Thursday 6 October 2016

... or they could cut out the middleman and just build social housing.

Emailed in by Ralph Musgrave from Property Week:

The accelerated construction fund, announced at this week’s Conservative Party conference, will be used to guarantee housing developments, with the government effectively using its balance sheet to underwrite the risk developers take...

This week communities secretary Sajid Javid said the £2bn fund, which will be paid for through additional government borrowing, would only apply to schemes on public land and would back the construction of an extra 15,000 homes by 2020.

“We will take government-owned land and partner with contractors and investors to speed up house building,” he said. “We will create new supply chains using offsite construction. And we will encourage new models of building to make houses that people want, more cheaply and at pace.”


Sounds like a massive slush fund to me.

Wouldn't it be easier and cheaper just to employ all the sub-contractors whom the 'home builders' would have engaged to build social housing on the government-owned land? If offsite construction is the way forward (cheaper) then that is how they will be built, for half the price that Mr Javid wants taxpayers to pay (£133,333 per unit).

The waiting lists are far too long, so if there is a 'market failure' (Theresa May's phrase of the week) it is here. The effective interest rate on the money spent/borrowed is effectively zero and the principal can be paid off from the rental income/savings in Housing Benefit to private landlords, so it ends up at a modest profit for the taxpayer generally, not a cost.

21 comments:

Lola said...

I saw that Moneyweek thing. I was too depressed to mail it to you...

Ralph Musgrave said...

Cheer up Lola: taking the p*ss out of government is FUN.

Mark Wadsworth said...

L, I did see it before but I pretended it wasn't happening.

RM, sometimes, but not in this case.

Steven_L said...

Does anyone know the big listed house builders are still filling tory coffers?

Bayard said...

"Sounds like a massive slush fund to me."

It is a massive slush fund, sir.

Mark Wadsworth said...

SL you can look up party donations at El Comm

Mark Wadsworth said...

SL first one on the Tory list

http://search.electoralcommission.org.uk/English/Donations/C0246098

Yup, quarter of a million quid from a company in the Blood Homes group.

Lola said...

If you know anything at all about how construction is organised this can only be a massive bung to the 'developers'. Either the LA 'develops' the land - i.e. subcontracts design to an architects, subs out the construction to a building firm, or the 'developer' does the same thing.

OTH I have absolutely no objection at all to genuine 'developers' doing the whole job themselves as long as they take all the financial risk and are taxed properly. that is LVT'd.

DBC Reed said...

Mrs Thatcher's decision to stop local councils building houses at rate of 175,000 per year (late 70's) was clinically insane.

Lola said...

I just found this:

http://www.independent.co.uk/property/house-and-home/property/britain-is-suffering-from-a-housing-crisis-who-is-to-blame-and-how-can-we-fix-it-9113329.html

(Note to self: Do some bloody work and stop playing....)

Bayard said...

That article needs a proper Fisking. I'll do it tonight.

Graeme said...

Do you have a link for that assertion? Given that Mrs T was only in power for 8 months of the late 70s it is a little hard to believe.

DBC Reed said...

@G
The facts are taken from: Theresa May wants to tackle the housing crisis ..in the Independent by its Economics Editor Ben Chu. Are you going to dispute them ?

Lola said...

DBCR. I have not seen confirmation that Thatcher told councils to stop building. What I have seen is that her government prevented councils spending right to buy receipts on building more houses.

Lola said...

DBCR. I have not seen confirmation that Thatcher told councils to stop building. What I have seen is that her government prevented councils spending right to buy receipts on building more houses.

Mark Wadsworth said...

DCB, can we stop blaming Thatcher for everything?

Home-Owner-Ism in its present form started very gently in the 1960s (abolition of Schedule A) and then gathered pace until the final kicker of the 1996 amendments to section 21 of the Housing Act 1988 which made it much easier to evict tenants. Selling off council houses was a Labour idea as much as a Tory one and Thatcher just rode the wave to buy votes.

This all set the scene for Blair-Brown who really let rip from 1997 onwards, Camerosborne were no better of course. Blair-Brown could have done the decent thing in 1997 and turned back the clock but they revelled in it. Brown boasted that people's homes were 'earning' as much as the people living in them.

DBC Reed said...

You are now re-writing history: abolition of Schedule A was in 1963 when the Conservative Party was at a low ebb and was seen at the time as a straight tax giveaway to Tories.It was not a direct attack on Council Houses which the escaped lunatic embarked on.Neither was she 'riding the wave' of a Labour policy to sell council houses en masse as you bizarrely put it.(42% of the Brit population was in rented council houses at one time.Booboo we want the market freedom to spend 70% of our income on rents.) Anything involving Blair is a write-off from the Labour p.o.v.
Your intro to this piece sneers at Theresa May for suggesting there might be such a thing as market failure. The whole principle of the Adam Smith laissez faire system is that it will fail unless there is a land value tax to stop property prices inflating out of control (like now).

Graeme said...

In other words, there is no link.

Mark Wadsworth said...

DBC, most of us on here try to take a slightly more nuanced approach whereas you go for black and white absolutes, everybody who doesn't 100% agree with you is a class traitor etc.

On that basis, I don't go round screaming 'market failure' all the time if I don't like outcomes - in this particular case, the lack of social housing is clearly a market failure on the government's part, it is not doing what would be economically rational etc. So before the govt goes around addressing market failures (i.e. monopolies and rent seeking) maybe it can address obvious government failures. To be honest, most so-called market failures are actually government failures (like taxing earnings and output instead of land values).

I thought that the highest % in social housing was about 30%, not 42%. maybe I'm wrong.

G, no link between what and what?

DBC Reed said...

@MW
Its not me whom you accused of diagnosing market failure but Theresa May who is so nuanced her head is on the wrong way.
I do not think you can call Mrs Thatcher nuanced : she made practically the whole housing market private sector with no inflation controls whatsoever to enrich her supporters. She went on to privatise public services so that the same people were employed to do much the same thing but show a profit. Result: structural disaster.
I cannot understand how she was allowed to get away with it. It took years for the normal nuanced Conservatives to chuck her out.

Mark Wadsworth said...

DBC, you are now doing complete double think again. Once I cancel out all the suppositions, exaggerations and false accusations aimed at the wrong people, it's not clear what your actual point is.