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Government: we are 'in the business of building houses' - (great) news for housebuilders?

Prime Minister Theresa May has today announced at the Conservative party conference that the government will commit a further £2bn towards affordable housing as part of her ‘personal mission’ to fix Britain’s ‘broken housing market’.

The government plans to deliver a new generation of council houses, the kind of which has not been seen since Harold Macmillan oversaw the build of 300,000 homes a year during the late 1950’s and early 1960’s.

This announcement is potentially good (even great) news for housebuilders, with the possibility of significant new projects to tender for across Britain. But before we get too excited, it’s important to examine some of the key obstacles and issues that will need to be dealt with in order to allow the government to implement its proposed strategy of delivering new social housing en-mass.

1. Flexibility in the planning process

Councils are working harder than ever (so we are told) to approve applications but as the impetus of housebuilding shifts back onto local governments they must be given the flexibility to pursue schemes which serve the needs of their communities – (i.e. through delivering a range of dwellings, tenures, affordable and social rental schemes) rather than being confined by outdated planning policy. In fairness, given the steady decline in council house building in Britain, it is inevitable that the planning system will need to re-adjust to its requirements should we see the increase promised by Mrs May. 

2. Re-investment of right to buy receipts

Another female Conservative Leader, another radical social housing policy – this time ‘Right to Buy’ which at its peak saw 45,000 council houses purchased by their tenants. The figure since 2015 stands at 25,000 and critics say without a Government Pledge that: a) Councils will be able to suspend RTB where appropriate (in order to maintain council housing stock) and b) re-invest 100% of receipts into the social housing market Mrs May’s announcement ‘isn’t worth the paper it’s written on’. It certainly appears to be a valid argument that if social housing quantity continues to be reduced at a greater pace than it is replenished, Britain’s housing crisis is likely to continue.  

3. Access to funding

Committing a further £2bn to fund social housing is one thing, unlocking that funding and making it accessible to Councils, another. Vice Cable recently highlighted the restrictions placed on housebuilding vis-a-vi commercial development under the Public Works Loan Board. At present we are yet to know how this additional £2bn will be structured – i.e. will it be tightly ring-fenced or will it supplement existing pools such as the Housing Revenue Account (which does place limits on borrowing for housebuilding)? If the latter, it is more likely that Councils will struggle to obtain access to the funding needed in order to deliver the quantity of social housing envisaged by Mrs May.

Despite these key obstacles, we should reflect positively on the announcement at this stage and look forward to further implementation proposals which deal with the issues raised above and also the array of further comments/criticisms which are likely to follow Mrs May’s speech in the coming weeks and months. 


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