Plans to build on public land are welcome, but cities need more incentives to tackle the housing crisis
Allowing cities to retain land and property taxes would encourage them to invest in housing.
Allowing cities to retain land and property taxes would encourage them to invest in housing.
When the Chancellor George Osborne proclaimed ‘we are the builders’ at the Conservative party conference last October, it wasn’t clear that he meant it literally. And yet today, the Government has announced the direct commissioning of SME developers to build houses on five publicly owned sites in the South East – where homes are most in demand. Furthermore, the largest sites are in London and Cambridge – two of the least affordable yet most economically successful cities in the UK. Getting more homes built in these areas should be a priority, and therefore this contribution is particularly welcome.
The second element of the announcement regards the builders themselves. The big three housebuilders (Barratt, Persimmon and Taylor Wimpey) make up nearly a third of new housing completions, and the top ten almost a half. The output from smaller builders has dropped dramatically since the recession, from just under half of completions in 2008 to just over a quarter last year, reflecting consolidation and limited financing in the industry. This has raised concerns that the current model, reliant on so few firms scaling up their operations so vastly, will not practically be able to deliver the level of housing required. To get closer to the 200,000 homes needed each year, a more diversified house building market is crucial – including more small housebuilders – and today’s announcements should help more firms enter the market or keep afloat.
However, today’s announcement must also be seen in context. The cumulative total from these five publicly owned sites will be at most 13,000 homes this year, against a national annual target of 200,000. Meanwhile, it shouldn’t be forgotten that many of these homes, built on public assets, have already been announced or have been long in the pipeline. For example the direct commissioning of housing at Northstowe was announced a year ago, and Old Oak Common has also been deliberated over for years.
Partly this is the point of today’s announcement – to kick start delivery on sites which have been frustrated. But given the politics of housing growth, the number of viable plots of publicly owned land available, and the level of housing needed to meet demand, there must be doubts as to how many times this kind of intervention could be repeated, and the impact it will ultimately have. For a longer term solution to boosting housing supply where it is needed most, central government must do more to incentivise cities to make these decisions themselves – and that means making sure they retain more of the financial benefits that boosting housing would bring, such as increases in stamp duty revenue.
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