Cooking the Books 2 – Housing: the market versus promises
One of Labour’s election promises in 2024 was to build 1.5 million new houses by the end of its normal term in office in 2029. Actually, it wasn’t a promise that the government would itself organise the building of this number of houses but a promise that it would create conditions in which profit-seeking housing ‘developers’ would.
This made achieving the 1.5 million target dependent on it being profitable for the house-building firms to build that many new houses. Which was why, in an article in February 2025, we expressed scepticism about Labour being able to meet its target as it had no control over which way the market would turn. ‘The 1.5 million target,’ we wrote, ‘will only be met if the market expands enough’. Now, analysts are concluding that the market won’t expand to that extent.
An article in the Times (4 May) by Tom Haywood headed ‘Mayday: distressing signs in housing data’ and subtitled ‘Labour’s 1.5m target may be dead in the water after a steep fall in property enquiries’ is a case in point. Noting that a survey of estate agents covering March ‘showed the steepest monthly drop in new buyer enquiries in almost three years’, Haywood wrote:
‘All of this is yet another blow to Labour’s ambitious target of delivering 1.5 million homes by the end of 2029, which now looks close to impossible. The government needs developers to be busier, not quieter, given that they will only build when they can sell at the price they need to make a decent return for shareholders’ (our emphasis).
Precisely. As further evidence, and more convincing than one month’s figures, Haywood noted that hedge funds are betting that the share prices of house-builders and their suppliers will fall in the future, an indication that these vulture capitalists are not expecting the companies they have targeted to make much profit in the next few years. The betting takes the form of ‘short selling’, in which the vultures borrow shares at their current price, sell them, buy them back at their expected future lower price, then return them to the original owners and pocket the difference. Money, apparently, is also to be made from houses not being built!
Faced with rising costs but falling demand, house-builders are unable to pass on to potential buyers all the increased costs and so ‘are struggling to make the economics of projects in the capital stack up’, but not just in London as one survey ‘found that it was not financially viable to build homes in almost half of England.’
There is not much the government can do to make building houses more profitable. Why, then, does the government not give money to local councils to build more houses, as certain naive reformists are demanding? Well, for a start, it hasn’t got the money to give or, rather, could only take it from profits either through increased taxes (these ultimately fall on profits) or borrow it at a higher interest rate that would have to be paid from profits. Which no government, under economic pressure to give priority to profit-making, as all governments of capitalism are, can do, at least not without making general economic conditions worse.
Under capitalism, where houses are commodities produced for profit, there is no way out. Houses will only be produced directly for use — simply for people to live in — when this is the aim of all production. And that is possible only when the resources to produce what people need cease to be managed by profit-seeking companies pursuing ‘a decent return for shareholders’ and become the common heritage of all under democratic control.