Don’t rely on the Market to Deliver Housebuilding Goals – Ian Lavery MP

“Could it be that the actual ‘blockers’ are the ‘builders’ themselves?”

By Ian Lavery MP

The Labour Government is adamant that nothing will stop it reaching its Manifesto promise of delivering 1.5 million new houses by the end of its five year term. I of course support this aim, but I fear it faces one possibly fatal hurdle –the vested self interest of the giant house building companies. Expanding the market with many more affordable new homes would  damage their profit margins, vastly more important to them than the social goal of decent housing for all.  Could the corporate directors in whom the Labour Leadership has placed such faith try to sabotage this crucial policy offering?

The UK has suffered a housing shortage for years as a result of previous Governments mostly relying on the Market to deliver new homes. The Conservatives tried to force an increase in homes built by the indirect method of setting new homes targets that local authorities were mandated to achieve, but watered this down significantly this in December 2023 in the face of voters opposition and industry complaints about planning delays.

Labour has returned to this mechanism, imposing eye watering targets on many councils and consistently blaming slow planning decisions as a major impediment.  But if the builders do not want to build what can councils do to force them? The Labour Government’s mantra of backing “the builders, not the blockers” is heard constantly, but could it be that the actual “blockers” are the “builders” themselves?

The largest house builders, according to the Competition and Market Authority, are sitting on 1.17 million plots of land, a significant proportion of which already has planning permission. Berkley Group has the largest of these so-called land banks, worth an estimated £32.47 billion. Builders are sitting on their vast land holdings for one reason  – increase profit margins by keeping  supply low when demand is high.  

The Government says it will force Builders to use their land banks by threatening to remove permanently existing planning permission if that property is not used for house construction within five years. Builders currently must commence construction within that period to retain planning consent indefinitely, with a ridiculously low bar for establishing that work has started . They just have to do is dig a ditch.  Is it not probable that the Builders will just delay planning applications to get around Labour’s current proposals? 

A more effective “stick” would be a land tax based on full market value on all unused land held by Builders for more than a couple of years, with market value being based on its worth with planning consent, whether or not such consent has been granted. I predict that such a threat to the Big Builders would see a lot more shovels in the ground very quickly.

Another big problem that the Construction Industry cites with some validity is the lack of skilled workers. Again the construction industry created this obstacle itself.  For decades instead of training UK bricklayers, plumbers, etc., the builders simply imported cheaper skilled labour. Brexit has curtailed the largest source for such recruitment, but there is no evidence that the industry is pouring money into new apprenticeships to fill the gap. Labour has to make them. There is an existing apprenticeship levy on the larger employers regardless of their industry.  Labour should apply an additional levy on the building industry and set targets of the numbers of new apprentices starting each year.

As is often the case, Labour can benefit by looking at its own history for inspiration that may help it deal with these dilemmas. The last time a Government reached the target of 350,000 new homes built in a year was in 1968 under the Labour Prime Minister Harold Wilson, who saw 425,000 built in one year. There was a very important difference between then and now, some 50 years later–  half of those homes were council houses built by councils’ own builders.

The effect was that although house price inflation wasn’t particularly low because of rapidly increasing prosperity creating demand, there were plenty of affordable homes available and homelessness was low, with only just over 9,000 families in temporary accommodation in the UK, as compared to over 100,000 now.  Council houses were built in large numbers simply for families to make lives in, not to be investments based on ever increasing values caused by restricting the supply of new dwellings.

Obviously, things have changed massively since Wilson’s day.  It is unlikely we can expect to see local authority direct labour organisations capable of such large scale projects and people’s desire for home ownership will remain higher than in the 1960’s. Regardless, if social housing is expanded significantly using today’s means the effect would be to take the heat out of the market and make both owner occupation and social housing more available. Labour’s present house building plans put almost all of its emphasis on enticing the private sector to build, with social housing being treated as the second string.  It is imperative that the balance is shifted significantly more towards the public sector and large amounts of additional money be made available so councils can employ local small and medium sized firms to build the dwellings needed.

The Government’s policy in England of reducing the discounts available and increasing the number of years occupation required before council house tenants can exercise the right to buy is a good first step.  Well over 40% of all council houses bought under this Thatcherite policy are now in the expensive private rental sector. Allowing councils to use the money from sales to build new homes that can’t be bought is also very positive. Nevertheless, to have a notable impact much more than the amounts of grant money currently available to councils will have to be found.  It would be money well spent and contribute a great deal towards Labour’s economic growth target.

Labour should allow councils increased powers for the compulsory purchase of empty properties, of which there are vast numbers, as renovation is a cheaper way of creating social housing than new builds. The law presently means they can only use such powers as a last resort, leaving scores of flats and houses owned by absentee landlords left to rot.

The Government is doing badly in the polls and Reform is seen by many working class voters as the only alternative.  To counter the rise of the populist right Labour has to be bold and radical, and put the needs of working class people above the interests of big business.

If it relies on the big construction companies to reach its goal of 1.5 million homes it will fail and further alienate its former voters. The 1.5 million new homes looks like becoming a pipe dream, unless the Government frees itself from its obsession with orthodox market based policies and looks to more socialist public sector solutions instead.

• Ian Lavery is the MP for Blyth & Ashington, you can follow him on Facebook, Instagram and Twitter/X.
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