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Cuts threaten UK housing with arrested development
May 2010
Rebecca O'Connor, The Times

Millions of pounds of funds allocated to housebuilders for new developments have been pulled at the eleventh hour as part of planned government spending cuts.

The Homes and Communities Agency confirmed yesterday that it would cut £100 million off the budget for low-cost home-ownership schemes, which are popular with first-time buyers and have helped housebuilders to sell property in a mortgage-starved market. A further £50 million will be shaved off Kickstart, a programme designed to revive mothballed housing developments.

The HCA, which has frozen all spending with immediate effect until next month's Budget, must save £230 million, part of the total £780 million that the Department for Communities and Local Government must cut this year.

Housing developments that are most likely to suffer are those that are not yet contractually agreed. Crest Nicholson, Miller Homes, Persimmon and Redrow are among housebuilders likely to be hit hardest by the cuts.

John Stewart, director of economic affairs at the Home Builders Federation, warned in a memo to the trade body's members on Monday night: "All Kickstart schemes not yet contracted are on hold and at risk [I would say serious risk] until after the Budget."

However, the amount of funding lost through cuts could be higher, as the Government also has the power to withdraw funding for schemes that have already been contracted. Mr Stewart said in the memo: "I understand that there are no plans at this stage to review any contracted schemes. However, given the very large additional savings [ministers] may have to make, I think this must remain a possibility."

A spokesman for the HBF added: "This raises enormous concern. For example, if a company has signed a Kickstart agreement, received half the HCA funding, let building contracts, ordered materials, started on site, taken reservations and possibly taken some sales to contract or even completion, where would this leave them? Would they have to stop work, pay back the HCA money, rescind contracts with purchasers, cancel reservations? This is a dreadful prospect."

Developers must wait until at least after the emergency Budget, on June 22, to learn whether they will receive the promised cash. Without government funding, some schemes will no longer be viable.

The cuts come at a fragile time for the construction sector. Private housing developments accounted for the biggest percentage of shelved schemes in the three months to April, according to Glenigan, the analyst.

Source : Times Online
 
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