Bovis Homes has confirmed all of our fears; Britain could never build the Government’s 200,000 annual house building target.
We’ve all heard the reasons – there aren’t enough builders or plumbers, planning permission is difficult to obtain, and the more we build, the pricier materials become.
Bovis named these factors, but also mentioned another: the lack of available finance for smaller firms.
The City is funding companies such as Bovis and Persimmon, but banks and Government-funded schemes are still demanding high interest rates and difficult terms for small, independent businesses. Without these firms, we cannot build the homes we need.
But it is unsurprising that lenders are wary, as it is just eight years since the last building bubble popped, costing them billions of pounds.
Also, they are aware that the more housing supply they fund, the more they reduce demand and prices.
This emphasises the problem with leaving the country’s complex housing demands to the free market.
Equally, the population requires more affordable housing, but investors prefer building high-end London apartments for the very rich.
Additionally, the City has not been approving of the slight increase in the amount of social homes that Bovis has built over the past six months. Its share price even dropped. But Bovis only built 345 social homes, against 1,079 private properties.
And if this is a low number, then consider how few private rental properties Bovis built, just 101, five less than the first half of last year. For a London and South East firm, where professionals into their 30s and 40s cannot afford a home, this is shocking.
And many new builds will be sold to buy-to-let investors, who increase their rents every year. This neither benefits tenants or the general economy. An influx of amateur landlords cannot be good for anyone.
But there is a different approach. Big pension funds, such as the Pru and L&G are searching for assets with fixed and guaranteed revenues over 50 years. They require this steady income to match what they have pledged to pay their customers in retirement.
They are the ideal buy-to-let landlords, offering long-term rental contracts fixed against inflation for decades.
Several projects of this type are coming to fruition. But progress is slow. House builders complain that the pension funds are requesting huge discounts that they will not offer – they can sell everything at full price to private buyers.
But this movement could be an answer. In the meantime, house building targets will still be missed, rents will still rise and families will have to suffer.