments on the Isle of Dogs – by approving a development by Conservative donor Richard Desmond, who showed him a video on his phone at a Conservative party dinner.

    But it is unclear how else he, or anyone else in government, is seeking to reverse decades of house price inflation which have put the dream of home-ownership beyond most young people. In the past two decades the average house price has grown by 195 per cent to 230,725. The average salary, however, has grown by only 70 per cent. To accumulate a 10 per cent deposit in 1999 required a first time buyer to save 44 per cent of his or her annual salary; now it is 76 per cent. Small wonder, then, that the proportion of owner-occupiers who are aged under 35 has fallen from 18 percent two decades ago to just nine per cent today.

    The government claims to have increased housebuilding to its highest rate in 30 years. That depends, however, on what set of statistics you use. If you look at a the figures for ‘net additional dwellings’, published by the Ministry for Communities and Local Government, they suggest that the housing supply in England rose by 241,340 in the year 2018/19, an increase of nine per cent on the year and higher than the peak achieved under the Blair/Brown governments in 2007/08, when the number of homes rose by 223,530.

    The trouble is that these statistics do not match with the government’s figures for new building dwellings. The net additional dwellings claim that the 241,340 can be broken down into 213,860 new building homes, 29,260 from change of use, 5220 from conversions, 940 caravans and houseboats, minus 7940 demolitions. Look at the separately-published figures for new build dwellings, on the other hand, and they only claim that 163,910 were completed in 2018/19.

    In other words, there is a disparity of 50,000 new homes. An entire new town the size of Telford seems to have gone missing – or perhaps conjured out of thin air for the other document. I have asked the Ministry for Communities and Local Government for an explanation for this disparity, but none has been forthcoming so far.

    But whichever of those figures is closest to the truth, it is hard to imagine housebuilding going in any direction other than downwards in the immediate term.    Estate agency group Savills says it expects housebuilding to fall by a third this year as the economic crisis reduces capacity – and because of interruption caused by the lockdown.

    Besides the planning system, the main housebuilders are often blamed for the low rate of construction in recent years. They have been accused of deliberately building out sites slowly in order to restrict supply and thereby keep prices high – something they deny. It is certainly true that the last couple of property crashes have helped concentrate power in the hands of a few large housebuilders – as recessions have made light work of smaller builders.

    Yet examination of housebuilding figures over half a century suggests that problem is not with the private sector – it is the social housing sector where new construction has plummeted. This plummeted from the 1980s onwards as responsibility for social housing passed from councils to housing associations. In 2019 housing associations completed just 31,730 homes and councils just 2150. Reinvigorating the construction of housing which the masses can afford to buy or rent is going to take more than a share of the £5 billion package announced by the Prime Minister this week.