Builders 'starved of capital and training'

Britain's housebuilding industry is locked in a vicious cycle of low investment and low productivity, building excessively standardised, relatively low quality but expensive homes, according to a study published by the Joseph Rowntree Foundation.

But while the industry could help put its own house in order, Government has a role to play by reducing the volatility of the housing market which makes it difficult for builders and developers to operate, the study says.

Investment in new housing has been falling for 35 years, reaching its lowest point since the Second World War over the past five years, and is far below that of other leading industrialised countries.

And while the demand for new housing is rising, there is little prospect that sufficient homes will be built, says the report by Michael Ball, Professor of Urban Economics at the South Bank University, London.

"A standard response to supply problems is to blame firms and workers as being speculators after short-term profits or lazy cowboys," Professor Ball said.

But there is little evidence that the players in the market are individually failing. Rather, the housing market is so volatile that it is hard for firms to plan ahead, and risky for them to invest in training and new techniques. The result is a chronic shortage of skilled labour and too little use of modern building methods.

Meanwhile the industry is destabilised by a sharp increase in land prices followed by collapse as the housing market fluctuates up and down.

The lack of new build means that homes with a design life of 60 years are now expected to last far longer and twice as much is spent on repair as new building.

Yet, the repair industry - frequently small, undercapitalised jobbing builders who do no training - is fragmented, technically backward and lacking in business skills, Professor Ball concludes, summing up a three- year project funded by the foundation. And reputable companies are left competing with "cowboy" firms who charge no VAT, some operating in the hidden economy.

The unwillingness - and difficulty - of demolishing existing homes and the relative lack of new urban building land is also leading to Britain's cities being "frozen in brick, wood and cement, rather than aspic". The result is more pressure on greenfield sites, with Britain, by default, creating a system "whose outcome is greater preservation of the suburb than of the countryside". That, Professor Ball added, "is surely is not what is desired."

Professor Ball's solutions include the Government setting credible housebuilding targets and spending more on social housing - council and housing association homes. That spend should rise during downturns and fall during booms, helping smooth market volatility. Stamp duty, likewise, should rise and fall with house prices to smooth demand. And there should be more rebuilding "without re-introducing the mass bulldozing of neighbourhoods."

VAT on repairs and maintenance should be reduced or abolished and building regulations should be strengthened to minimise subsequent repair costs, while "lifetime homes" - which are built to be easily adapted for the disabled and back again - should be encouraged.

Housing and Construction: A Troubled Relationship? Policy Press pounds 11.95. Summary free from JRF, 40 Water End, Y03 6LP.