What's wrong with building more houses? There is obviously a massive demand for truly affordable housing

I've previously sketched out a way to build affordable rented homes that would cost rhe exchequer precisely buggerall and would then lead to stimulus in employment and a reduction in housing benefit.

and yet, people vote for 'em time after time. i know, just look at capita, fingers in so many public sector pies, their website is a feast of the great work they're doing in the public sector. all down to that fella aldridge (he builds schools too, well academies). but it's all a swizz, he gave pots of cash to the tories...oh, wait, sorry, it wasn't the tories, but blair and his chums. i must have been thinking of bernie ecclestone and the whole peddling cancer for cash affair....no, wait, he was giving cash to the labour party too.

i'm sure which ever marginal political party you give your vote to has firm views on this sort of thing, and i'm sure you'll agree that anyone decrying the tories for being in bed with big business while voting labour is nothing more than a hypocritical oaf.

Its exactly what is needed actually and it was a solution that The Thatcher employed from European money in the late 1970s, I should know, the company Iwas working for as a surveyor virtually built the whole of Washington New Town on European money, plus the Tyneside Metro, one involved several phases of private and council house building (and you thought the Tories never built council houses) plus a huge network of roads, and the other one of the biggest public transport infrastucture spends in our lifetime.

The building trades still involve large numbers of manual workers, skilled and unskilled, there are no machines that build houses or lay roads while one or two people stand machine minding and any decent house building project will involve dozens of private companies employing hundreds of workers, on each site, all of them taking home income, paying tax and spending money in shops.

I can't think of a quicker way to get government investment into employment and into increased retail spending within the UK economy, and end up with substantial infrastructure benefits.

The only investment that government would be required to make, in my housebuilding scenario, is time and will. No money ever need change hands. It may require government guarantees but it wouldn't necessarily cost them a single brass farthing.

In fact the only thing that I can think of that's preventing them from initiating such a scheme is that no f[iu[/icker will get rich from doing it

How is anyone going to get the money to buy them - banks are requiring deposits that are beyond what most first time buyers especially those looking to buy 'affordable' houses can muster.

Or are you suggesting these as an alternative local authority housing?

How many additional people with this employ? The government needs to find a way of stimulating manufacturing - turn raw materials into finished product is both people hungry and if run properly very profitable.

Roads don't use huge numbers of people - the majority is done by large machines - houses yes but it is a long term investment that takes years to see any benefit. The demand for affordable housing is mainly in and around London an area of dense population - where is the money going to come from? The government will have borrow huge amounts if you believe in Keynesian theory.

Yes thats because there is a shortage of the supply of housing. If you build more houses the price will fall.

depends where you build them

No, it depends more on what quantity they are built in.

A couple of thousand houses dotted around the south east won't change much in great scheme of things, building them in the tens of thousands country wide just might.

The demand for affordable housing is all around the country and as the parent of a child who is looking for an affordable house of her own I can see the evidence myself.

Truth of the matter is that there is a small government backed scheme to make new housing affordable to first time buyers called NewBuy which offers guarantees to lenders to allow those lenders to offer 95% mortgages.

Unfortunately its only available on a very limited number of developments and properties although I understand (and correct me if I'm wrong) that its actually doesn't cost HM Gov anything in hard cash, they just act as guarantors to the lending company.

Most new developments have a legal requirement as part of their planning authority to build a small percentage of houses which will qualify for NewBuy and these properties are ALWAYS sold off plan and immediately in the first few weeks of release - this indicates the huge demand for such properties.

As an example a development near here has two bed houses starting at £160k, which, if you can get in on the NewBuy scheme will require a deposit of £8k, if not then you'll need a minimum of £16k.

It may surprise you but £8k is not an unsurmountable obstacle to first time buyers, for a couple looking to spend upwards of £800 to £1000 a month on their first mortgage then a years worth of saving and getting used to putting that amount of money aside every month will generate their deposit, if not then some parents would consider stumping up that sort of money too - bump it up to £16k and you're now talking about saving for several years or lending your offspring some substantial amounts of cash and suddenly the option to rent becomes the only option.

Not that there is anything wrong with renting, other than the fact that its not going to stimulate the building trade very much, but a big push on schemes such as NewBuy and the previous HomeBuy scheme, would be popular, would stimulate the building trade (a HUGE business), would solve an imminent housing problem, would boost every allied business associated with having a home (DIY, Garden Centres, Furnishing Retail etc), and would not cost very much at all other than set-aside guarantees.



And I'll chuck another one into the mix for you - back in the recession of the early 90s the big saviour was 100% tax allowances for business asset purchases, and if no-one is modernising at the moment (and they aren't) then there is no tax income to lose by re-invoking this.

