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Cuts Threaten Huge Slump In Affordable New Homes

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Cuts threaten huge slump in affordable new homes, housing associations warn

• Changes to planning system will hit social housing

• Crisis could create a rift in Conservative-Lib Dem coalition

Jamie Doward and Toby Helm

The Observer

Sunday 13 June 2010

Housebuilding in Britain will "fall off a cliff" this year due to a "catastrophic" combination of financial cutbacks and changes to the planning system, the government was warned last night.

The National Housing Federation, which represents England's housing associations, predicted the most vulnerable in society will be the hardest hit, with the number of affordable homes built this year in England slumping by as much as 65%, to 20,390. This would be the lowest number of affordable homes built since 1990, with profound consequences for the 4.5 million people on waiting lists across the country.

The federation said the private sector would also be affected and expressed fears the total number of homes that will be built this year in England would fall below the 100,000 mark, the lowest level for almost a century. Similar problems are predicted for Wales and Scotland.

The previous government estimated there was a need to build a minimum 250,000 homes a year to reach a target of 3m new properties by 2020 if an acute housing crisis is to be alleviated.

"The prime minister and deputy prime minister have repeatedly said public spending cuts will not disproportionately hit the most vulnerable, but if these measures go ahead the impact on housebuilding will be catastrophic," warned the federation's chief executive, David Orr.

Any failure to tackle the housing crisis would threaten a major rift between the coalition partners. Simon Hughes, the Liberal Democrat deputy chairman, has made the issue a top priority, asking Cameron for assurances that the new government "would do better than Labour in building affordable housing".

But the federation said the crisis would worsen if the government did not urgently reconsider its policies. It claimed the decision to scrap regional housebuilding targets, without replacing them with an alternative system, would leave councils free to reject all new social housing developments.

Orr has written to the housing minister, Grant Shapps, urging the government to honour spending commitments on new housing schemes during this financial year and to halt the proposed changes to the planning system.

In the letter, seen by the Observer, he states: "If the government fails quickly to replace the regional planning mechanism it has just scrapped, the building of affordable homes could potentially grind to a halt this year – with all housebuilding… falling off a cliff."

Shapps warned last week that around 150 social housing projects were under threat because of a £610m "black hole" inherited from the last government. The coalition has already announced a £100m cut from the National Affordable Housing Programme, which will see plans to build another 1,453 social homes axed.

Housing associations typically fund 60% of the cost of affordable homes, with the remainder met by grants. Many associations have invested heavily in developing sites but now face the prospect of the promised money being withdrawn.

Experts warn the sector faces a double blow as a result of proposed changes to the planning system. Around 40% of affordable homes are delivered through "planning gain agreements", whereby developers are given permission for housing schemes if they agree to build some social housing on the sites. But the government is considering scrapping the agreements, a move the federation said would lead to around 19,000 social homes being axed this year.

"The slashing of front-line funding means big cuts to the numbers of new affordable homes," said John Healey, shadow minister for housing and planning. "But it is also linked to changes to the planning system that will strengthen the Nimby tendency. This, of course, means fewer homes, even where they are badly needed and demand is obvious."

Campbell Robb, chief executive of Shelter, warned that any curtailment in the construction of affordable housebuilding would have wide ramifications: "It will have a huge impact on people's jobs and economic growth and will weaken our capacity to build homes in the future as skills are lost."

But Shapps defended the decision to axe regional targets. "Houses cannot be built by targets that don't work with money that doesn't exist," he said. "We have the lowest peacetime rate of housebuilding since 1924 and top-down control that alienates the public and undermines support for new housing."

He pledged the government would introduce incentives for developments and promised to make £170m available to build 4,000 unfunded, social rented homes this year, safeguarding around 3,500 jobs.

So if there are no affordable housing schemes, won't this put huge downward pressure on house prices?

Just shows you how far the market has absolutely collapsed - lowest housebuilding rates since 1924. Do you think there might be a small problem of oversupply perhaps?

I love this quote:

"Houses cannot be built by targets that don't work with money that doesn't exist,"

...that never stopped the Americans ;)

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the senseless government subsidies [mortgage interest relief, v low CGT] that are available for landlords for all houses that they buy, even where they are 100-yrs old, where they're outbidding would-be owner-occupiers, and where the total volume of stock does not increase, should be wiped out overnight of course but might there be a case for keeping them on new build properties only, whereby it could be reasonably assumed that the property would not be built without private sector funds [sorry, debt]?

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Perhaps if the government focused on creating an environment which encouraged the thousands of already empty properties to become more affordable, they wouldnt have to worry about building affordable houses - just a thought :blink:

Bring on the CGT rise

Increase the rates

Regulate mortgage lending

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