A realistic route to homes
Author: Dermot FinchDate: 25/11/2008
Publication: Local Government Chronicle
Gordon Brown's 'three million by 2020' house-building target looks impossible
But the longer-term demand for three million new homes is still there.
Rather than clinging on to the current unrealistic target, housing minister Margaret Beckett and Homes & Communities Agency (HCA) chief Sir Robert Kerslake should extend the deadline from 2020 to at least 2025. The revision should include a commitment to build more high quality, private-rented homes.
There is broad consensus that we won't build three million new homes by 2020. The government's original plan was to build two million new homes by 2016, increasing from 185,000 per annum in 2007 to 240,000 by 2016. This would require a 3% year-on-year increase in the rate of new build until 2016. The third million was to be delivered during 2016-20, by keeping the rate of new build constant at 240,000 a year.
But the government's plans have got off to the worst possible start. This year, we are likely to see fewer than 140,000 new homes and some sources say no more than 100,000 - with maybe even fewer in 2009. Supply will not turn up again until the credit and mortgage markets are de-clogged and we are through the recession. The more we undershoot now, the harder it will be to deliver three million homes by 2020.
By 2010, new house building will be about 200,000 behind target. That's a major shortfall. And that's why the three million already looks unachievable. Ms Beckett is clearly aware of this, and has been taking a hard look at the numbers since becoming housing minister. She is a canny and experienced operator, and will not want to box herself into an impossible commitment. She's already hinted at a possible revision, admitting last month that two million was 'challenging', and three million was 'an ambition, rather than a target'.
Remember, the original plan was drawn up during the housing boom and based on over-optimistic economic forecasts. If Ms Beckett and Sir Robert were devising a house-building target now, in a recession, they would never commit to build two million by 2016.
The Department for Communities & Local Government has so far been sticking to its original plan, despite Ms Beckett's comments. But national house building chief David Orr has since said three million new homes won't be delivered until 2029. Growing scepticism about the target is undermining the wider case for new house building. That's another reason why the target needs to be revised - to restore confidence in the need for more housing.
As soon as the HCA goes live next week, Sir Robert should announce a review of the three million target - and the assumptions underpinning it. He should stick to the three million, but extend the deadline beyond 2020. The precise end-year should be informed by fresh analysis of projected housing demand and a more realistic assessment of likely supply. My guess is the three million will not be delivered until 2025 at the earliest.
The HCA should also commit to more homes for rent. By 2021, we will have 1.2 million more renters than in 2001. We need to increase the supply of good-quality, private-rented homes to take pressure off social housing and increase labour mobility. More immediately, the HCA should invest in the renovation of empty homes.
This would be cheaper and more sustainable than new build and provide much-needed employment for the construction industry. We still need to build those three million new homes. It's just going to take longer than we first thought. By revising the target, Sir Robert will give his agency - and the case for new house building - some much needed credibility.
A version of this article first appeared in the Local Government Chronicle
