The government’s 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.
The stark warning was issued today by David Orr, chief executive of the National Housing Federation, while addressing delegates at the annual conference of the Federation.
Mr Orr maintains that unless radical action is taken immediately only 1.6 million homes will be delivered by 2020. Based on those figures, the three million target figure may not be reached until 2029.
“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,” Mr Orr said.
“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.”
“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 said that the private developer sector, which traditionally builds around 75 per cent of new homes, has been badly damaged by the current market downturn – with the number of new privately built homes plummeting.
He went on to say that last year, housing associations built 30,677 homes but 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 said 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 said 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 believes 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 said: “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 said 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 measures to build confidence in the mortgage market.
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.