How To Save The Construction Industry

by Ray_North on April 29, 2013

Unknown-3Amidst the euphoria of last week’s news of the massive .3% growth in our economy, came the news that the construction industry continues to be terribly depressed and has now shrunk by 17% since the beginning of the recession and 2.5% alone in the last quarter.

It’s important this. The construction industry is as good a barometer of overall economic performance as any sector of the economy, taking in, as it does, the housing market and being directly linked to household expenditure. It is also a labour intensive industry which can be hugely beneficial to other local industries.

In short, if the Government wants the economy to recover then, quite simply, it can’t afford to let the construction industry decline any further.

But, sadly, so many of their policies will do absolutely nothing to assist construction industry, indeed, most of them are adverse to the industry.

First, there is the mess about Housing Benefit. The government’s spin, which I now think they are stupid enough to actually believe, is that poor people are somehow responsible for the high levels of housing benefit that we pay out. This is nonsense, the reality is that housing benefit is high because of a paucity of social housing and a lack of control over rents being set by private landlords. The rent assessment committees, though not toothless, rarely effect the rents set by landlords unless the rent is being increased to a level above the regional average – this means that as long as all the landlords set high rents then they will get away it. As a result of this, private rents have increased and housing benefit has crept up to keep up. The government’s answer has been the introduction of the Universal Credit which puts housing benefit directly into the hands of tenants, and a cap on the amount of housing benefit – but neither will do anything to reduce housing benefit or assist the construction industry. If anything, private landlords will increase rents at an even greater rate with the new benefit as they become increasingly worried about their tenants failing to pay their rent, as such many tenants will have to ask for more housing benefit, and as they are more likely to be single and unemployed, they will still be eligible regardless of the benefit.

Nor does it help the construction industry as landlords aren’t really interested in the construction of new property, simply filling existing property; whilst tenants are unlikely to renovate a house they don’t own.

In short, the coalition of greedy private landlords and stupid government will continue to force up Housing Benefit whilst doing nothing to assist construction.

Far more effective would, of course, be a massive investment in social housing, together with the introduction of policy to control the increase in rent.

For a number of years the housing market has been in stasis – with both supply and demand being depressed by the lack of new housing stock, particularly social housing, together with a lack of lending by the banks and the continuing high prices in certain parts of the country.

The government’s policy to address this was the rather odd Help To Buy scheme in which the government will act as the provider of loans to allow new buyers to get on the property ladder – something which may well end up causing a subprime type crisis in the housing market or further inflation of housing prices, which is the last thing anyone in the construction industry wants.
What would be much better would be for the government to implement a proper policy to force the banks to start lending again, which would, in an instant, kick start the housing market, which if new house were being built at the same time, wouldn’t cause too much house price inflation.

In short, the government must stop blaming the poor by making unhelpful changes to the beneftis system and instead encourage builders to build and the banks to lend – otherwise the construction industry will remain depressed and the economy as a whole will continue to stubbornly remain in or close to recession.

{ 2 comments… read them below or add one }

Mike Killingworth April 30, 2013 at 7:36 am

You forgot to mention the policy of marketization of social housing rents.

And, as a guide, over the last 40 years, house prices (in London at least) have increased three times as fast as incomes. Downsizing is now seen as the normal source of middle-class pensions so the political pressure is for this process to continue. As the song says about cocaine, “doctor say it kill you but he don’t know when”.

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construction news May 8, 2013 at 8:18 am

In short, the government must stop blaming the poor by making unhelpful changes to the beneftis system and instead encourage builders to build and the banks to lend – otherwise the construction industry will remain depressed and the economy as a whole will continue to stubbornly remain in or close to recession.

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I love the statement right there , we must not more pressure the poor lets help them instead , give more help and not more insults . build for the brighter future :)

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