Why should the government loan money to small construction firms that build homes (at a profit)? Could this money be used in a different way to supports the development of a not for profit building industry?
These questions are prompted by the government’s decision to set aside £500 million to create a ‘Builder’s Finance Fund‘ in a desperate attempt to increase the number of houses that are built in the UK. We are still waiting for more details but it seems that the government will lend money to small and medium sized house builders.
It comes from the undoubtedly true twin observations that we are not building enough homes and that the construction industry is increasingly dominated by a small number of large house builders. These two facts are linked. These large house builders do not currently seem to be inclined to dramatically increase production.
Given this situation you can see why the government would want to create more competition between house builders. Hence today’s announcement.
This is a missed opportunity. The government could have used this moment to signal that they would support a different type of house builder. Not just small builders but value based builders.
Rather than giving cheap loans to small private house builders, the government could be doing much more to support not for profit construction companies such as housing associations or council owned construction companies (such as the one recently established by Newham council).
Instead we are left with yet more state support for private industry.