Sharp decline in housebuilding threatens Osborne’s targets

// HA News

The decline in new houses built by housing associations and local authorities in 2015 could thwart plans outlined by the Chancellor George Osborne to build 1m houses by 2020.

George Osborne told MPs in his autumn statement in November steps would be taken to deliver 400,000 new affordable homes by 2020 to help tackle the housing crisis. However, public sector house building slumped somewhat in October according to official figures, perpetuating a string of month-on-month falls that goes back to the time of the election.

The National Housing Federation (NHF) stated that the decline was the result of several contributing factors, one of which being Osborne’s decision in the first budget review to cut housing association rents by 1%, forcing the housing associations to look again at their budgets.

NHF also said that new housebuilding had also suffered as a direct result of the government’s three-year funding cycle for housing associations, which in effect creates a “boom and bust” pattern within the sector.

A new funding plan is set to run to 2018, but common consensus is that homes due to be built under this latest scheme have only just been commissioned, meaning that there has been a long period of time before any real benefit has revealed itself.

A spokesman for NHF said “It would support housebuilding if funding was over a long period than the current three years because there would be greater certainty. It is this factor and the 1% rent cut that has undermined certainty.”

The Office for National Statistics echoed concerns, stating that public housing output has dropped from £458m in April to £361m in October. Output by the private sector has remained flat during the same period at around £2bn. They blame austerity measures for delivering a blow to house building targets.

Chief UK economist at the consultancy Pantheon Macroeconomics, Samuel Tombs said “The fiscal squeeze will only intensify over the next year, constraining the growth of the construction sector. Meanwhile, the low level of construction orders in Q3, unchanged from their level a year ago, indicates that the underlying trend in output is likely to be flat over coming quarters.”

Shelter’s chief executive, Campbell Robb added “These figures highlight a worrying downward trend in the number of new homes that people on low or average incomes can actually afford.”

“It’s been encouraging to see the government finally acknowledging our housing crisis, but schemes geared towards better-off first-time buyers can’t replace investment in genuinely affordable homes to rent or buy.”

“This is further compounded by the extension of right to buy, funded by the forced sale of thousands of council homes, which will further deplete the number of homes available for people on lower incomes.”

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