PM to 'take charge' of housing as housing associations pledge homes boost
A UK house-building surge is on the cards as Prime Minister Theresa May pledged to take "personal charge" of fixing the housing market, while a significant technical change is expected to produce a major boost in output from housing associations.
May and Communities Secretary Sajid Javid led a dual push on the housing sector on Thursday, a week ahead of what is expected to be an important Autumn Budget.
"We must get back into the business of building the good quality new homes for people who need them most," May said.
"That is why I have made it my mission to build the homes the country needs and take personal charge of the Government's response."
Javid said a 15% increase in the number of new homes in England over the past year was a step in the right direction, but he wanted to see "a giant leap, and hundreds of thousands more homes. We owe it to our future generations to fix this broken housing market and help them find a home of their own."
Jostling with May somewhat, he said he was "stepping in" to make sure more local councils produce a plan to set out how and where new homes can be built in the area.
Last month Javid said the government would consider increasing borrowing to help fund a serious increase in housing output, though it remains to be seen whether the Chancellor includes such measures in next week's Budget.
Against the current new homes output of around 150-160,000 per annum, he indicated an annual output of up to 300,000, a level of housing output not seen in the UK since the 1960s, using a plan to "sensibly borrow more to invest in the infrastructure that leads to more housing".
SIGNIFICANT CHANGE FOR HOUSING ASSOCIATIONS
Housing associations have been restricted from investing as much as they would like over the last two years after they were classified as public bodies by the Office for National Statistics.
But in move with twin benefits for the government, the ONS has been persuaded to agree to reclassify these social housing providers as private bodies, removing their £70bn debt from the government's ledger, a change that the providers also said would allow them to build more homes.
Analyst Robin Hardy at Shore Capital said any increase in rival channels of supply would be a threat to the quoted house builders such as Barratt Developments, Berkeley, Persimmon and Taylor Wimpey.
"The housing associations are possibly the worst rival they could have because 1) they are very good house builders 2) they do not need to make a margin. This means that they can be willing and able to pay more for land.
"So, supply of housing goes up and that could be deflationary and competition for resource (land, labour and materials) does up which is creates a perfect storm for margins," he said, pointing to existing pressure on margins from rising build costs.
Hardy said the "bad news" for house-builders may be exaggerated. "If the government is thinking in this way they might even consider some of Javid’s ‘borrow to build’ ideas to provide more public sector and crossover output and they might even throw out some help for the SME house builders too.
"Just cutting stamp and tinkering with planning will not be enough in the Budget (in fact that would be both useless and unhelpful). They need to get bold and May might actually mean what she says about fixing housing as she could come out of it looking like a hero. Saving your own skin and doing some real good is political Nirvana."
After a review in 2015, the ONS classified private registered housing associations as 'public non-financial corporations', in accordance with the Housing and Regeneration Act 2008, as the government had consent powers over disposals of social housing assets, and power to direct the use of disposal proceeds, as well as powers over the management of a registered provider through the HCA.