Homes for a million

OK, OK, OK. I promised that I would start my blog next week but something has come up in the news today that has caught my eye and producing only one post a week was not one of the rules that I said I would stick to.  Occasionally there will a special souvenir pull out…this is one.

It has been widely reported this morning that the government is to relax planning laws and regulations in an attempt to inject some adrenaline into our flagging building trade.  I’m not going to argue with the principle that we are on the cusp of a real house building crisis in this country but I would argue that the failure to build houses is not a result of an overly burdensome planning regulatory system.  The Local Government Association has quoted today that there are planning permissions out there for 400000 new homes in the United Kingdom that are not being executed…so let us read that again. 400000 homes that have “got through” our overly burdensome planning regulations – homes for over a million people. I think the government needs to look long and hard as to why these dwellings have not been built. I have my theory which may not be based on any real evidence but I do think it’s worth considering as I think that there may be an element of truth to this.

House prices have rationalised. I don’t like the term “crashed” because its frankly not the case. But nonetheless, house prices now are a margin below where they were in 2008 yet the cost of constructing a dwelling is the same as it was in 2008, possibly more with the increasing cost of materials and fuel etc so effectively the profit margin in constructing new dwellings is diminished from where it was.  Now the issue is, that if prices are expected to rise then the big house builders are more likely to sit on planning permissions in the hope that the market picks up, resulting in a higher profit for the company and a better return to the stock market.  Don’t get me wrong, you can still make a profit on building a house but the return might not be what it was some years ago.  I can say with a certain degree of certainty that the building trade for one off developments of 2-3 dwellings has not decreased significantly but these are generally in the hands of small building firms who are generally local. This leads to my assumption that there is a certain element of greed at play amongst the big developers.

To me this smacks a little bit of turning the blame once again on the public sector rather than seeing this for what it is which I believe is a failure of the free market.

I am not sure what the solution to this problem is but I am pretty sure a further deregulation of the planning system beyond that of the National Planning Policy Framework launched less than six months ago is not going to be the cattle prod to get house building going again.