When the Chancellor allocates a little over one page to housing in his 120 page budget report, it accurately yet sadly reflects the Government's commitment to providing affordable housing to those who need it most.
The measures announced by the chancellor are simply too small to have any impact on housing supply. Rather, they have the capability to feed an unhealthy property market, led by unsustainable demand and predicated on rising prices.
We are facing an almost stagnant lack of finance for house builders - something which the recently announced £500m builders finance fund for SMEs will do little to alleviate. What we need is scale. Why is the chancellor announcing with great fanfare a pot of money which will kick-start the development of a meagre 15,000 new homes when the country needs a staggering 200,000.
Of course, the Budget did deliver some positives. The £150m fund to kick start the regeneration of large housing estates through repayable loans is intended to boost housing supply; presumably by bringing back empty homes into use. It's a small but useful measure that needs to be rolled out beyond the three named projects. Additionally there are some promises of new relaxation in planning consents, particularly regarding change of use. These are particularly helpful for developers and are a genuine step in the right direction.
The disturbing thing about this Budget, however, is that it shows that the Government still has not really got to grips with the key issue: that of housing supply. The main thrust of the budget is centred on stimulating demand, via help to buy and soon 'right to build', rather than building supply. Rents are rising at twice the rate of wages to fuel the demand-led housing recovery process, a point confirmed to me by a member of the CTLG parliamentary select committee. When asked if we should cap rents he told me that the committee had considered this but felt that rising rents were the best tool to stimulate housing investment.
The Government’s house building plans will meet less than 12% of the UK’s genuine need and further contribute to the North/South divide. But even worse; they will seek to drive up prices yet again. There is simply no focus on sustainability or affordability. The government has entirely failed to recognise that building houses for affordable rent is the only truly sustainable method of addressing need.
What's my suggestion? For starters, Mr Osborne could support affordable developments by making land available to housing associations. Our own study from November 2013 found that more than 50% of housing associations in the UK would like to build more homes in 2014, but are being hampered by planning restrictions. He could cap rents and encourage investment into new supply; the two measures are not incompatible. Mr Osborne could allow a depreciation allowance on social housing stock as they do in Germany.
The Government as a whole could change housing provision from an investment model into a supply model, the opportunities are almost endless, however, such measures seem rather unlikely.
Instead, I fear that we are in for a slow and painful recovery, particularly in the private rented sector. In fact, this budget practically guarantees it.
Phil Shanks is CEO of Houses for Homes.
