Ministers need to find an extra £20bn if the government is going to fulfil its pledge to build 300,000 new homes a year, a leading business group has warned.
A new report for London First undertaken by leading economics consultancy Volterra estimates it will cost around £68bn from both government and private sector investment, to meet lofty housebuilding targets set by Theresa May at the end of last year. This means finding another £20bn – or a 40% increase – on top of the £48bn spent in 2016 – 17.
The paper entitled ‘Hard Choices: How much should the nation spend on building new homes?' Has found that shortages are most acute in the capital with a 65% increase in housing spending desperately needed. Researchers say the shortage of new homes is pushing house prices up to 13 times more than average earnings and forcing 35,000 thirty-somethings out of the city a year.
The mayor’s new London Plan sets a target of 65,000 new homes a year, more than double what is currently being delivered and Sadiq Khan has recognised the need for a “fundamental transformation” to meet London’s housebuilding target.
Commenting on the latest research, Jasmine Whitbread, chief executive of London First, said the country needed more money from government, more land made available to develop, and for the private sector build in new, smarter ways to speed things up.
She added: “Londoners come up against a brick wall when it comes to finding an affordable place to rent, or fulfilling the dream of owning their own home. And businesses can’t afford the continued drain of talented people away from our capital. The government needs to face up to some hard choices about how to unlock a further £20bn worth of investment if it’s ever going to turn its rhetoric of building 300,000 homes year into reality."
In a speech delivered last November, the prime minister said it was her “mission” to fix the broken housing market and get more homes built across the country. May stated it was her “personal mission” to get building more homes, more quickly and there must be a joined-up effort to get back into the business of building the good quality new homes for people who need them most.
Among other key findings, the Hard Choices report found that of the £48bn invested in housebuilding in 2016/17; £5bn came from public sector and £43bn came from private investment. While 217,000 homes were built in England in 2017 – 18 – an increase from the average of 174,000 homes built a year since 2004.
Ellie Evans, partner at Volterra, added: “The government’s capital expenditure on housing delivery has risen by 20% in the last year which is a positive step in the right direction but, put simply, we need to spend an awful lot more on building new homes. This report outlines how the government could make good on their commitment to building these new homes, but there are no easy options. The challenge of increasing total capital spending on housing delivery by one percentage point of UK GDP is a substantial increase but, with careful planning, an achievable goal.”