Time for big builders to lose their plots

The UK is facing an acute housing shortage, particularly for first-time buyers and those in the lower income bracket. Much has been made of the Government’s proposed planning reforms to fix the situation but why aren’t these translating into new homes? The foundations of the problem run deeper than planning issues, as this piece by Lian Halligan in The Telegraph discusses.

‘Four-fifths of residential planning applications are now accepted but permissions for over a million homes remain unused due to ever=lengthening delays between permissions being granted and homes being built,’ explains Halligan. The reason, he says, is that too many of these permissions are being hoovered up by a monopoly of large housebuilders with no incentive for them to build. ‘They make higher profits overall by producing fewer homes so prices keep rising. Unless ministers tackle this massive market failure, the lack of competition within a housebuilding sector dominated by a few large players, our chronic housing shortage will remain.’

Policy specialist Alex Morton’s report, ‘The Housing Guarantee’, published by the Centre for Policy Studies last week sets out some welcome proposals to address the issues, including ‘delivery contracts’ setting out legal obligations to build out within a certain timeframe or face the penalty of giving up the land to other developers at a pre-set price, forcing the existing model of housebuilding to focus more on delivery, not land speculation. Morton also recommends that councils set targets relating to houses actually built, not just making land available, and that some public sector acreage should be sold off to SMEs, again with delivery targets, to help level the playing field between smaller, niche players and larger identikit housebuilders.

Despite the pandemic, average UK house prices hit an all-time high in March this year, with the average home now costing eight times the average annual wage – double the long-term earnings multiple. ‘We need around 250,000 new homes each year to meet population growth and household formation. Housebuilding hasn’t reached that level since the late 1970s,’ says Halligan. ‘The shortage of homes to both buy and rent means adults aged 25-45 now spend more on housing and are more likely to rent than any generation since the 1930s – as sky-high prices deny home ownership.’

The reality, as Halligan says, is harsh. ‘Our housebuilding industry is denying millions of hard-working people the chance to rent or buy a reasonably priced home. It’s time to shake it up.’

Read Halligan’s full article here.

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