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Labour’s Help to Build scheme will succeed where the coalition has failed

By providing government guarantees to small construction firms we will kickstart housing supply. 

By providing government guarantees to small construction firms we will kickstart housing supply.
Traditional terraced properties in Greenwich on June 4, 2014. Photograph: Getty Images.

Today on a visit to a small builder in Kent, we outlined Labour’s proposal to boost small house-builders and help the next generation on to the property ladder. Our Help to Build scheme would underwrite bank loans to smaller housebuilders and unlock much-needed finance to get them building.

We’re in the midst of the biggest housing crisis in a generation. Families and young people are struggling to get on the property ladder. More and more people are living in the private rented sector which often doesn’t provide them the stability and peace of mind that they need. And if you’re on the waiting list for social housing then there are another 1.6 million households in the queue with you. The key driver of the crisis is that we’re simply not building enough homes. We're currently building less than half the number of homes we need to keep up with demand.

It’s true these housing pressures didn’t begin under this government - after all no government has built enough homes for 30 years. But things have certainly got much worse on this government’s watch. Under David Cameron, house building has fallen to its lowest levels in peacetime since the 1920s. Only today, we have learned that the government’s flagship housing policy, the New Homes Bonus, is redistributing money from some of the poorest Labour councils to the richest Tory and Lib Dem authorities, and is not delivering the homes communities need.

Labour can do better. We want more people to realise their dream of home ownership. But, unless we build more homes, property prices will rise further out of reach because supply cannot keep pace with demand. So today we are setting out our proposal to tackle the housing shortage by boosting small-builders by improving their access to finance.

Emerging findings from the Lyons Housing Commission, set up by Ed Miliband to deliver a roadmap to getting 200,000 homes a year built by 2020, show there is a need to increase diversity and competitiveness in the housing sector. Figures show that 25 years ago small builders were building two thirds of new homes. Now they're not even building a third of new homes. Over the same period, the number of firms building between one and 100 units has fallen from over 12,000 to fewer than 3,000.

What has caused this decline? The Federation of Master Builders (FMB) surveys of small house building firms have consistently shown that for these firms access to finance and land are the most significant barriers to growing their businesses and increasing the supply of new homes. In the FMB’s 2013 House Builder Survey, 60 per cent of house builder members cited access to finance as a major barrier to their ability to increase their output of new homes, more than any other factor.

That’s why earlier this year, Labour set out plans to increase access to land for SME builders. The next Labour government will require local authorities to include a higher proportion of small sites in their five year land supply. We will give guaranteed access to public land to smaller firms and custom builders. And we will guarantee that a proportion of the homes built in the next generation of new towns and garden cities will be built by smaller firms.

But we must do more. As Ed Balls said earlier this year, we need a Help to Build scheme that tackles the root cause of the credit crisis for SMEs. Our proposals would kickstart the supply of homes by providing government guarantees for bank lending to SME construction firms in a similar way to how the current Help to Buy scheme underwrites mortgages.

The Help to Buy scheme may increase access to mortgages but, when even Mark Carney, the Governor of the Bank of England, has warned about the risks to our economy of a lopsided housing market where housing demand hugely outstrips supply, it is clear the time is now right for a Help to Build scheme, using the strength of government guarantees to help increase the supply of affordable properties.

Labour’s Help to Build scheme will encourage small house-builders to deliver more homes, as well as stimulating the local economy and helping to prevent prices from spiralling ever further out of reach for young homebuyers. And we would lock in a series of stringent safeguards, such as a cap on the value of loans available for each development, to ensure the scheme is focussed on smaller builders, and the normal bank checks on construction firms' ability to repay.

This proposal alone will not solve the housing crisis. There is no one single proposal that can. That’s why our Housing Commission will report later this year, producing a roadmap of how we can reach our ambition of getting 200,000 homes a year built by 2020. But in the meantime, acting on this crucial issue will help get our small builders building again and it will begin to tackle the housing crisis which is leaving so many people without a decent home at a price they can afford.

Chris Leslie is shadow chief secretary to the Treasury; Emma Reynolds is shadow housing minister.