NHF: Global credit crunch could delay 2020 housing target by up to nine years

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Tuesday, 19, Aug 2008 12:00

The Government’s ambitious target of building three million new homes by 2020 could be missed by up to nine years unless ministers intervene further in the housing market, a leading expert will warn tomorrow (Friday 19 September).

National Housing Federation Chief Executive David Orr will issue the stark warning at the ICC, in Birmingham, when he addresses the annual conference of the Federation, which represents England’s housing associations.

Mr Orr believes that unless radical action is taken immediately only around 1.6 million homes will be delivered by 2020. Based on those figures, the three million target figure may not be reached until 2029.

Mr Orr will say: “The Prime Minister was both brave and right to put the dire need for new housing centre-stage, and make it a national priority, when he took office last summer.

“He is rightly aware that too many people are living in cramped and unsuitable conditions and that more than five million people will soon be on waiting lists for social housing.”

He will add: “However, with the global credit crunch worsening, and conditions getting tougher for all house builders, it is time to recognise that the very commendable 2020 target is now almost impossible.

“The climate for house building has changed beyond all recognition, for both private developers and social house builders. The number of homes being built is falling, and we need the Government to take further action to put the programme back on track.”

“We have already worked closely with ministers to introduce a mortgage rescue scheme. We now need the Government to be even more radical, and housing associations to be even more creative, to deal with the changed market. If we get this right, housing associations could be in a position to lead the recovery in house building.”

Mr Orr will say that the private developer sector, which traditionally builds around 75% of new homes, has been badly damaged by the current market downturn – with the number of new privately built homes plummeting.

He will go on to say that last year, housing associations built 30,677 homes. But he will add that with the right level of government support, associations could build up to 70,000 new homes a year by 2011 – to significantly boost the chances of the 2020 target being met.

Mr Orr will say that while the Government wants 240,000 to be built by all sectors every year from 2016, experts believe that this year the total number of new homes produced could be as low as 100,000. Last year, the figure was 167,577.

He will say that, based on current figures, unless ministers intervene the number of new homes built each year will stay at around 100-110,000 in the short-term and then rise to 160,00 in the long-term.

Under the Government’s original plans, it was expected that housing associations would build around one third of the new homes. While the social housing sector is the only one currently building more homes year-on-year, Mr Orr will say that this is set to change.

Historically, housing associations have funded the building of social homes by raising more than £1 privately, for every £1 provided by central government. It has been the most successful public-private partnership in the economy.

However, with the cost of private finance rising, and the market becoming more unpredictable, it will be harder for housing associations to raise money privately, and from their own resources. He will say:

“The housing association financial model that has been so successful for so long can’t work in the present broken market.”

To support both private developers and housing associations, Mr Orr will say that ministers must:

• “Ensure that the planning system is made faster and more efficient –

to allow all house builders to build at a faster rate.

• “Consider m• “Make public land available to housing associations at discounted

rates.

• “Support housing associations to buy private land so that when the

market improves they can build to higher rates.

• “Increase the level of grant for each new housing association home –

to make up for the shortfall in private finance currently available.

(Grant rates could fall again in the later years of the programme as finance markets stabilise and lending appetite returns.)

• “Bring forward the entire social house building budget for

2008/9-2010/11 and make it available for housing associations so they can use it for house building now.

• “Pledge continued investment in the delivery of new social housing

of at least 70,000 new homes per year until the three million homes are finally delivered.”

Ends

For more information contact:

• Nick Foley on 07748 931286, or

• Paul Rees on 07974 826587