Mind the housing gap

By David Smith

The Queen’s speech, published last Wednesday, sets out the areas the government considers important in the year ahead.  Britain’s impending serious housing shortage, one must conclude, is not a priority.

True, this was a speech designed to extract maximum political advantage for the government in the months left before the election.  And true, not all changes require legislation.  But the need to build many more homes in Britain, and thus improve affordability, which was once such a priority for Gordon Brown, has slipped off the agenda.

When he was chancellor, this was a big issue.  Britain needed 240,000 new homes annually to meet demand and hold down house-price inflation.  Though the housing market has changed since that target was set, the underlying picture has not.  The UK has 61.4m people, and official projections are for this to rise to 63.5m by 2013, 67.8m by 2023 and 71.6m by 2033.

How far are we running behind the target?  The National House-Building Council reports that it received applications to build just under 25,000 new homes in the three months from August to October: 27% up on the same period last year, but still barely more than a third of the target.  While the builders are increasing their output, it is from a very low base.  Government initiatives, meanwhile, most of them launched in a blaze of glory, have either been forgotten or scaled back to the point of irrelevance.  Remember the £60,000 home?  How about eco-towns?

The slump in new housing supply has, of course, helped to prop up prices, thought not as much as the “sellers’ strike” by existing homeowners.  But it is storing up serious problems for the future.

Stuart Law, chief executive of Assetz a property investment company, says: “The current undersupply of property is likely to worsen, as house builders struggle to deliver any substantial increase in new properties in 2010.  Developers are only going to be building about 100,000 units next year, whereas at the peak this was around 180,000 units a year.”  The market will stay thin, which will support prices, but it is a long way from normal.  Judging from the Queen’s speech, the government has run out of ideas about what to do about it.

Gross mortgage lending last month was an estimated £13.5 billion, up 5% from September, but down 27% from £18.5 billion 12 months earlier, the Council of Mortgage Lenders says.  It reports that the number of loans to buy new homes has picked up significantly in recent months, but remortgaging has dropped to levels last seen a decade ago. (David Smith, The Sunday Times).