The government has plans to build 2m new homes by 2016  but this is threatened by the sharp decline in house building across UK. The new housing projects have fallen to their lowest level since the records began in 1980.

Analysts believe that as a result of fewer houses being built, the government is unlikely to achieve its target of building 2 million homes by 2016 and 3 million homes by 2020.

The main reason for the sharp decline in new house builds is the current credit crunch which is making it impossible for the developers to get the finance that they are looking for. The banks have become far too strict and cautious when lending and have really tighten up their criteria. If we continue at the current level of house building then there would be around 1.2 to 1.3 million homes by 2016 as opposed to 2 million.

As house building companies found it harder to get finance from banks, the new house building projects began to fall in the first half of 2007 and the decline continued ever since. This was further aggravated by a record fall in mortgage approvals and buyers being pushed away due to falling house prices. The Council of Mortgage Lenders has reported a 52% drop in mortgage lending over the last year.

According to official figures, the number of new houses being built in England fell by around a quarter during the last three months of 2008. The figures from the Department of Communities and Local Government shows the number of new homes being built in the final quarter of last year was, at 16,310, its lowest level since comparable records began in 1980. This figure was 27% lower than in the previous quarter and 58% below the number of new houses started during the last quarter of 2007.

The government is hoping to build around 240,000 net new homes every year until 2016. However, even in 2006-07 when there was no housing crisis, there were only 200,000 new homes built, which is far less than the stated target of 240,000 new homes every year.

At the peak of the housing boom, it was estimated there were around 300,000 people employed in the industry according to the Home Builders’ Federation. Since then the industry has lost around a third of its work force.

However, there seems to be some room for optimism as in recent weeks, it has been reported that there has been an increase in the housing market activity with a rise in new buyer activity. The government needs to convince the banks to start lending to home buyers, house builders and small businesses in order for the economy to pick up again.