“A swingeing cut of 17.98% to the budget for new affordable homes would deepen the national housing crisis and lead to the loss of thousands of jobs and apprenticeships” So said the National Housing Federation’s Chief Executive, David Orr recently.
That over-inflated asset prices fuelled the economic recession of 2009 is without doubt. According to estimates, there are between 220,000 and 230,000 new households being formed annually; the population is increasing, while the average size of households is declining. A range of demographic factors have been cited as factors contributing to this, such as increasing life expectancy and more divorces. Couple this, with the inability of the construction industry to keep abreast with demand; at present more than eight out of ten construction firms report skill shortages. Many developers also cite the complex planning laws as a deterrent; refusals for planning permissions in major housing developments increased from just 15% in 1996-1999 to 25% in 2002. Strange then, that budget cuts aimed at reducing the national debt and saving the economy will actually stimulate economic conditions so similar to those that were the root cause of the last recession.
Social housing waiting lists have rocketed by 55% over the last five years, but research by the National Housing Federation (NHF) suggests that rising unemployment and repossessions will cause the number of households on waiting lists to jump from 1.77m in 2008 to a record high of around two million in 2011 – a rise of some 200,000 homes in just three years. This means that the number of people on social housing waiting lists will have doubled from 2001, when there were just over one million households waiting for a social home. Around 80,000 of the expected new households on waiting lists over the next two years will be directly attributable to the downturn. The other 120,000 households will join because of the lack of affordable housing across the country – England alone has a shortfall of around one million homes. In July 2007, in an attempt to tackle Britain’s chronic housing shortage, the Government pledged to build 3m homes by 2020, a million of which would be affordable.
Now though, the Institute for Fiscal Studies said figures set out in the Pre-Budget Report imply spending cuts to the housing budget of 17.98%, which if implemented over the next decade, would slash the planned number of new affordable homes by 556,000 and lead to some 300,000 jobs and apprenticeships in the construction industry, and the wider economy, either being lost or not created. If the reduced rate of building, that would occur under cuts of 17.98%, was continued into the long term, it would take the Government until 2038 to build the envisaged one million affordable homes – some 18 years later than expected.
The National Housing Federation also warned that the poorest communities would be hardest hit by the proposed cuts to housing, as bad housing conditions are closely linked with poor health, poor educational attainment and higher crime rates.
“Reducing the number of new homes by such a huge degree would kill off the dreams of more than a million people in desperate need of decent, affordable housing – leaving many to live in cramped, unsuitable conditions for a generation. Axing the new homes budget would also increase unemployment and obliterate the national programme for creating apprenticeships – as housing is one of the nation’s key generators of jobs and prosperity.” Orr continued.
Housing Minister John Healey said while the NHF was right to lobby government, it was in danger of "missing the bigger political picture". "Of course the public finances are tight but this Government continues to demonstrate our long-term commitment to affordable housing, whether through the extra £1.5bn investment of the Housing Pledge or the PBR's boosting of support for first time buyers. The Tories not only opposed us, they also proposed a £1bn cut in last year's housing budget that would have seen 9,000 fewer homes built and the loss of many jobs in the construction industry. Taking this as a clear indication of Tory priorities, the NHF would do well to consider the threat a Cameron Government would pose to affordable housing”
It is indeed true that Conservative housing policy leaves more than a little to be desired; indeed, the fact that they proposed budget cuts in the last financial year reveals a lack of vision and possibly even understanding of the depth of the crisis at hand. There was desperate housing shortage before the last economic recession that in no small part caused the last recession and was only intensified by the recession. This paper has called for, on more than one occasion, extensive investment in housing. The opportune moment for such investment was as part of the Government stimulus package, designed to ward off the worst of the recession, to protect jobs and reduce the loss of skills in the workforce. Now though, the requirement to bring the deficit under control is as important. The Government however, would do well to consider that unless investment in housing is protected, asset prices will continue to rise in the long-term - and cripple the economic recovery that they have, so far, carefully and successfully nurtured…