Housebuilding - Developer Bypass Required

The Government have announced two projects this week to assist the construction of more homes. One, will provide money for small builders to help them compete with the big boys. The other will identify sub-standard land and to improve such ready for building. Worthy endeavours albeit tiny in the scheme of things.

Interestingly, the mainstream press all but ignored these announcements. Why? Because we've heard it all before and even a headline hungry media are now tired of repetitive, regurgitated press-releases that purport to solve the housing crisis but that inevitably end up being confined to the Whitehall Graveyard, a fictitious place that if it existed would be full of headstones imprinted with failed, hastily published housing initiatives.

Currently, annual new homes delivery sits at 187,000 units (2017). Whilst the Government's target is a whimsical 300,000. Yet, awkwardly, the UK has not seen that level of supply since the 1960's and so whilst ambition is evident, reality is rather further away.

House-building is static. Limp-wristed even, whilst our country's population grows by c.270,000 people each year and, now, 28% of total households are lived in by single occupants, up significantly on 20 years ago.

More people, less homes.

At the same time as this slow-motion starvation unfolds, one part of the mix has benefited. Massively.

Which is that most of the UK's housing stock is built by just 15 companies, around 100,000 units annually. Barratt Homes; Persimmon; Taylor Wimpey; Bovis; Bellway; Berkeley Homes; Countryside Properties; Crest Nicholson; Cala Homes; Redrow; Kier; Galliford Try; L&Q; McCarthy & Stone and Ballymore, roughly in that order.

Yet in 2017 they owned or controlled over 500,000 plots of land between them. They are delivering upon just 20% of their inventory each year.

Any GCSE Economics student will explain that a commodity's price is a consequence of the balance between supply and demand and therefore it is wholeheartedly in the best interests of the developers to gently feed just enough homes into the system to ensure that this number remains below demand in order that prices continue to rise. A bit like OPEC, the oil cartel. The result is maximum shareholder value regardless of the consequences on society whereby not enough properties are built.

And talking of fuel, there's Help to Buy. Nitrous oxide for the housing market introduced by the current government in 2013 and a scheme that has assisted over 170,000 people to buy. This sounds great, benevolent almost until you remember that the housing problem is not one of lack of demand but rather an acute shortage of supply. A bit like your local baker running low on bread but discounting the remaining loaves in any case rather than just baking more. The result is that lots of people go hungry, but some people benefit disproportionately.

Indeed, benefiting disproportionately is exactly what has happened where housing is concerned.

The table above demonstrates the benefit of HelptoBuy to developers. Whilst they have had their foot on the throat of housing supply, despite five times as much land being available to them than they use, their profits have exploded by an average of 384% to nearly ￡5bn per annum since Help To Buy was launched. Many of these developers' CEOs talk quite openly about how 'vital' Help To Buy is to the market and at the same time, financial analysts attribute around 40% of developer profits to the scheme currently. A tax-payer subsidised house builder profit-fest. A reverse Robin Hood almost?

So, to me it's pretty evident where the problem is in the system. And therefore what the solution is...

This Sunday 23rd September I am speaking at a Labour Party Conference fringe event (Progress) to set out how we should tackle this huge issue, an issue that will have a profoundly detrimental affect upon society, politics and domestic economics if we do not act.

Here is the solution in a nutshell:

Developer Bypass - if we can't beat them, join them?

• A national house building company (Help To Build Plc) that is owned by the tax payer and run like a private house builder with an independent board of directors from the private and public sector and an experienced management team from the housing sector
• A 5 year strategy that outlines where homes are needed and of what type and tenure (the opportunity here is that unconstrained by bottom line and just housing delivery, Help To Build can partly focus on shared ownership/affordable purchase; build to rent; social rent; rent to buy etc at volume and not just as a throwaway tit-bit as a function of often renegotiated S106 agreements). Target 100,00 additional new homes per annum
• Identify developable land amongst the 180,000 local and national government land assets that they currently preside over
• The remit is to build homes for resale and for social good but in proper proportion based upon need, not profit. The financial surplus from the private built sales is then ploughed back into future construction
• Build what's needed, where it's needed and when it's needed. Developers duly bypassed and left to their own devices, bottlenecks and all

Now, those that know my politics will wonder why I am about to be sat alongside the Labour Shadow Housing Minister John Healey MP and a Guardian journalist in order to expound my strategy. It's not my natural political home. Well, because I don't care about ideology or politics when it comes to fixing the problem of broken housing supply. My solution may well be called left-wing and of a 'big government' mentality. But I don't believe it is as I would argue that it's actually a free-market solution emanating from the public sector with a private sector mentality. But I don't really give a toss about the ideological label, frankly. Ideals just get in the way.

Both of the main political parties have failed us on housing for decades. And my honest belief is that if they do not remedy that failure now, the party that most evidently demonstrates that abdication of responsibility will be punished at the ballot box by those future generations that feel let down, ostracised and pushed away from home ownership.

It's about time that governments did what they are elected to do on housing and stopped preening their feathers on the sidelines whilst prices rise and every accommodation sector suffers from undersupply. The solution is workable and, ironically, uses the very land that politicians have controlled all along on our behalf. We just need to go around the problem of house-builder lethargy for profit.

Obvious really.