1.5 million houses or bust…is it really feasible ?

 

Starmer’s latest hobby-horse, which is currently being given an outing in the media by his housing minister and deputy Angela Rayner, would seem to be setting his party up for failure….. 

Almost everyone with any knowledge of the house-building industry seems to agree that under the circumstances we’re likely to see during the remaining 4.5 years of Labour’s term, building this many houses just isn’t feasible. The majority of our Local Authorities, who will be directly responsible for achieving the target in their areas, endorse this view. 

Starmer is thus either a) not listening or b) convinced that he is right and everyone else is wrong (or indeed both!)….Moreover, by setting himself and his party a fixed target such as this, he is virtually guaranteeing his government will be found wanting come the much-awaited ‘reckoning’ before the next election.

So much for the continued ‘crazy’ politics then….but what about the feasibility of building this many houses – why does the plan appear so impracticable ?

For a start, nothing like it has been achieved in UK before – there have certainly been phases of rapid house-building at intervals, notably between the two world wars, and again post WW2, when a lot of the dreadful concrete pre-fabs, that needed so much improvement in the '80s and '90s to make them habitable, were put up. These were followed by the infamous 1960s 'eyesore' tower blocks that proved so unpopular with their tenants. As an added ‘legacy bonus’, many of these blocks are now providing fire risks due to the cladding fiasco, and blighting the lives of their unfortunate leaseholders. 

At the very least we should look back on this unfortunate period of history and learn the lesson: You can’t rush house-building, and that any housing you do build must be a) fit for purpose, b) affordable and c) built where it’s really needed...and not on flood plains! Despite the Tories’ focus on increasing house-building during their term, the best they ever managed was around 178,000 per year, with the lowest around 106,000 at the start of the Austerity 1.0 era in 2010. They never achieved their nominal 300,000 target.

Is our building industry ready for such a huge challenge ? In a word, no…we need to look at some recent history to explain why.

Thanks to post-Brexit restrictions on EU immigrant workers, on which the building trade depended before 2021, and a decline in UK recruiting to the industry since then, numbers entering the building trade have declined. We simply don't have sufficient of the many trades-people with the wide variety of skill sets needed to build the houses themselves, and the infrastructure that supports them. 

Our Blairite obsession since the early noughties with sending everyone to university has a lot to answer for here. The construction industry workforce was briefly more buoyant at the peak of building in 2022, but still only managed less than 200,000. We would therefore need to build up the industry again even to attempt the 330,000 figure that would be required every year to meet Starmer’s ill-conceived target. There is also still a class-prejudice against ‘trades’ generally, which can deter would be candidates from choosing building-related occupations, so this, combined with a marked reluctance of our young people to make a career in the trade, makes this a tall order. 

An additional problem the industry has is that the remaining workforce it still has is an ageing one, with many already over 50 and set to move into less physically exacting jobs and /or retire whenever they can. Even 'our Angela', swanning around ministerially in her hard hat and Hi-Vis jacket for the cameras, won't be able to make any impression on this hard reality. I have even heard talk of co-opting those on long-term sickness benefit to help out – anyone with any experience of the skill level and sheer physical stamina required in being a ‘brickie’ will realise how daft that idea is!

But there is an additional, but very significant issue which is likely to confound the plan. It stems from the fact that government must rely on the private sector to take the leading role and ‘make it all happen’. There is no ‘public sector’ building industry as such. This in turn means that the programme will have to be profitable for the house-builders for them to agree to, and then implement it at the rapid pace required. No amount of government edicts and threats to our hard-pressed LAs will alter the fact that the private sector is in control, and will build where and when it chooses.

The typical ‘mix’ of housing that tends to appear on most new estates nowadays is clearly designed to achieve maximum profit yield, and is largely composed of 3-5 bedroom detached and semi-detached, with a relatively small proportion (ca 15-20% max) of so-called ‘affordable’ 1-2 bed terraces/flats. (These so-called ‘affordables’ still cost upwards of £200k in some areas, so the term is arguably a misnomer). Most of the developer’s profit is made on the more expensive properties, with the ‘affordable’ ones effectively being unprofitable, and these are usually included at the minimum level required to secure planning permission. Now that approval is virtually guaranteed under Labour's new rules, we should expect fewer, rather than more, of them in planning submissions.

The problem is that we would need a completely different mix to satisfy the real housing need we’re faced with in UK. To meet the demand at the entry level, approx. 40-50% of the 1.5M proposed would need to be affordable, and these would need to be priced much more reasonably at say £100k-£150k to enable the people who need them to obtain adequate funding. This combination would simply not be profitable for the developers, who just wouldn’t agree to it, and would either decline to build or go out of business altogether. 

