Housing and the credit crunch: follow-up - Communities and Local Government Committee Contents

1  Introduction

It is very simple: if you cannot sell a home, you do not build it.[1]

If we cannot build new homes and we lose that construction capacity, and the skills, then it will take a long time for this to build up again.[2]

At root this comes back to the availability of mortgage finance.[3]

1. The quotations above come from the evidence given by representatives from the National Housing Federation and the Home Builders Federation at the oral evidence session which preceded this Report. The remarks exemplify in stark terms the concerns of key organisations within the industry. The Government is doing a great deal to support the housing industry, but far more needs to be done to tackle the growing housing shortage.

Background

2. Last year, we decided to inquire into the issues surrounding housing, in the light of the current economic downturn. We invited written evidence, held an oral evidence session in December 2008 and published Housing and the credit crunch in February 2009.[4] In that report, we committed ourselves to revisiting certain issues to examine progress. We duly held a further oral evidence session on 1 June 2009.

Oral evidence session

3. Our evidence session began with the following external witnesses, representing the same organisations who had given oral evidence to our earlier inquiry:

—  Mr Andrew Heywood, Deputy Head of Policy, Council of Mortgage Lenders;

—  Mr David Orr, Chief Executive, National Housing Federation;

—  Mr John Stewart, Director of Economic Affairs, Home Builders Federation; and

—  Mr John Heron, Deputy Chairman, Intermediary Mortgage Lenders' Association.

We then heard from the following witnesses on behalf of the Government and its agencies:

—  Rt. Hon Margaret Beckett MP, then Minister for Housing;

—  Mr Richard McCarthy, Director General, Housing and Planning, Department of Communities and Local Government;

—  Sir Robert Kerslake, Chief Executive, Homes and Communities Agency; and

—  Mr Peter Marsh, Chief Executive, Tenant Services Authority.

4. Our oral evidence session included discussion of the following topics, amongst others:

• the Budget, including funding for housing programmes and the Asset-backed Guarantee Scheme (Q1-8, Q16, Q37-38, Q40-48, Q82-84);
• house building targets and current levels of housebuilding (Q9, Q38, Q10-15, Q64-70);
• the effect of the 'credit crunch' on housing associations (Q25-27, Q 38, Q56-57, Q71-81);
• repossessions (Q28-32, Q85-90); and
• low-cost home ownership schemes (Q34-36, Q49-55, Q58-63).

Issues covered in this report

5. Since we last inquired into this subject, the Government has made further provision for addressing the effects of the credit crunch on housing through the 2009 Budget. We summarise the housing-related provisions in the Budget, consider the reactions to the Budget from our witnesses, and discuss three crucial issues arising out of the evidence we took at this follow-up session: the Government's house building targets; capacity in the house building sector; and the flow of mortgage finance.

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1   Q 11, Mr Stewart, Director of Economic Affairs, Home Builders Federation. Back

2   Q 17, Mr Orr, Chief Executive, National Housing Federation. Back

3   Ibid. Back

4   Third Report from the Communities and Local Government Committee, Session 2008-09, Housing and the Credit Crunch, HC 101. Back

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Prepared 14 July 2009