By David Milliken
EBBSFLEET, England (Reuters) - Where Britain's first new town in over 40 years is due to be built there is little more than a gaping hole - a symbol of the huge housing shortage successive governments have failed to fill.
For almost 10 years the project has languished, first as developers worried about its scale and then as the financial crisis hammered the construction industry.
Now, under a new government-backed plan, more than 20,000 new homes will be built in Ebbsfleet, 20 miles east of London and just 17 minutes from the centre of the capital on a high-speed rail line.
But that is just a drop in the ocean, according to a report by a former Bank of England policymaker published in March which said Britain was short of 1 million homes.
The dearth has helped fuel a jump of nearly 10 percent in British house prices over the past year, and much more in London, bringing with it echoes of past booms and busts.
"We've had to reshape colossal, almost biblical, amounts of land," said Jeremy Kite, leader of the local council in Dartford, the nearest main town, who has been working with the site's owner, Land Securities, to get building started amid disused chalk quarries.
Construction in England slumped after the 2007-2009 financial crisis when banks, alarmed by a 20 percent tumble in property prices, stopped lending.
In 2013, 110,000 homes were built, the second-lowest reading since records began in 1978 and down from 177,000 in 2007.
A rebound is likely. Work has started on almost 25 percent more homes than a year ago, but even if house-building gets back to pre-crisis levels, Britain is still likely to face a housing shortage that could unbalance its economic recovery.
The central bank is watching closely as it considers when to start raising interest rates from record lows.
Bank of England Governor Mark Carney has warned that Britain's housing market can move rapidly "from stall speed to warp speed", a major concern given the country's high level of home-ownership.
The International Monetary Fund last week pointed to the risks presented by the country's "surging" house prices.
There is alarm even in the real estate sector. The Royal Institution for Chartered Surveyors said last week the lack of property for sale was now a major concern. There was a "desperate need for more", it said.
SHORTAGES OF SKILLS AND LAND
Last month's report for the Home Builders Federation, drawn up by former BoE policymaker Kate Barker, estimated that the number of new privately built homes would need to almost treble to 260,000 a year to bring down Britain's rate of house price inflation nearer to that in the rest of Europe.
Reaching that level is likely to be many years off because the industry has been so ravaged and also because of a shortage of land which can be built on.
John Stewart, the HBF's director of economic affairs, said building 200,000 homes a year by 2020 was more realistic.
"The industry's capacity has been severely hit by the crash of 2007-08," he added.
Stocks of bricks are down to two months' supply, their "lowest level in living memory", said Martin Warner, chief executive of brick manufacturer Michelmersh.
The Federation of Master Builders, which represents small and medium-sized construction firms, said bricklayers were pushing for pay rises of between 10 and 15 percent.
Keith Adey, the chief financial officer of home-builder Bellway, said he expects his company to complete 20 percent more homes in the current financial year, but that annual growth thereafter was likely to slow to 10 percent.
For both Adey and Stewart, the bigger long-term constraint is the supply of land.
Since the 1980s local authorities have gained increasing powers to determine what type of housing is built on what land, and to demand payments from developers for infrastructure such as schools and clinics.
"We have moved away from a system where private house builders were market-responsive - if demand picked up, you found more land, built more houses and away you went - to a system that is virtually managed by the state," Stewart said.
Stewart was hopeful that local authorities would show more flexibility, citing planning reforms introduced in 2012 that place a greater onus on local authorities to make sure they have sufficient housing in their areas.
"This is the best chance that we've had in 25 years to right some of the wrongs in the planning system."
Dartford council leader Kite, a Conservative, said he was keen to see more homes in his area, but that local politicians had to carefully manage development. "We don't want loads of sprawling houses, we want a rounded community," he said.
LOCAL WORRIES
Last month, the government extended until 2020 an equity loan scheme to encourage people to buy newly built homes, a boost for demand.
The HBF said this was crucial in giving construction firms confidence to buy land, seek planning permission and build, which takes about five years from start to finish. But if greater supply does not arrive, prices could spiral further.
At the national political level, there is broad agreement that more housing is needed. The opposition Labour Party says it will make sure 200,000 homes are built each year if it wins a national election in May 2015, an echo of elections after World War Two in which politicians vied to pledge more building.
Residents of Northfleet, a working-class town across the railway tracks from the Ebbsfleet site, had mixed views about the development.
Pub landlady Helen Reading saw no harm in the new houses as long as they did not all go to migrants from overseas.
Net immigration has added around 2 million people to Britain's population over the past 10 years, roughly half of total growth. The anti-European Union UK Independence Party has seized upon the issue and is expected to poll strongly in next month's European parliamentary elections.
Idriz Shaba, an Albanian-speaker who runs a car wash and has lived in Britain for 15 years, said he would prefer to spend money on smartening up the local area and shared the dislike of building on open space that is common to many Britons.
"I like green space more than bricks," he said. "If someone had come and said we had money to spend, I would say we should refurbish the estates here, rather than build on new land."
(Additional reporting by Paul Sandle and Brenda Goh; Editing by William Schomberg and Catherine Evans)