Lords Report Tackles Housing Crisis and Slams Housebuilders

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Lords Report Tackles Housing Crisis and Slams Housebuilders

The House of Lords has called for the new Government to tackle the housing crisis by building 300,000 new homes a year. The Lords say local authorities must be allowed to borrow money to build new social housing because private house builders deliberately construct too few new dwellings to keep house prices, and their profits, high.

In their report, Building More Homes, published today (15 July 2016), the cross-party House of Lords Economic Affairs Committee slam house builders: “The private sector housebuilding market is oligopolistic with the eight largest builders building 50% of new homes. Their business model is to restrict the volume of housebuilding to maximise their  profit margin.”

The report also criticises government for restricting local authorities’ borrowing to build more social housing and for creating uncertainty in the “already dysfunctional” housing market by frequently changing tax rules, subsidies for buyers and renters, and the Right to Buy. It says the Government has had a narrow focus on home owners, while neglecting those who rent – one in five households.

Commenting Lord Hollick, Chairman of the Committee, said:

"We are facing an acute housing crisis with home ownership – and increasingly renting – being simply unaffordable for a great many people.

"The only way to address this is to increase supply. The country needs to build 300,000 homes a year for the foreseeable future. The private sector alone cannot deliver that. It has neither the ability nor motivation to do so. We need local government and housing associations to get back into the business of building.

"Local authorities are keen to meet this challenge but they do not have the funds or the ability to borrow to embark on a major programme to build new social homes. It makes no sense that a local authority is free to borrow to build a swimming pool but cannot do the same to build homes.

The Committee recommendations to address the housing crisis include:

  • Restraints on local authority borrowing should be lifted. Councils should be free to borrow to fund social housebuilding as they are for other building programmes. This would enable local authorities to resume their historic role as one of the major builders of new homes, particularly social housing.
    The current historically low cost of borrowing means local authorities could make a large contribution to building the houses we need for the future. Further, the new Prime Minister has announced that the Government will abandon their fiscal target. This paves the way to increase local authority borrowing powers.
  • Council tax should be charged on developments that are not completed quickly. The Government’s reliance on private developers to meet its target of new homes is misguided. The private sector housebuilding market is oligopolistic with the eight largest builders building 50% of new homes. Their business model is to restrict the volume of housebuilding to maximise their profit margin. To address this, the Committee recommends that local authorities are granted the power to levy council tax on developments that are not completed within a set time period.
  • Maximise the use of public land. The Government must take decisive steps to build on the very substantial holdings of surplus publicly owned land. The Committee recommends that a senior Cabinet minister must be given overall responsibility for identifying and coordinating the release of public land for housing, with a particular focus on providing low cost homes. The National Infrastructure Commission should oversee this process.
  • Local authorities should be given the power to increase planning fees. Local authorities should be able to set and vary planning fees to help fund a more efficient planning system and the upper cap on these charges should be much higher than the current limit.

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