

A sharp decline in new home building by housing associations and local authorities this year could wreck the government’s plans to build 1m 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.

Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, warned that the government’s austerity measures were hitting public spending on construction across the industry.

He said infrastructure spending was 3.6% below the average for the last three months, new public housing was 1.4% lower and other public construction was 2.6% lower.

“The fiscal squeeze will only intensify over the next year, constraining the growth of the construction sector. Meanwhile, the low level of construction orders in Q3, unchanged from their level a year ago, indicates that the underlying trend in output is likely to be flat over coming quarters,” he said

A Treasury spokesperson said: “Investing in Britain’s long term infrastructure needs was at the heart of the spending review, where the chancellor committed to investing £100bn into major building projects over the next five years.”



“The chancellor has said that the failure to build enough houses has been one of the great social failures of our age, and that’s why we have doubled the housing budget from 2018-19, setting out the most ambitious plan since the 70s to build homes, including delivering 400,000 affordable homes as well as further reforms to help get more houses built.”

Campbell Robb, Shelter’s chief executive, said: “These figures highlight a worrying downward trend in the number of new homes that people on low or average incomes can actually afford.

“It’s been encouraging to see the government finally acknowledging our housing crisis, but schemes geared towards better-off first-time buyers can’t replace investment in genuinely affordable homes to rent or buy.

“This is further compounded by the extension of right to buy, funded by the forced sale of thousands of council homes, which will further deplete the number of homes available for people on lower incomes.”