Now we’re all Keynesians again, public money is going to be spent on stimulating demand. But in the case of social housing, what should it actually buy? Nick Raynsford has some suggestions

As is always the case in periods of economic retrenchment, the construction industry is quick to feel the chill. Having said that, the degree to which orders and output have declined varies significantly between sectors. In the past, publicly funded projects were often the first casualties as governments cut back on capital spending to balance the books. This was usually much easier than cutting revenue budgets, even if the long-term impact was more damaging to the economy. If the bitter pill needed sugaring the ministerial gloss usually put on it was that the investment was merely being postponed.

Today, we are in a different world. The cutbacks are coming disproportionately from the private sector, with housebuilding the worst affected. At the same time, the government clearly understands the benefits of maintaining large public-sector investment programmes, whether these involve schools, transport infrastructure or social housing. Having accepted that normal borrowing limits had to be breached to enable the bank bail out to proceed, the government has accepted the same logic for maintaining investment programmes. Indeed, ministers are exploring options for “front loading” some capital spending to help offset the impact of the recession.

However the options are not always as easy as advocates of counter-cyclical public investment make out. Public and private investments are often much more closely entwined than they were in the past. For example, most housing associations have depended on cross-subsidising new homes for renting with the profits of selling homes on the open market or selling larger shares to shared owners. Inevitably, those sources of funding have fallen away, so the number of new homes that associations can provide will be affected.

If the bitter pill of cutting investment needed sugaring, the ministerial gloss usually put on it was that it was merely being postponed

Nor is it the case that housing associations can simply buy up empty properties that cannot be sold on the open market. In the first place, such properties, particularly when they are made up of a disproportionate number of small apartments, may not be suitable for social housing needs, where larger family-sized units are in strong demand. And, as was discovered in the early nineties, when a similar approach was adopted, many of the acquired properties did not meet the standards normally expected by associations and proved problematic to manage and maintain. Nor would it be sensible in social policy terms to revert to large-scale single-tenure developments. We have made good progress in recent years in creating more mixed communities that generally avoid the problems associated with mono-tenure estates. We should not risk returning to a failed model.

This is not to say that public money, deployed in this case through the Homes and Communities Agency, cannot make a real difference in current circumstances. What is essential is that it be used where it will have the most beneficial impact. This may involve kickstarting developments that would not otherwise be viable without an element of public funding. It may involve supporting new tenure options for people who aspire to buy but cannot obtain mortgage finance. It may involve bringing forward some labour-intensive repair and maintenance work that will help retain capacity in the industry. These and other options all need to be explored, with the underlying objective being to target public-sector investment where it is likely to have the best effect.

Similar considerations will apply in most other sectors of the industry, for example in relation to major infrastructure and civil engineering programmes. This is one of the reasons why I have been keen to establish a Strategic Forum taskforce to focus on the current economic situation. The group will comprise leading figures from all sectors of the demand and supply side. So it will be well placed to provide an up-to-date and comprehensive view of the impact of current and likely future market conditions on the industry.

As was discovered in the early nineties, when housing associations acquire unsold private houses, many of them do not meet the standards they normally expect

It will also provide a channel for liaison with government, and will be able to help inform and evaluate options for public investment and other measures to assist the industry and the country through these difficult times. I hope that the taskforce will assist all parties in understanding the full implications of current conditions and in framing the most effective responses.

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