Government must overcome £20bn brick wall to meet housebuilding target – London First
18 September 2018
Forty per cent increase in investment needed across England
Problem most acute in London, with £8.6bn more needed, a 65% increase
Business group calls for more money, more land, and better ways of building to address shortfall
A £20 billion brick wall stands in the way of the government’s ambition to deliver its promise of building 300,000 homes a year in England. That’s according to a new report for the business group London First by leading economics consultancy Volterra out today (Tuesday).
The report, ‘Hard Choices: How much should the nation spend on building new homes?’, estimates it will cost around £68 billion from both government and private sector investment, to meet the housebuilding target. This means finding another £20bn – or a 40% increase – on top of the £48bn spent in 2016 – 17.
The challenge is most acute in London, where the shortage of new homes is pushing house prices up to 13 times more than average earnings and forcing 35,000 thirty-somethings out of the city a year1.
Jasmine Whitbread, chief executive of London First, said: “Londoners come up against a brick wall when it comes to finding an affordable place to rent, or fulfilling the dream of owning their own home. And businesses can’t afford the continued drain of talented people away from our capital.
“The government needs to face up to some hard choices about how to unlock a further £20bn worth of investment if it’s ever going to turn its rhetoric of building 300,000 homes year into reality.
“We need more money from government, more land made available to develop, and for the private sector build in new, smarter ways to speed things up.”
The Mayor’s new London Plan sets a target of 65,000 new homes a year, more than double what is currently being delivered2, and Sadiq Khan has recognised the need for a “fundamental transformation”3 to meet London’s housebuilding target.
Putting the scores on the doors
Among other key findings, the Hard Choices report shows:
Of the £48bn invested in housebuilding in 2016/17; £5bn came from public sector, £43bn came from private investment.
217,000 homes were built in England in 2017 – 18, a much-needed increase from the average of 174,000 homes built a year since 2004.
The government spent £24bn on addressing the impact of the UK’s housing shortage, such as paying housing benefit in 2017 – 18 – double the amount spent on housing and community amenities (£12bn)4.
Combined, public and private capital spending on housing delivery currently represents 2.3% of UKGDP5.
To fill the funding gap, the analysis shows it would require the equivalent of a one percentage point increase in UKGDP — to reach 3.3%.
Commenting on the research, Ellie Evans, Partner at Volterra, said: “The government’s capital expenditure on housing delivery has risen by 20% in the last year which is a positive step in the right direction but, put simply, we need to spend an awful lot more on building new homes.
“This report outlines how the government could make good on their commitment to building these new homes, but there are no easy options. The challenge of increasing total capital spending on housing delivery by one percentage point of UKGDP is a substantial increase but, with careful planning, an achievable goal”.