House Building Shortage

House Building Shortage, Or Not

House prices today are considered astronomical, and the accompanying shortage a national crisis. Government has called for the construction of one million new homes by 2020, and the responding building figures from the industry show nothing like that figure is being built at all.

After the Second World War, house building was running at around 300,000 units per year, and even given the current population of the country, house builders are unable to provide half that number.

Burgeoning immigration, living longer lives, the increase in single occupancy and shortening supply of social housing, could surely be met by increased house building, which in turn, by the laws of supply and demand, ease the price of dwellings.

That the majority of house building, after the consolidations of the last twenty years, is in the hands of around half a dozen large builders, is probably why feelings are running against them over the price of houses. There are accusations in the air that they will not build more than the current price structuring will allow, to keep the market “high”.

It may be possible to trace the beginnings of the housing “crisis” to the Thatcherite Government of the early eighties, with the right to buy under the Housing Act 1980. This gave tenants of council housing the right to buy the property at an advantageous price, putting a whole new social strata in the realms of capitalism.

Another effect was to stop councils building social housing, which they had become very productive at. They were building as many, and for some years more, than the private sector, and when it stopped, the private sector did not take up the momentum left by the vacancy.

There is another school of thought which not only exonerates the building industry but places the causes of the property price risings in very different hands.

The simple free market doctrine of supply and demand, that is to say, build lots more houses and the prices will become more affordable, do not necessarily apply in the property market.

It may be, that the housing supply is not a problem, but the supply, or, over supply of money is the problem, with financial market investments barely keeping above inflation, property has become the place to put money.

This indicates that whatever the supply of housing, actually obtaining it may still be a prohibitive problem, and perhaps keeping the money supply in the stock market may be the answer.