Written by Tom Hall, Chief Economist at Barbour ABI
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Recent events have shown the need for long term and joined up planning. The Coronavirus pandemic has, in a sense, drawn a veil back to reveal the need for a prosperous, well-functioning society.
More than this, everything is connected. Short term or narrow thinking creates unintended consequences. Take the continuation of help to buy and the stamp duty holiday. Yes, it maintains housing demand by allowing those that can already, or almost afford a house by subsidising their purchase. In turn it bolsters the supply of new housing as housebuilders have an incentive to meet demand.
However, the policy has considerable consequences: it pushes up prices in a housing market that already is one of the most expensive in the world, making home ownership further away for those who can’t afford it. It also creates homeowners acutely sensitive and at risk to falling prices. It soaks up investment that could be used productively elsewhere. Ultimately the housing market requires ongoing substantial government intervention or faces a necessary and likely painful readjustment.
There are other ways: increasing the housing stock through social and affordable housing for example, and improved legislation and regulation that put our existing (and relatively abundant) housing stock to better use.
So, what should we be focusing on? To my mind we should be focusing on the areas that provide the greatest benefits to society and people over the long term. What policies are going to contribute to improving our built environment and society over the long term rather than creating spillover effects or a short-term sugar rush that someone down the line is going to have to sort out?
The buildings we build today last for generations. Our existing stock of buildings was built in times with lower energy efficiency, and we haven’t maintained them as well as we might have. Heating and hot water for homes make up 25% of the UK’s energy use. Meanwhile UK homes have the lowest energy efficiency in Europe.
And the problem mainly lies in the private sector: some 70% of homes fall below a C energy rating. Many of these are rented out or pensioner-owned, where the owner is without sufficient incentives or the financial means to improve a property’s energy efficiency.
11% of UK households are estimated to be in fuel poverty. The impacts on our health from poorly maintained housing are well evidenced. Greater strain and cost is placed on health & social services. Cold, stressed, and tired people are unable to function nearly as well.
A grant and loan programme that targets those that will benefit the most from improving energy efficiency will improve the nation’s housing stock, citizens’ health and wellbeing and relieve pressure on public services, while helping achieve the UK’s carbon emissions targets.
Long-term investments need to be financed. A green infrastructure bank can act as a specialised institution that is able to better leverage private, as well as public investment to achieve improved outcomes. Before the previous UK Green Investment Bank was sold in 2017, it had enabled much of the UK’s recent investment in renewable generation, especially in offshore wind.
A new Green Bank could deliver scale and specialist expertise to a national retrofit strategy, as well as investing in renewable generation and low-carbon transport infrastructure. Its critical that such an institution is given the scale and scope to make this happen, taking long term societal and environmental benefits into its decision making.
Additionally, a focus on localism would put decision making and power in the hands of communities. What is the good of a built environment that doesn’t serve the communities that use it?
The construction industry faces short term labour supply issues as the supply of foreign-born labour dries up, but also longer-term challenges. We face a demographic crunch, and construction will be more impacted than most. There was already a lack of young workers in the construction industry; younger foreign-born workers were filling the gap. With a more restrictive immigration regime, it is critical that the UK can draw on skilled local labour. The expansion of apprenticeships has an important role to play.
However, it goes wider – we need better education and to create more opportunities for everyone to be able to thrive in the industry, improving diversity and encouraging people from different backgrounds from all communities that construction serves. This will help us create improved outcomes of what, where and how we choose to build.
There is now greater understanding of the benefits of doing something different; the willingness to do more, to take more risks and make better decisions. Every opportunity passed by is one that history will judge us harshly.