Public & Private

In a logical market, a company that wants to increase profits should increase production and sales. However, in the bizarre world of housing, the opposite seems true. Housebuilders are producing fewer homes than ever and yet their profits are soaring.

This worsening cyclical market is happening almost entirely because of the government's failure to tackle market intervention, in the form of the planning system's refusal to allow housing supply to match need.

I say "almost entirely" because most economists, when asked why property prices continue skywards, generally talk about low interest rates and a buoyant economy, rather than the long-term issue of supply.

Unfortunately, these short-term factors offer the perfect excuse to brush the supply issue under the carpet. So too does the avalanche of initiatives, focus groups, quangos and pathfinder projects, ostensibly designed to find a solution to Britain's affordable housing crisis but which in reality do a much better job of putting off commonsense, but politically difficult, decision-making.

A good way of establishing how well an issue is being fudged is to look for new words or definitions. Hence council housing became social housing and now "affordable" housing; low-paid public sector workers in emotive professions – teachers, firefighters and nurses – became "key workers", getting special help while other low-paid workers could go hang.

However, in terms of really twisting the truth, top marks have to go to the individual or group who suggested the housing shortage was down to housebuilders who, strangely enough, have no wish to build houses.

Their irresistible logic was that, with prices soaring due to undersupply, developers would be better off building fewer homes and hanging on to their appreciating landbanks.

Housebuilders don’t like being held to ransom by a cyclical housing market any more than homeowners

As is so often the case, this theory was put forward without a scrap of evidence to back it up. In fact, the only independent investigation of this pointed in completely the opposite direction. The report, by property consultant FPD Savills, says: "The supply could be as little as one year. This is a very low level of raw material stock to have in hand.

"We do not believe that most housebuilder-owners can afford the luxury of holding on to land that is capable of being developed."

I doubt this presentation of fact will deter the anti-housebuilding lobby – it certainly hasn't in the past.

The inevitable question now faced by the booming housebuilding industry is: "Why are you complaining"? The simple answer is that we don't like being held to ransom by the cyclical housing market any more than homeowners.

When times are good for owners, they're good for builders, and vice versa. This cycle is driven by the stampede for housing which then implodes when the debt burden becomes too great or interest rates rise.