House building falls to lowest level since 1920s

House building levels are set to slump to their lowest levels since 1921 with work starting on just 70,000 homes during the next financial year.

Leaders of the National Housing Federation are warning that construction levels will fall by 50% from the current level of 140,000 homes a year.

Two thirds of all new properties will be supplied through housing associations as private developers mothball hundreds of projects.

The federation said its latest forecast strengthens the case for a house building fiscal stimulus package.

Under the terms of the package, the government would fund the building of 100,000 affordable homes over the next two years, at a cost of around £6.3bn – which could save thousands of jobs and provide a massive shot in the arm to the economy.

Housing associations are expected to prop up the ailing house building industry in 2009/10 by building up to 45,000 new homes for rent or low cost home ownership. 

Not-for-profit housing associations remain optimistic that they will be able to build through the downturn – by making use of government grants and investing their own finances to fund developments.

The government has a target of building three million new homes by 2020 but house building is falling rather than increasing.

While the government wants 240,000 homes to be built by all sectors every year by 2016, the number of new homes built in 2008 was around 142,000 - 33,000 fewer than in the previous year.

Federation director Ruth Davison said: “After years of boom, the house building industry is lurching towards bust – with a very real possibility that the number of new homes built in 2009/10 could slump to the lowest level since the 1920s.

“Housing associations are continuing to build through the downturn and we remain optimistic that our members will be able to maintain and even increase the supply of desperately needed social homes.

“But with waiting lists for social housing expected to hit five million by next year and the house-building industry on its knees, we need ministers to commit £6.3bn to the building of 100,000 new social homes over the next two years as part of a fiscal stimulus package.

“With every pound spent on housing leading to around two pounds’ worth of economic activity the value of the proposed package, to the economy, could be more than £20bn.”