How the government will tackle impossible house prices in the South and impossible houses in the North
This month, John Prescott will reveal his Communities Plan: the key statement of the government's thinking on what sustainable communities are and how they should be achieved. But however big and bold the deputy prime minister's ideas, do not expect them to have much impact on the homes being handed over to occupants this year: the plan will not be fully realised for 30 years.

In the meantime, housing providers will continue to struggle with the consequences of undersupply in areas of high demand – in 2001, housing completions stood at 162,000, their lowest peacetime level since 1924 and far below the 220,000 needed to keep pace with household growth. Last year's total will be little better – in the first eight months of 2002, completions were up just 0.9%.

In the private sector, the housing market is showing some signs of softening, most markedly in London, and a few prophets of doom have been predicting massive price falls in some of the capital's classier postcodes. The consensus among the forecasters, however, is that prices will continue to rise overall, albeit moderately. Agent FPDSavills predicts a national inflation rate of 12% (6% in London) for 2003. The canniest South-east developers, therefore, will be targeting those trying to climb the lower rungs of the property ladder, where greatest buyer interest is expected.

But slowing of the market in London is still unlikely to bring property prices within easy reach of the teachers, nurses and other low income workers who need housing. "We are building up a huge problem. We are building too few houses," says Richard Donnell, head of residential research at FPDSavills. "Not enough effort is going into getting land for housing where it is needed."

That is an issue that is to be addressed by Communities Plan and London mayor Ken Livingstone's draft plan for London. Both will tackle the undersupply of affordable housing. As more than twice as many affordable homes are sold to tenants than are built, the "right to buy" has been called into question. Having raised the prospect of limiting it last year, the government has now commissioned research into the consequences of doing so.

Northern England has the opposite problem: too many houses of a type that nobody wants to buy in areas nobody wants to live. Housing market renewal gets under way in earnest this year with PFI pathfinder projects, but the task of transforming streets of abandoned terraces into the new Hulme should not be underestimated. "It is a huge job to turn round a failing housing market," says Donnell. "It is about more than housing. It is about other issues like employment. Each area has its own reasons why it is failing."

The government's determination to bring existing homes up to a decent standard is also making slow progress, as local authorities struggle to finance improvements. Until last year, large scale voluntary transfers, which took council homes into housing association ownership, were the most popular route: almost 600,000 homes were so transferred. But this process depends on tenant approval, and a succession of no votes have thrown it into doubt. Since then, government has loosened the restrictions on other routes, and attention this year will turn to arm's length management organisations, which allow councils to retain ownership of their homes, and to smaller-scale transfers. But there is still a lot to be done, and the 2010 deadline by which government wants homes to meet the decent homes standard is a year closer …

Average prices for a British semi-detached house

Isle of White
West Glamorgan