The government can borrow money at record low interest rates (during the last year it was borrowing at negative real interest rates). A fiscal stimulus would be very effective at delivering increased economic growth, because the economy is currently struggling and we are in a liquidity trap.

Its not a case of borrow money for a stimulus vs save money by cuts. Its a case of borrow money to fund much needed economic growth (which reduces debt as a percentage of gdp), or make cuts which devastate the economy, kill off growth and thus lead to higher borrowing anyway.

Remember, because the cuts have damaged growth to such a larger extent than planned, Osborne is actually borrowing more than Alastair Darling was going to.

The trouble is so many got used to 100%+ mortgages that the thought of saving for a deposit became old fashioned, you had to get on the "Property Ladder" before you got left behind.

I remember my parents having to rent for years to save up a deposit, this then showed the lenders you could budget and cope with the commitment of a mortgage, you certainly didn't get one in your early twenties.

What stops people saving today is the huge cost of renting, lack of housing stock has not only pushed house prices up to insane levels but has pushed rents up dramatically too. Investing in houses for both sale and rent can and will bring down both house prices and rents, impacting on the economy is several ways, a dramatic one would be forcing down the amount councils hand over to private landlords in housing benefit. The houses for rent don't have to be council houses either, pension schemes have huge investment pots that need a decent return, legislation for them to get into the private housing market shouldn't be too taxing.

Only building houses in the tens of thousands can really sort this problem, governments of either hue have been ignoring this crisis for far too long

Your first para is very true, my eldest is looking at renting in the short term but they are having to look at rents which are equivalent to mortgage repayments in order to do so, which then negates their ability to save for a deposit, its Catch 22, if I had the balls to do it and any sort of job security then I'd make enquiries about buying a second home with some of my equity as a deposit and renting it to them for the cost of my second mortgage - having a #2 daughter waiting to follow on behind gives some sort of long term stability to my plan

Your second para reflects what I mentioned some time back that when I first entered the job market the building scene was focused almost entirely on housebuilding, it was massive and when I think back I'm staggered that such huge scale housing (both private and public, both purchase and rental) could ever be funded, but it was, and in a period when we had an economy that was on its knees, the PM having to beg from the IMF, interest rates in the stratosphere (comparitively), power cuts and a three day week - it was afforded then and I haven't a clue how.

Well at the risk of repeating myself (yet again) on this subject (I really should save this in note format):

There are thousands of hectares of government-owned (local and national), that is suitable for building new homes. Rather than sell this land and receive a one-off boost to the exchequer, it would be far better to lease it at a peppercorn rent on a 99 year lease, to charitable institutions or housing associations. The total cost of a new house is approximately 60% land price + 40% materials and labour. So any rents charged should reflect this and not the prevailing market rents of other similar properties in the area. New, rented properties could then be offered at around 50% of the prevailing rate. Couple that with an introduction of commercial property taxes applied to all empty buildings and vacant land (LVT-Lite if you wish) and a great chunk of currently banked land assets would also suddenly appear on the market at less than speculative prices.

The money to build would come from pension funds and other institutional investors: these funds are always looking at long-term investments and this type of investment would offer the sort of security only usually seen in government bonds but at a far better rate of interest. Even if British investment funds were unwilling to invest, there would be no shortage of foreign funds willing to plough in the capital required to fund the projects. The knock-on effect of such a scheme would be to drive down rents in the adjacent private sector. There would have to be safeguards built in, such as covenants to prevent sub-letting, multiple tenancies and any future right-to-buy.

Further benefits would come from: increased direct employment in the actual construction and allied trades sectors. All these homes would need furnishing, so retail would receive a stimulus. The jobs created would benefit the exchequer through increased income tax, National Insurance and VAT receipts. The exchequer would further benefit from decreased housing benefit and tax credits. The people who inhabit these properties may find that they can now pay rent AND save for a mortgage deposit, should they wish to eventually own their own home.

Of course there will be losers: banks may see their assets shrink as property values reduce. Speculators who foolishly rushed into buy-to-let may find themselves paying more in mortgage repayments than they are receiving in rents. But after all, we're "all in this together" ain't we?

As a nation we need to shift from viewing a house as an investment and get back to viewing it as somewhere to live. You know, a home.

Gideon was on the telly this morning (yes folks, he was above ground, albeit a little pale, and deigning to be seen himself rather than sending some lobby-fodder nincompoop with no grasp of his brief).
He was saying how important it to build infrastructure as an investment in the future (jaw-dropper, who'd have thought of that? the man's a genius).

Unfortunately, he was talking about HS2 which will do nothing right now.

But ... is Gid moving stealthily to plan B do you think?