BUDGET 2017: It was on a site visit to a Barratt housing development in Salford last month that chancellor Philip Hammond had his epiphany.
“They told me three interesting things,” he said. “They have been importing bricks from abroad, would you believe it? Because there are no bricks in this country,” he said. “They are now constrained not by the speed at which they can sell their houses, it’s the speed at which they can build them. Because they can’t get the labour and the skills they need.”
It’s the supply problem, stupid.
In his “make or break” Budget, Hammond appeared to finally start to listen to the industry’s demands for government to address the supply problem with an additional £15.3bn of new investment in the form of capital funding, loans and guarantees to help the industry build 300,000 homes a year (up from 217,000 built last year) by 2020.
Encouraging higher density building in cities and around transport nodes and significant infrastructure investment, such as the £1.7bn Transforming Cities Fund for the Northern Powerhouse and Midlands Engine, are also welcome long-term investments in housing and development which have been missing from government policy in recent years.
The policies represent a significant shift towards long-term supply-side thinking. Remember, it was only at the start of last month at the Conservative Party conference when the government appeared to think a £10bn extension of Help to Buy and an additional £400m of infrastructure investment in the North of England would just about cover it.
Do the proposals go far enough?
The National Housing Federation says on the housing proposals: “They may make an incremental difference but will not deliver a step change in the supply of new homes.”
Bill Hughes, head of real assets at Legal & General Investment Management, says: “In isolation, I don’t think it’s only about money. Access to land and skills are also deeply important.”
The FTSE 100 responded badly to the Budget, with shares in Berkeley Group rising throughout Hammond’s speech before falling by 2% after the announcement of an “urgent review” of landbanking. In practice, the review is probably more a strategy to win over supporters of Labour’s anti-developer rhetoric than an intention to change policy. While the Office for Budget Responsibility has questioned the real impact of SDLT relief for first-time buyers, Hammond probably also planned this as a vote-winning ploy designed to appeal to younger people.
Tough gig
Against a backdrop of gloomy growth forecasts and the looming impact of Brexit on the economy, the industry can be generally satisfied with the direction of government policy on housing, even if a real solution remains elusive.
“It is, in the grand scheme of things, a relatively small amount of money, but it is an important signal,” said Greater Manchester Combined Authority chief executive Eamonn Boylan.
Hammond had a light-bulb idea and failed to fully recreate it. Did the chancellor do enough to keep his job? Most people in the industry would recognise a change of leadership now would probably do more harm than good. It’s not curtains for Hammond yet.
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