FLUCTUATIONS IN PRIVATE HOUSEBUILDING IN GREAT BRITAIN, 1950–1966*
| DOI | http://doi.org/10.1111/j.1467-9485.1968.tb00010.x |
| Published date | 01 June 1968 |
| Date | 01 June 1968 |
| Author | M. J. Vipond |
FLUCTUATIONS IN PRIVATE HOUSEBUILDING
IN
M.
J.
VIPOND
I.
Zntroduction
THE
purpose of this article
is
to examine the pattern of fluctuations
in private housebuilding relative to changes
in
general economic
activity from
1950
to
1966.
Since seventeen years is too brief for
analysis of long waves the study refers to short period cycles. Previous
studies of short-run instability in building activity establish
no
conclu-
sive evidence for either
a
pro-
or
an anti-cyclical movement
in
building.’
In
our analysis
a
comparison between fluctuations
in
private
residential construction and the rate of growth
of
G.D.P.
shows that
private housebuilding followed a marked pro-cyclical course. Changes
in costs, incomes and credit are considered as possible causal determi-
nants of the fluctuations and it is suggested that credit conditions had
the dominant influence. Furthwmore, it is seen that, while credit
availability affects both the supply and demand for dwellings, it is
probable that its impact
on
supply
is
relatively the more important.
GREAT BRITAIN,
1950-1966*
11.
Identification
of
Building
Cycles
We measure private residential building by the number of dwellings
completed annually in the private sector.* This use of physical units
has,
of
course, the disadvantage that it does not show changes
in
the
size and quality
of
house^.^
On
the other hand the alternative indicator,
housing expenditure, is equally imperfect because of problems asso-
ciated with fmding an accurate price deflator.
*I
wish to thank Professor
M.
Gaskin, Mr.
H.
W.
Richardson and
Mr.
J. St. G. Jephcott for their comments
on
drafts of
$is
article.
lho
Grebler and Sherman
J.
Maisel, Determinants
of
Residential
Construction: A Review
of
Present Knowledge”
in
D. B.
Suits
el:
al..
Zmpacts
of
Monetary
Policy
(1963). H.
W.
Richardson and D.
H.
Aldcroft,
Building
in
the
British Economy
between
the
Wars,
Chs. 11 and 12, Section 1 (1%8);
Three
studies
of
postwar American residential construction that associate
short building cycles mainly
with
changes
in
credit conditions are: Leo
Grebler,
Housing
!ssues
in Economic Stabilisation Policy
(1960,
N.B.E.R.!;
J. M. Guttentag, The Short Cycle in Residential ConstruFtion 1946-1959
,
American Economic
Review
(June
1961);
W.
W.
Alberts,
Business Cycles,
Residential Construction Cycles and the Mortgage Market
’,
Journal
of
Political
Economy
(June 1962).
SFrom 1960, at least, there appears to have been no quality change in
the average private house constructed.
Short
Term Forecasting
of
Housing
Investment
’,
National
Institute
Economic
Review
(Aug. 1967).
Appendix Table
I,
Col.
1.
196
FLUCTUATIONS
IN
PRIVATE
HOUSEBUILDING
197
We felt that completions are
a
more suitable index
of
building
activity than starts since series such as building permits and housing
starts represent future output rather than the volume
of
activity itself.'
The choice between completions and
starts
depends primarily
on
the
research problem5
When
we talk of the pro- or counter-cyclical
character of building activity we are looking at the relationship
between building output and fluctuations in the economy as a whole.
and in
this
context completions seem more appropriate. However,
when we investigate the impact of changes in credit,
costs
and income
on
building the chain of causation
is
more clearly visible
if
we use
starts
rather than completions. We take account
06
this in Section
I11
by lagging the variables, while in Section
IV
we explicitly use starts.
One problem arising from any analysis of private housebuilding
in
the United Kingdom
is
the possible interdependence between the
private and public sectors.
In
the postwar period owner occupiers
have formed much the major part
of
private housing demand. This fact
may suggest a greater degree of independence between the two sectors
on
the demand side than before 1939, when the private sector still
supplied a considerable amount of rented accommodation. Moreover,
private housebuilding, since the end of 1954 has been subject
to
economic forces with little direct government intervention.
In
the
public sector,
on
the other hand, market forces have obviously been
subordinate to policy decisions.
Has,
therefore, the private market
been influenced by the provision of dwellings by the public sector?
From 1950 to 1961 there was
a
continuous increase in the number
of dwellings completed annually for private owners.6 At the same time,
there was an almost continuous increase in the private sector's share
of total housebuilding.'
In
addition, between 1954 and 1963 there was
a decline in the number of dwellings built for local authorities. This
suggests
that the upward trend in private housebuilding was, in part,
a result
of
a reduction
in
public sector suppIy. However, in
an
analysis
of short cycles what is important is not the trend itself but the fluctua-
tions about it.
An
inverse relationship between trends
in
building
activity
in
the two sectors does not invalidate
an
individual analysis
of
short cycles
in
each sector. Moreover, since
in
this period there
was
little
attempt by governments to use local authority building to
stabilise total building output, a separate analysis
of
fluctuations
in
Leo
Grebler,
Housing
Issues
in
Economic
Stabilisation
Policy
(1960,
For
example,
J.
M.
Guttentag,
loc.
cit.
and
W. W.
Alberts,
loc.
cit.
both
Appendix Table
I,
Col.
1.
Appendx
Table
I,
Col.
2.
N.B.E.R.).
used
starts
in their
studies.
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