New scheme needed to protect housing sector from collapse

The Centre for Policy Studies has warned that the coronavirus crisis is likely to make it impossible for the government to hit its housebuilding targets and exacerbate the already devastating impact of the housing crisis.

Construction sites have returned to work after the initial impact of coronavirus, but the think tank has warned that most are simply finishing off existing projects. Cautious estimates suggest housebuilding could fall by around 38 per cent over the next year, leading to 76,000 fewer homes being built. The impact could be far worse if the economy fails to bounce back, leading to a near collapse of the sector.

In the wake of the 2008-9 crisis, it took six years for supply to return to previous levels. The CPS says that a repeat would deal a devastating blow to the government’s plan to fix the housing crisis and encourage mass home ownership.

The centre-right think tank has developed an emergency plan to support the sector, suggesting that ‘Help to Build’ would help all developers to weather the storm, ensure continuing housing supply while saving smaller and medium sized developers from ruin and having to make hardworking employees redundant.

Under the scheme, house builders would be allowed to access grants up to a maximum of £25,000 for each new-build property (capped at a percentage of the home’s value). Given property prices we expect the grants to average around £20,000 – if capped at £3 billion, as the report suggests, this would ensure the construction of around 150,000 homes next year.

In return for using this scheme to support sales, housebuilders would be required to continue building at similar levels to their existing pipeline, ensuring that both the housing supply and construction employment are maintained through the crisis and its aftermath at a relatively low price.

Alex Morton, head of Policy at the Centre for Policy Studies and former Special Adviser to David Cameron, said: “The UK housebuilding industry is not just economically and socially vital, but particularly vulnerable to the impact of recession. We cannot afford a repeat of the past two economic crises. This scheme will keep housebuilding going over the next 12 months, while laying the ground for further reform, and avoiding a catastrophic slump in supply. This scheme - or something very much like it - is the most cost-effective way to protect jobs and keep Britain building.”