Could the government force the industry to comply ? 

Not really…it’s unlikely they would attempt to use new legislation to force this through, for legal reasons if nothing else. As private enterprises, as we've alluded to above, private sector developers are entitled to choose where and what they build, subject to planning approval. 

As discussed above, Labour’s own efforts have given Local Planning effective ‘joke’ status i.e. anything Whitehall wants, happens...no 'ifs', no 'buts' from Planning. Thus there is no effective brake on unsuitable developments and the restraint of the ‘Green Belt’ of old is no more. Developers can virtually build where they like, including on flood plains and prime agricultural land, and the housing'mix' will be geared to maximising profit. The last 3 weeks of widespread flooding have just shown once again how poorly sites for many new homes have been chosen.

A more likely scenario that might be considered to force 'the project' through is some form of government subsidy to maintain profitability, either in the form of a direct grant for each purchase, or via tax concessions. And make no mistake, this would cost…big-time. 

Just to take our example of ‘sponsoring’ a reduction in the price of every affordable house from £200k to £150k, with a 50% ratio, this would require an extra £37.5 billion from the treasury, dwarfing the ‘Black Hole’ in the finances we’ve heard so much about for the last 6 months and the highly controversial extra tax-take already introduced to cover it. The remaining housing in the ‘mix’ would then need either to be subsidised as well, or sold at an even higher price to maintain profits at an acceptable level in the face of the reduced level of profitable properties.

We, as taxpayers, would of course be the ones to fund all this out of…yes, you guessed it.….ever higher taxes, which this time would have to be levied as personal taxation, rather than on our employers. Reeves and Starmer know that doing this in the wake of October's disastrous budget, and the recent surge in Government borrowing costs resulting from it, would be politically suicidal, so the likelihood of it happening is virtually nil. 

There is another, perhaps less obvious, issue that follows on from this, and that is the availability of the funding needed for purchase. 

Many of the younger members of society who would like to own their own house, but can’t get onto the housing 'ladder' at present are, basically, skint. Due to a combination of low starting salaries, zero hours contracts, cost of living crises, Covid pandemics, etc, etc. they have virtually no savings, and a very uncertain economic future, and most would be very unlikely to be able to raise even the small deposit required to purchase. Moreover, getting any mortgage funds at all, let alone the 90-100% required, with their poor financial prospects would be difficult. 

We all saw what happens when lenders are too free with mortgage funds in 2008, and I suspect our mortgage industry would just not be prepared to take the enhanced risk involved in providing the truly immense amount of capital required to buy 1.5 million homes at current prices (assuming any of them actually get built !). The average cost of a home as of Jan 24 in the UK was around £282k, with England topping the £300k mark. Many of the new builds on our new estates now weighing in at upwards of £350k - I'll leave it to the reader to do the maths.......There is no possibility of the government stepping in here, of course – the vast sums that would need to be under-written are just too mind-boggling.

Is there a solution ? Yes, but it would require time…and a large element of joined-up thinking.

We do need more houses, certainly, but a large part of the problem is that our population is already too large. The first thing we need to do is to put a hold on UK population growth by restricting immigration, at least down to the tens of thousands per annum, and identifying and deporting all our illegals. This would allow the natural decline in birth rate we’re experiencing to start taking effect, and eventually stabilise numbers at the ‘steady state’ figure of around 60 million that might actually be sustainable for our small island kingdom long-term. The problem will just get worse if we don’t do this, given that many of the would-be immigrants (legal and illegal) are likely to swell the demand for scarce cheap ‘affordable’ accommodation even further. 

It is only once we’d achieved this, that we’d be able to adopt a more measured and realistic approach to house building, and focus on accommodating those who are entitled to live here, and are able to afford home ownership, by building the right type of houses....where they are really needed. We'd also need to make sure there is no ‘stigma’ attached to not owning your own house, and ensure that there is enough affordable rented accommodation for everyone who opts out of ownership. Penalising legitimate buy-to-rent landlords and boosting tenants' rights certainly won't help with that, and will just lead to many leaving the field. The shortage created would drive a thriving ‘black economy’ in the rental sector with more ‘rogue’ landlords taking advantage of high demand...and breaking the rules with impunity, leaving tenants actually worse off. Both the private rented sector and Local Authority housing must be adequately supported to stop this happening.

All this will of course take time, and will require continuity of government support. The likelihood of a second term for Labour is declining daily, so we should expect a more right-leaning administration from 2029 with different housing policies. The need for housing won’t go away, though, so the policies adopted now must be acceptable enough to make the transition between political regimes successfully, if continuity is to be achieved.

Updates to follow…

First Published 17.12.24 

Revised 16.1.25