The Budget Statement includes a £600 million funding package to ‘homeowners, homebuyers and the housing market’ (in fact £100 million of this appears to be an attempt to increase councils’ ‘energy efficient’ building programmes).

While any increased support for housing is welcomed this amount is very small. As at 2006 UK investment in housing, at 3.2% of GDP, was the second lowest proportion in Europe. Housing was 6.1% of Government spend in 1981 and had dropped to 1.2% in 2001. The recent increases in spending, including this latest announcement, raise the proportion by only a percentage point or so. In the face of the urgent need for a large-scale programme of council house building, so clearly established by a number of pressure groups (see example) the £100 million is derisory.

The Statement seeks to tackle the constraints identified by the housebuilding industry including speeding the rate of development on sites already with planning consent. But constraints identified by the industry itself are likely, when reduced or removed, to lead to a resumption of ‘business as usual’ – a continuation of the processes and practices that themselves have grave systemic defects.

Z2K believe that the systemic problems will not be effectively addressed in this way. It is shown there are 190,000 sites with planning consent lying undeveloped in London alone. The need here is for a very significant increase in the capacity of the HCA (Homes and Communities Agency), or councils themselves, to infrastructure building sites. It would help considerably if local authorities could issue Bonds to cover some of the infrastructure costs needed as is common in the US. Or the situation would be materially eased if the Treasury Accounting Rules adopted a definition of public sector borrowing more in accord with EU norms , there was no mention of these issues, or measures to tackle them, in the Budget Statement.

Another significant factor that has held back the rate of housing output in recent decades has been the widespread incidence of land speculation in the UK. In many states of the market in the past it has been possible for builders to make far more money from land speculation than from their prime purpose – housebuilding. This has meant that there has been little incentive for them to compete on grounds of design, technical innovation or management improvements. The effects are clear.

The systemic problem here is that the 1947 planning system has generated enormous gains in land values when consents are granted, thus giving ‘headroom’ for land speculation, but the tax system has consistently failed to recoup any reasonable proportion of this gain for the public purse. This situation has been clearly argued. There is a clear need to take land profits out of the development equation and to develop mechanisms such as Community Land Trusts, or development on building leases, that retain the freehold value of the land in public or community hands while providing sites for housing of all tenures to be constructed. Or radical changes in fiscal arrangements, such as Site Value Taxation, are needed to disincentivise the withholding of sites with planning consent.

 
There has been a striking failure in the housing delivery system and a loss of focus on the fundamentals. In short the housebuilding industry has lost the plot.  It needs to re-focus on the fundamentals. In so doing there would be very significant cost reductions on health and many other public services.

The Budget Statement, and Government thinking generally, takes no account of these structural explanations of why there has been a very low output of the housing sector even before the severe difficulties of mid-2007 onward. A comparison with Japanese methods and output is offered by Z2K and the Japanese constructor Misawa Homes demonstrates the point. The Japanese industry has developed better quality homes, and a far higher per capita output, by concentrating on good design and factory production methods.

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