Leader: Russian courage

Quick, housebuilders! You’d better vote the Tories out quick. No, not because Russia is in fighting mood, and Theresa May is busy poking it with a big old stick. But because the chancellor has just opened the door to some reforms that should make you sit up and listen. 

Philip Hammond only stood up for about an hour this week to do his Spring Statement and, as boring as it was, once he got past his sluggish growth rate patterns the chancellor mooted some uncomfortable changes to the way housebuilders may be forced to operate. It’s connected to Carillion’s demise too, but more of that in a moment. 

First, on Tuesday, Hammond presented the initial findings from the government-commissioned review by former cabinet minister Oliver Letwin (remember him?) into land-banking, which has squarely blamed our lack of housing on big housebuilders’ stranglehold on the pace of delivery on large sites. But it also specifically accuses housebuilders of manipulating something called the “absorption rate”. Via this nifty manoeuvre, Letwin says, they boost demand and, therefore, prices by holding back new homes until desired sale prices are achieved. 

Oliver Letwin has, for once, come up with some crunchy rhetoric with detail that could make developers behave differently

Letwin also says that build rates are held back by slow delivery of the social housing that this country really needs, so he’s looking at alternative ways of doing that. I’ll tell you for free, Oliver: government intervention and investment. But, the government does like to continually spin that the UK’s housing crisis is everybody else’s problem but their own. 

This is, however, Letwin’s big moment. And he’s seizing it by going nose-to-nose with the powerful housebuilding lobby, who, while they are not quite as volatile and all-powerful as the US gun folk, do know how to throw the odd coffee cup about in a minister’s office in a fit of rage. So we’ll wait and see how they fight back over the summer. 

Hammond has promised the government’s housebuilding recommendations will be fully reported in November’s Autumn Budget. So it may still be kicked into the political long grass – but Letwin has, for once, come up with some crunchy rhetoric with detail that could make developers behave differently. 

For example, it looks likely he will recommend that large-scale housing sites be broken up and delivered by multiple companies. The government could also require developers to offer a wider range of homes on sites.

These measures, by spreading the risk, would increase delivery. And with Hammond also declaring that, following Carillion’s collapse, the government will examine payment practices in the construction industry and their impact on small firms, you can start to see how they may run public sector procurement in the future. You can expect a greater number of smaller firms delivering housing – and maybe much more varied government frameworks than just shortlists of the same old chosen few giants. Whether the government takes a further step and regulates or incentivises the private sector to do the same and share out work to the masses remains to be seen. 

Of course, we’ve heard some of this before and governments do like to posture on this issue, playing off the nimbys against the folk in need. But step back and if you were to come up with a plan to unlock housing – along with a few billion quid’s worth of investment – this would probably be it. So the question really is: IS Theresa May politically brave enough to implement far-reaching reforms to unseat housebuilders? Well, if she’s prepared to take on Putin, maybe she is. So, on that basis housebuilders, consider yourselves on notice.