Investment in housing and its contribution to economic growth

By: FTI Consulting  Published: October 2011


In this report FTI Consulting evaluate and assess the case for investing in housing as part of a government strategy to promote economic growth. The key findings of this report were presented by Vicky Pryce at Shelter's Housing and the Economy Roundtable on 14th October 2011.

Summary

The current uncertainty over growth prospects worldwide means that the case for a short term stimulus to the UK economy has increased since the 2011 Budget. The Bank of England has resumed quantitative easing but that may not be enough. There may in addition be a need to relax fiscal policy by a combination of increased spending and reduced taxes. Action to increase investment in housing has attractive properties in terms of increasing growth quickly: there is spare capacity in the industry and sufficient land available for extra investment to quickly turn into increased activity; in addition, relatively little of the extra demands leaks outside the UK. Increased investment also has the benefit of improving the UK's long term growth potential because of its beneficial impact on overall economic capacity and through strengthening labour mobility and work incentives.

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