A sharp decline in new home building by housing associations and local authorities this year could wreck the government’s plans to build a million new homes by 2020.
Housebuilding by the public sector slumped in October, according to official figures, adding to a series of month-on-month falls going back to the election that undermine minister’s claims of a revolution in house building.
George Osborne told MPs in his autumn statement last month that measures to support housebuilding would add 400,000 affordable homes by 2020. His comments followed a claim by housing minister Brandon Lewis that a successful housing policy would result “in a total of something like a million homes” by the end of the parliament.
The National Housing Federation, which represents housing associations, said the downturn was the combination of several factors, including the chancellor’s decision in his first budget of the new parliament to cut housing association rents by 1%.
“Rents were cut by 1% in the July budget and that meant housing associations had to look again at their budgets,” said a spokesman.
He said new home building also suffered from the impact of the government’s three-year funding cycle for housing associations, which creates a boom and bust in the sector. The latest cycle came to an end in the spring.
A new funding plan runs to 2018, but homes due to be built under this latest scheme have only just been commissioned, causing a long period of low activity over the summer.
“It would support housebuilding if funding was over a long period than the current three years because there would be greater certainty. It is this factor and the 1% rent cut that have undermined certainty,” he said.
Osborne also announced a right-to-buy scheme that will force housing associations to sell homes to tenants for below market prices. The federation said that this decision would also force housing assocations to review their finances, but had probably not yet affected the level of building.
The lack of public sector building since the banking crash has already left a huge shortfall in new homes. Fewer than 460,000 homes were built between 2011 and 2014, despite forecasts that 974,000 houses were needed.
The ONS said public housing output dropped from £458m in April to £361m in October. Output by the private sector has remained flat during the same period at around £2bn.