Not Enough House Building?

House Building Numbers

House prices in England are at their highest levels ever, and only show signs of increasing, albeit possibly more slowly than the previous five or six years, which have seen phenomenal growth, particularly in the south-east, absorbing the “London effect”.

The cry from many quarters, including the Government, is to build more and more houses as soon as possible, but the theory that the greater the supply, the easier the price structuring does not apply in the housing market. Property does not behave like a traded commodity such as grain or tin, and many factors affect it.

To look at house building trends it is necessary to begin in the years following the First World War. The seismic changes in social attitudes and expectations, and the virtual absence of any building works for the duration of the war, led the Government to become fully immersed in the project to provide homes.

The “Addison Act” in 1919 was the catalyst which saw the introduction of corporation (council) housing, based on Government subsidies to local councils, or, authorities, to enable new housing to be sustained by the tenants, the local rate payers, and the treasury.

The private sector and council builds, constructed up to 350,000 homes per year, with expanding new towns and suburbs. With a dip or two in markets, the trend continued until the hiatus of the second war, and by the ‘50’s, councils were constructing over 250,000 homes per year, and by the ‘60’s, output between private and public sectors was around the 400,000 mark.

In the early ‘80’s, the Government housing act gave council tenants the “Right To Buy” their dwellings, which brought a cash bonus to the treasury, but in effect, all but stopped councils building houses in the public sector.

Busts and booms in the economy shaped short term house prices until the new millennium, where the industry has struggled to build around 150,000 per year and prices have roughly doubled, and in some cases, far more than that.

There is a sector that is questioning the correlation of prices to housing production numbers, and that the demand is instead, fed by the availability of money for house buying. The rising prices since the ‘90’s have been brought about because the available amount has risen substantially.

A weak stock market has seen financial investment in established bricks and mortar, and a growth in the buy to let sector. The answers as this group of observers see them, lie not in frantic building policy, but in an alteration of the creation and distribution of money, and changes to tax and investment policies, changes to the benefit system and credit control, along with local and regional planning.