More new build homes would cut government borrowing

Date:

Tuesday 23rd March 2010

23 March 2010

The construction of an additional 100,000 new homes each year would generate around £23bn more in government finances over the life of the next parliament, according to data compiled by the housing investment consultancy division of Savills.

The research revealed that such a move would improve tax revenues, create almost half a million jobs and deliver much needed homes.

Noughties housebuilding peaked in 2007 with the delivery of 200,000 new homes, but fell back sharply in 2009 when less than 120,000 new build homes were delivered and only 90,000 new flats and new houses started. It is unlikely that this year's total will pass 100,000 units. The calculations are based on current housebuilding forecasts being boosted by the delivery of 100,000 additional new homes each year between 2011 and 2015.

The paper, The Case for Housing, based on analysis by Savills and supported by the Oxford Economics UK Macro Economics Model, sets out the measurable economic impacts that an additional 100,000 new homes would deliver, and concludes that it would add 1% to the UK's GDP growth.

The benefits to the economy would include the creation of almost half a million jobs, savings to benefit payments which would rise to £1.1bn annually by 2015 and, again by 2015, a potential annual boost to tax revenues of £5.8 billion potential boost. This would in turn reduce government borrowing, improve economic confidence and, potentially, reduce the cost of borrowing.

"Housing delivery is key to the success of the UK economy - more homes, more jobs, more tax take, it is a virtuous circle, " says Philip Callan, director of Savills housing investment consultancy. "We know that the demand is there. If more new houses are built people will rent or buy them. We need to act to remove the barriers caused by the economic downturn and reduced mortgage supply situation, with banks remaining less willing to lend. We need to break out of this downward cycle and go beyond the initial action that the government has taken.

"Although many will continue to aspire to own their own home at some point, there is strong demand for rent, with over a million more rented homes provided by buy to let. We need to shape and harness that demand by creating a strong market rented sector and use this to boost overall supply. The paper makes the case for housing and suggests action by government to provide incentives to produce new homes".

The Barker Report and others have highlighted a requirement for three million additional homes to meet the needs of a growing, ageing and increasingly single population.