Affordable Houses or Cheap Spin?

Prime minister, David Cameron, has announced a plan to directly intervene and commission the construction of thousands of affordable homes.

Alice Straker Account Manager

Alice Straker21.01.2016

Described by No. 10 as ‘ground-breaking’, the plan entails building 30,000 affordable starter homes on underused brownfield land with a particular focus on utilising small housebuilders. There was a certain triumphalism in the tone of the Tory declaration. This was not perceived as sensitive news concerning the Bedroom Tax or fracking licenses to be buried on the last day of the parliamentary year, but a positive declaration to herald in 2016. As great swathes of the UK remain affected by continuing and lingering flooding, is this just an exercise in deflection or genuinely good news for the construction industry?

The issues of a lack of affordable housing and a general housing shortage have been burning in the media and the public’s consciousness for some time. The government has made a commitment to build one million new houses by the end of its mandate in 2020. David Cameron’s description of the “government rolling its sleeves up and directly getting homes built”, invokes a rather unlikely image of Eton-educated ministers toiling at the coalface of a construction site. Maybe I am being a bit cynical! I shouldn’t doubt their endeavour to arrest the housing shortage whilst providing greatly needed affordable homes to people.

So, beyond the political posturing and government back slapping, what does this mean for the construction industry in general and especially smaller building contractors? Industry reaction to the announcement was largely positive. Jeremy Blackburn, Head of Policy at the Royal Institution of Chartered Surveyors (RICS), professed the belief the initiative would help “slow current high rates of house price growth” and “bring much-needed new developments swiftly to market.” Richard Donnell, Director of Research at Hometrack, was similarly optimistic, describing the announcement as sending a strong message that “smaller builders have an important role to play” in growing housing volumes. Whilst, Brian Berry, Chief Executive of the Federation of Master Builders (FMB), welcomed the direct government commissioning but called for further action to “tap into the potential of SME house builders” by making “a wide range of packages of land available to the smallest of developers”.

Furthermore, as this government initiative is aimed at smaller developers and housebuilders, it will inevitably stimulate competition and open up opportunity within the sector. At present, eight of the largest housebuilders in the UK provide 50% of new homes. One of the main barriers to entry for these smaller housebuilders is the cost of obtaining planning permission. This issue is circumvented by the fact that the sites that the government has identified thus far already have planning permission. Cutting through this red tape could buoy the SME housebuilder market. Potentially, more entrants will be attracted to join or re-join the SME housebuilder market thus increasing their accumulative autonomy within the industry and ultimately more homes will be built at a faster rate.

This measure, whilst not a commitment to provide additional starter homes than those previously announced, is a late Christmas gift for SME house builders and contractors that should further instil confidence and stimulate growth in the construction industry as a whole as we enter 2016.

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