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Is mere house building enough to beat the housing crisis?

Published by Phil Morgan on Monday, November 5th, 2012 at 10:09 am

And yes there is a housing crisis. It works on many levels – an inflated housing market, a shortage of lending, a growing shortage of housing and the emerging threat of welfare reform.

The National Audit Office has just published its report into Welfare Reform. It reveals two main areas of concern. Firstly that the gap between welfare payments and the Local Housing Allowance will mean 1.4 million people in the private rented sector will either have to pay more or move. Oh and that gap is growing by the way. Secondly that a further 660,000 tenants will be worse off under the bedroom tax and in turn will also have to find more money or move. And the very homes they want to move into are the same homes that the displaced private rented tenants will also be seeking.

Add into the mix that private rents (including mine) continue to rise, house building continues to drag 100,000 behind what we need to keep level and Affordable Homes being funded by the very Housing Benefit being reduced. So yes I think crisis is the right word to use. And as with all crises it looks like it will get far worse and no obvious sign of how it will get better.

Taken in isolation the separate policies of reducing welfare benefit and managing to build more homes with limited resources are plausible. However together they expose the lack of a coherent approach to housing – one Grant Shapps did think about before he got distracted with ever more career enhancing headlines.

So the obvious answer is to build more homes. One favoured by the NHF, the CIH and just about everyone else at different times. But would building more homes in the current market be enough? If we built an extra 50,000 a year more than now would that change of dynamics of the housing market to deal with the issues above?

I wonder if the issue is the still inflated market in which housing operates and the money that has been sucked out by undoubtedly grateful homeowners with massive gains over the last 20 years. So let’s come up with a solution that manages the housing market including new build rather than pretend that there is a panacea of house building alone.
Could this include a statement to manage house prices down in real terms over the next 10 years by 30%? Would a Mansion Tax help cap high prices and fund the extra new build?



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