Nick Raynsford: It’s an inept beginning

Housing has been the hardest hit, of all industry sectors, by the recession. In part this reflected the fact that it was a housing market problem - albeit in America - that triggered the downturn in 2007. The Northern Rock crisis that autumn made it very clear that the contagion of the American sub-prime market collapse had spread and would be felt just as harshly here. The subsequent abrupt shift in mortgage lending policies - from feast to famine - accelerated the process and by the spring of 2008 consumer confidence had collapsed and the market was in freefall. The consequences have been dire.

The fear of substantial public sector job cuts could already be having an adverse impact on housing market confidence

From 185,000 homes started in 2005/06, the level of new housebuilding halved, with only 90,000 starts in 2008/09. It would have been even worse if the Labour government had not make a series of interventions designed to stem the collapse and help restore confidence. Measures such as Kickstart to support development schemes which otherwise would not have gone ahead, and Homebuy Direct to help buyers who could otherwise not have afforded a house, contributed significantly to propping up a desperately weak market. Additional funding for affordable and social housing through the Homes and Communities Agency and the council home building programme also helped boost numbers, so we have begun to see a rise in output. About 120,000 homes should be started this year.

One would have thought that the coalition government would have wanted to build on these foundations. They were critical of the Labour government’s housing record when they were in opposition and claimed that they would get more homes built if returned to power. Housing minister Grant Shapps talked grandly of his aspiration to “turn Britain into a nation of homebuilders”.

Instead their actions in the course of their first six weeks in power have prompted claims throughout the housing world that recovery will be stopped in its tracks, housebuilding output will decline, and the social and affordable housing programme will be decimated. It is difficult to imagine a more inept start to a period in government. The coalition has:

• Savagely cut the Homes and Communities Agency’s funding, so effectively halting social and affordable housing investment and the Kickstart scheme.
• Announced the abandonment of regional spatial strategies and the associated housing targets, thereby giving every encouragement to nimby councils to refuse planning applications for new housing.
• Compounded uncertainty and delay in the planning system by axing the Planning Delivery Grant, which had incentivised councils to process housing applications expeditiously.
• Torn up planning guidance on brownfield development and density policy and encouraged councils to reject infill housing schemes that have generated a significant proportion of new homes in many urban areas.

’Ministers don’t seem interested in listening to our views’ is a common complaint. ’They just seem fixated on their own agenda and can’t get their heads around the fact it won’t deliver more homes’

All of these measures are already having a negative impact on confidence and housing output. If you want to encourage increased homebuilding, as Grant Shapps claims he does, nothing could be better calculated to have the opposite effect. Ironically there are many people in senior and responsible positions in housing who were not unsympathetic to the new government and were ready to offer advice and expertise on delivering an expanded housing programme, yet who feel frustrated and ignored. “Ministers don’t seem interested in talking to us or listening to our views” is a common complaint. “They just seem fixated on their own agenda and can’t get their heads around the fact it won’t deliver more homes”.

And this was before the Budget - the contents of which were not known at the time of writing - which seems likely to pose other challenges to the housing market and public investment. One of the more prescient analyses of recent weeks suggests that the fear of substantial public sector job cuts could already be having an adverse impact on housing market confidence, particularly in those parts of the country where there is a higher than average proportion of public sector employment.

So facing a “quadruple whammy” of public investment cuts, paralysis in the planning system, reinvigorated Nimbyism and declining market confidence, prospects for housing in the second half of 2010 look bleak.

Nick Raynsford MP is honorary vice-chairman of the Construction Industry Council and a former construction minister