Housebuilders should be given up to £3bn in short-term grants to prevent a collapse in the supply of new homes, according to a new report.
Centre for Policies Studies, a think tank, has called for the urgent stimulus to protect the sector from a lasting impact due to the coronavirus outbreak. It has proposed a 12-month ‘Help to Build’ scheme where developers receive grants of up to £25,000 per new build.
Grants should be conditional on the properties being built and sold and could go towards buyer discounts or part-exchange schemes, it said. It estimated the policy could lead to 150,000 homes being built.
The sector was hit hard by lockdown with the property market suspended and construction on almost all major projects ground to a halt. In March, the share prices of major housebuilders such as Persimmon, Bellway and Taylor Wimpey halved.
Since lockdown easing began, building and transactions are underway again and share prices have somewhat recovered. But there is a big question mark over the future of housing supply with little ground being broken on new projects.
The think tank said the sector’s would not immediately recover. Instead, housebuilders should expect a small relief followed by a prolonged slump. Estate agent Knight Frank estimated housing delivery this year would be 35pc down versus previous estimates.
Previous housebuilding crashes have been grim, the report added. Between 2007 and 2009 the number of new homes fell by 54pc and recovery only came with the introduction of the Government’s Help to Buy equity loan scheme in 2013. This still supports one third of new-build transactions.
Alex Morton, author of the report, said: “Small housebuilders will go bust. The larger ones will slow down and wait then buy up land on the cheap while not building. Years down the line, the sector will be more controlled by the larger players and the supply will fall.”
The think tank said Help to Build would maintain fluidity in the market. The grants – which would be capped at 10 to 15pc of the property’s value – should also be conditional on the builder maintaining its pipeline of homes.
However, questions remain over the state providing further support to housebuilders, who have been the biggest beneficiaries of the Government’s Help to Buy scheme which just pushed up house prices.
The grants should be targeted to sites with existing permissions, the report said. Help to Build is “explicitly a short-term solution”, Mr Morton added. After 12 months, landowners would start to mark up prices in response to developer buying power, he said. “It has a self-built redundancy mechanism.”
