How U.K.s Austerity Cost London 6,300 Affordable Homes

Londons affordable housing investment will pay for about 15 percent fewer properties than it would have three years ago because of soaring construction costs, consulting firm EC Harris LLP said.

The city government will spend 1.25 billion pounds ($1.89 billion) constructing 45,000 affordable homes in London through 2018. If it had been invested in 2012, when the construction market was at a low point, the money London is spending now would have built 6,300 extra homes and created 2,000 jobs a year, Mark Farmer, head of EC Harriss residential team, said in a report.

It is surely a common-sense philosophy to maximize the expenditure of public money when you can get more bang for your buck, Farmer said. Some major infrastructure programs such as Crossrail have proceeded on this basis during the depths of the recession, but it would appear publicly funded or subsidized housing has not.

Chancellor of the Exchequer George Osborne cut spending on housing for the countrys poorest by 60 percent from 2011 through 2015 as he focused on reducing Britains budget deficit. The number of social and affordable homes completed in England fell by almost 30 percent in fiscal 2014 from three years earlier, according to government statistics.

Bricklayers stand on scaffolding as they work on the "Catford Green" residential apartment complex during construction in the Catford district of London. Much of the U.K.s low-cost housing is funded today by private developers through levies paid in return for having their projects approved. Close

Bricklayers stand on scaffolding as they work on the "Catford Green" residential... Read More

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Bricklayers stand on scaffolding as they work on the "Catford Green" residential apartment complex during construction in the Catford district of London. Much of the U.K.s low-cost housing is funded today by private developers through levies paid in return for having their projects approved.

Every pound spent on homebuilding results in a 2.75-pound benefit for the economy, meaning the government should spend more on housing when the economys weak, Farmer said.

Much of the U.K.s low-cost housing is funded today by private developers through levies paid in return for having their projects approved. That means affordable housing construction moves up and down with the private market, when it should be doing the opposite, Farmer said

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How U.K.s Austerity Cost London 6,300 Affordable Homes