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Coffee House

Housebuilding slumps

16 August 2012

5:30 PM

16 August 2012

5:30 PM

If ministers needed any more encouragement to improve the supply of new homes in this country, today’s figures on house building starts and completions from the Communities and Local Government department might just do it. Housing starts in England in the three months to the end of June fell by 10 per cent on the previous quarter. If you compare the figure for starts in this quarter to those in the same quarter last year, there has been a 24 per cent drop. The number of completions has also fallen by five per cent between the first and second quarters of this year, but has risen seven per cent on last year.

If you burrow into the figures, which you can find here, you’ll also see a sharp drop in the number of housing association homes being built since last year. In the second quarter of 2011, 5,680 housing association properties were started, but in the second quarter of 2012, there were only 3,080 starts: a drop of 45 per cent. All this suggests a serious slowing-down of housing supply. Ministers have pointed to rising starts in the past when defending the government’s housing policies as they suggest more supply coming down the line, but a fall in both completions and starts suggests a real blockage in the system. The graph below shows there has been a creeping recovery in annual housing starts since their crash in 2008, but the dip revealed by today’s figures is rather less encouraging:

Housing minister Grant Shapps points to the £1.3 billion of investment in kickstarting stalled housing developments, and the government’s new affordable housebuilding programme. The line from Number 10 over the past few months when figures like this have emerged has been that there was always be a glitch in the system as this government’s new policies take a while to bed in, but it is going to become increasingly difficult to continue arguing this as this parliament wears on.

As Coffee House has been reporting over the past few weeks, the Treasury is already on the case when it comes to increasing housing supply, and is pushing for further planning reform. David Cameron has also intervened, and has sent out Downing Street staff to work in CLG. The department, meanwhile, is worried that the flow of credit is the problem, not the planning system. Either way, expect an announcement early in September detailing how the government will attempt to use housebuilding as part of its push for growth.

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