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Richard Harrington MP: Housing Strategy and Planning Reform are both critical components of the growth agenda

Harrington Richard August 2011 Richard Harrington is MP for Watford. His article is the third in a seven part series of articles by Conservative MPs, each discussing the Coalition's policies to get more people into good homes.

The incoming Coalition Government faced many pressing problems, the most important of which was the stagnating economy. Obviously some of the factors causing this were international or macro economic in nature, but in my view an important cause was the long-term problems in the housing market.

It is important to remember what growth actually comprises. It is the aggregate of a series of decisions made by individuals or entities to enter into greater economic activity than previously. Obvious examples are to get a new job, expand a business by recruiting a new person, buying a new house and so on. All of these decisions require confidence and the ability to achieve them. When taken, the decision needs to be facilitated by capital and the availability of other resources to achieve it. A factor in deciding is the price and availability of accommodation . The shortage of housing in the private and public sector over the last decade has been a fundamental  problem inhibiting growth.

How did it happen?  It was caused by severe deficiencies on the supply side of the equation brought about by the absurdly complex planning system, which led to huge inflation in land prices and the lack of affordability for first-time buyers. Although demand has been dampened in the short term by the economic situation, a significant constraint has been the reduction in loan-to-value percentages by those institutions offering mortgages to purchasers, meaning higher deposits. This has prohibited buyers taking advantage of low interest rates.

The forecasts show that, even with the proposed significant reduction in immigration, we will still need more than 200,000 new homes per year. We cannot allow supply to be constrained as it was - whereby house prices doubled in the ten years to 2010. The average first-time buyer is now 37 years old, a disaster for young people who have been the main victim of this lack of supply.

The twin track approach of the Localism Act with the National Planning Policy Framework and the new Housing Strategy is a comprehensive and radical approach towards increasing housing supply in the public and private sectors, as well as helping buyers and renters with mobility. It is to be commended.

Of particular significance is the release of Government land, freeing up in excess of 100,000 plots. This approach is enhanced by using it in conjunction with the 'Build Now, Pay Later' scheme also announced by Grant Shapps. Providing enough of this land is where people want to live, it will be most helpful to increasing the supply - so long as the land can receive quick and easy planning decisions.

The Mortgage indemnity scheme will be a great tool for house builders and I believe it is very clever the way the Government has enabled most of the risk to fall on the industry itself rather than the public purse.

The Right to Buy discount and the use of all funds for further social housing is also significant, as is the help for self building, which should also be a useful tool in busting open the supply constraint.

The New Homes Bonus is also beginning to work. It is a very useful incentive for local government to provide for expansion

However, we must put these changes into perspective. None alone will provide a quick fix. Land has to be made available where people want to live and it is important that the land is enough to generate levels of profit that can be used to pay for large numbers of excellent quality affordable homes. The much-needed reforms to planning must result in fast decisions which are in the interests of Local Communities but which are not allowed to be slowed down to allow endless rounds of argument to be played out. This can provide this raw material to stimulate growth which is so crucial to our futures.

Labour's opposition has been pathetic. Nothing constructive came, just another use of (the tenth) a possible bankers tax - to build more affordable homes. Apart from a thinly-disguised increase in public debt which would lead to higher interest rates, their suggestion does absolutely nothing to fundamentally deal with the lack of supply problem. It would appear they have learnt nothing from their 13 years in power.

Overall, the Housing Strategy provides an imaginative response to a difficult situation and is an important part of the programme to return us to prosperity by expanding home ownership, giving public tenants more flexibility and offering local people more of a say than ever before. This should provide an important part of the stimulus the Chancellor knows is necessary to get the economy going again.


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