Cbi On The Uk Housing Shortage: It’s Bad For Business

By Author: Bradley Weiss
Total Articles: 272
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The million-plus homes deficit in Britain is treated like a social issue. It is that but so much more; leading business organisations have calculated the costs.



It’s conventional wisdom that the UK’s housing shortage is harmful to families. But when people spend too much of their income on homes, or cannot move out of parents’ homes to form new households, it creates a drag on the economy as well.



So says the CBI, “the voice of business,” in its 2014 report “Housing Britain: Building new homes for growth.” According to the CBI deputy director-general, Katja Hall, “Housing is not just a social priority, it’s a key business issue. We see the impact of too few homes being built not just on the front pages of our newspapers but in the experience of our families, friends and colleagues...it also has huge implications for our future economic competitiveness. Businesses need a flexible and mobile workforce, but the high cost of moving home, and lack of decent and affordable housing, are barriers to attracting and retaining employees.”



...
... This is a key driver for those engaged in UK land investment, working to build homes where needed. That almost always is where a local economy is growing and one or several employers want their people to live nearby.



The CBI publication points out that restrictions on land use for new development, a function of the planning permission system has “for decades…caused cyclical house price volatility - a situation that has contributed to macroeconomic instability to the detriment of households and businesses alike.” It also cites statements from Mark Carney, Governor of the Bank of England, who has said that the housing market poses the biggest risk to future financial stability.



The CBI partnered with the Centre for Economic and Business Research (CEBR) to put numbers to these claims. Findings from this and other CEBR research include:



• £4 billion per year - How much extra spending power households would have if housing and commuting costs rose at the price of inflation (the Consumer Price Index), instead of the 56 per cent rise in UK house prices since 2004. That much incremental spending would multiply itself as goods and services are purchased.



• £770 million per year - The portion of that £4 billion that would be saved simply in reduced transportation costs if people could afford to live closer to where they work. That doesn’t account for time savings, which could be substantial. Managers of property funds wisely focus their research on sites that would serve employer needs.



• £5.5 billion - Money spent on suppliers to the homebuilding industry, part of the £12.5 billion invested in land and buildings for homes built per year (based on the 140,000 homes built in 2013, which is only about 60 per cent of what needs to be built).



• 600,000 jobs - Number of people employed in a year when 140,000 homes are built. If 250,000 homes were built, it would bring this up to about one million jobs.



The goals of the CBI are aggressive. They see a doubling of new home building (to 250,000 or more per annum). The business organisation sees it necessary for a “pipeline of land” - the work of specialists engaged in planning permissions - to deliver well-designed homes for sale or rent. Also, innovative financing programmes and an increase in the skilled workforce able to build would further this objective. A simpler and more competitive tax regime, paired with a flexible planning system, are required as well.



Investors in house development understand that both obstacles and handsome returns meet the high demand for homes. What all investors need to do is to discuss their interests in home-development investments with an independent financial advisor.