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What Can the New PM do for the Housing and Construction Industries?

After David Cameron’s resignation following a failed ‘Remain’ referendum campaign, the UK looked to be in turmoil after the prospect of 4 months of a government without leadership loomed, shrouding industry across the UK and beyond in uncertainty. 

Resignation, Nomination, Competition, Coronation

However, as Cameron quipped at Labour’s expense in his final PMQs, after resignation quickly followed nomination, competition and ultimately the coronation of Theresa May, former Home Secretary and now second female Prime Minister of the United Kingdom. With May now at the helm, we take a look at what this means for the construction and housing industries, and what industry experts think May could do to help these industries continue to thrive.

Early indications seem to be positive for the housing industry, with May suggesting that ‘more housebuilding’ would be at the forefront of her economic reform policies:

“… it is also why housing matters so much, and why we need to do far more to get more houses built.

Because unless we deal with the housing deficit, we will see house prices keep on rising. Young people will find it even harder to afford their own home… And more and more of the country’s money will go into expensive housing instead of more productive investments that generate more economic growth.”

In addition, former Housing Minister and newly appointed Minister for State of Policing and the Fire Service, Brandon Lewis, seemed to suggest that May will stay true to the conservative housing policies such as Starter Homes and Right to Buy. His comments suggested that there would be no renegotiation of the deal made between housing associations and the government over the extension of Right to Buy. Furthermore, whilst still Minister for Housing, Lewis twice reiterated his commitment to build 200,000 starter homes before 2020.

Of course, as Lewis is no longer Housing Minister, his words may no longer carry much weight. However, having been an MP since 2010, his understanding of his new Prime Minister’s opinions on certain matters will be better than most.

Abolish All Demand-side Subsidies

Not everyone is ‘for’ the continuation of the aforementioned housing policies, however. Daniel Bentley, the Editorial Director of Civitas, suggests that such policies should be abolished, and that May should make houses harder to buy:

“…Mrs May should abolish all demand-side subsidies for prospective first-time buyers, such as the Help to Buy and Starter Homes initiatives. By propping up purchasing power these are self-defeating, using taxpayers’ money to make housing more expensive for everybody.”

Bentley also suggests other ways that May could solve Britain’s housing crisis: getting tougher with housebuilders - “Mrs May should impose build-out rates on all developments, requiring homes to be released into the market much more quickly. Where developers fail to comply they should face fines and forfeiture of the land”; commandeering all surplus public land - “In London alone, there is enough for the construction of at least 130,000 homes… which is owned by local authorities… The process for getting these sites into the development pipeline should be streamlined and the power for individual authorities to hold up sales overridden by Whitehall”; and focussing on apprenticeships to tackle the skill shortage - “Britain needs a network of skills academies to train construction workers… Within a few months, tens of thousands of trainees would be ready to take up apprenticeships on construction sites.”

A New Housing Minister

As Brandon Lewis exits, a new appointment, Gavin Barwell, will be looking to make his mark. Much like Lewis’s, Barwell’s comments seem to paint a positive picture for housing industry, though as of yet there has been no mention of specific policies:

“I look forward to working with councils, housing associations, developers, investors and local communities to make sure we build what we need with the mix of tenures that people want and that those homes should be great places to live.”

The construction and housing world appeared to accept Barwell’s appointment as a positive one, seeming hopeful that he recognises the importance of maintaining the flow of development projects. David Orr, Chief Executive of the National Housing Federation, commented:

“Housing Associations look forward to working with him in partnership to tackle the country’s housing deficit.

The priority now must be to ensure the supply of new homes does not falter and housing associations are well placed to step in and keep Britain building.”

Brian Berry, Chief Executive of the Federation of Master Builders, expressed similar optimism:

“The government has rightly identified housing as one of the greatest challenges facing this country and having reaffirmed its commitment to building one million new homes over the course of this parliament, Barwell is assuming an important position at a critical juncture.

It’s encouraging that Barwell has previous experience in the Department for Communities and Local Government as a Parliamentary Private Secretary to Greg Clark, who has been a great champion of local house builders… It’s of vital importance that Barwell continues with the positive legacy Lewis left behind, which saw house building completing figures rise and a range of initiatives introduced aimed at empowering small developers.”

Radical Solutions

Although Berry seems in favour of continuing with previous housing policies, like Bentley, he also called on Theresa May to introduce some more ‘radical’ solutions to the housing crisis:

“With a new Prime Minister in place, now is perhaps the time to start thinking about more radical solutions to the housing crisis, including enabling local authorities to fund house building by lifting borrowing caps. Local house builders are ready to play a much larger role in getting Britain building again, and we look forward to working with new Housing Minister in identifying how SMEs can help achieve this.”

Clarification is Key

As with housing, it is uncertainty that currently effects the construction industry. Construction companies will seek quick clarification from the new PM and her government on the so called three Hs – HS2, Hinkley and Heathrow – as well as a number of other matters.

As James Hastings, Experian’s Head of Construction Future, comments, clarification is key in helping construction:

“The one thing government can do is make it clear they want to take forward the projects currently in the infrastructure pipeline and recommit themselves to all those projects to give contractors some clarity.”

Former Chancellor George Osbourne’s decision to abandon the commitment to achieving a budget surplus before 2020 could be a positive move for the industry, loosening the government’s infrastructure spending ability. With the post-referendum slump in construction, spending on public sector projects could be critical in the coming months with regards to avoiding an industry recession. Head of Strategic Research and Insight at Arcadis, Simon Rawlinson, has suggested that a boost in public sector construction investment has worked previously – “[After the financial crisis] the stimulus the government had in place in 2008 to 2010 really worked” – but has also recommended that other potential policies that don’t involve mass spending could include giving further incentives to energy firms to build power plants, private rented sector developers to build rental properties, or, similar to one of Daniel Bentley’s suggestions, the release of public land.

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