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Why do we need to build more houses?

A recent survey suggested that office building in central London has jumped by 24 per cent in just six months.

Not a week goes by without a newspaper headline crying out for the government to build more homes to help control rapidly rising house prices.

In order for first-time buyers to get a step on the property ladder, for families to move up the housing ladder and for older people to downsize to homes they want in the right location – the government must address the shortage of new homes being built. Housing crisis resized pic

The good news is the UK is building. A 2015 survey suggested that office building in central London has jumped by 24 per cent in the first six months.

There are also a number of residential tower blocks being built. The Government has a target of 275,000 affordable homes being made ready during the course of the current Parliament.

However, that is nowhere near enough. The Government has also said that local councils will determine annual house building targets in the future. But surely part of the solution to the lack of new housing is to ensure that a percentage of any new commercial development, especially offices, has to be reserved for residential use.

This, of course, will not be enough to solve the problem itself. We need brownfield sites in cities and towns to be freed up quickly by councils fast tracking the planning process and we need much more imaginative thinking.

Fortunately there is a glimmer of hope that this might be happening. One of the major supermarket chains is reported to be linking up with a leading house builder to include residential units when it redevelops existing sites or builds on new ones. And in the Scotswood area of Newcastle, a previously rundown district dominated by terraced council housing has been handed over to two developers to build 1,800 homes.

To make the scheme viable the council has not charged up front for the land but instead will receive a payout from the profits while most of the buyers will use Help to Buy to subsidise their purchases.

While these developments are welcome they do not solve the problem of lack of supply. 

The previous and current Governments have spent much time worrying about the demand side of the housing market with rather less time spent on the supply side. 

Offering help to people trying to get a high loan-to-value mortgage through those who qualify for Help to Buy, or giving housing association tenants the right to buy their own home is all well and good but when the number of properties available is already well below that required, all it will do is drive up house prices even further.

An enormous £1.4 billion a year is being spent on home ownership subsidies such as Help to Buy and Right to Buy rather than on the building of residential properties.  In fact the amount spent on subsidising rent and ownership schemes between 2010 and 2014 was £115 billion.  Critics claim that sort of money spent on building homes would result in an extra 6.8 million properties.

Perhaps it’s time the current Government really pushed the supply side accelerator.  That would do more to get first-time buyers on to the housing ladder than any subsidy.

By Paul Quade 

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