Demands for action to fix house market

A PAIR of damning reports by MPs have slammed government efforts to build homes, saying they lacked “urgency and ambition”, while urging the break-up of “dominant” housebuilders.

A report by the public accounts committee said the Department for Communities and Local Government “conceded that the shortfall in housing ‘will continue… for decades’, and that this would be reflected in issues of affordability and of homelessness”.

It added that the department “has been very unclear about the details of this objective [to build one million homes by 2020], including how chal- lenging it really is”, adding it had quietly scrapped this ambition.

In a separate report by the communities and local government committee, MPs urged the break-up of the big housebuilders to create more competition to “fix the broken market”. It said: “If we remain overly reliant on a part of the industry that has little incentive to change… then the country will not be able to deliver the new homes it needs.”

Contrary to ministers who said last year developers had to “stop sitting on landbanks,” the committee found no evidence of landbanking, when developers sit on land so its value increases.

It said: “While we have not seen evidence of [landbanking], we have found that there is little incentive for volume housebuilders to build any quicker. It is in their commercial self-interest to maintain profits and they cannot be blamed for this.”

However, it quoted figures by Barbour ABI which suggested that developers were sitting on many plots: “In July 2016 there were 684,000 units with detailed planning permission granted on sites which had not yet been completed. Of these, 349,000 units have started and 335,000 units are on sites yet to start.”

The report also said the committee should examine the case for public intervention in the competitive land market, which forces developers to pay inflated prices and recoup their investment by cutting affordable homes, increasing density and building more slowly.

It also promoted more housebuilding by councils, and urged a change to rules that limit what they can borrow.

Housing minister Gavin Barwell said on BBC Radio 4’s Today programme that “[councils] should get back involved in building homes again”, adding that there were measures in a White Paper to promote this.

Clive Betts, chairman of the committee, said: “A successful housing market is a competitive one and Government should support smaller developers if it wants to increase the housing stock. This includes earmarking land, improving access to finance and reducing risk by proactively preparing sites for development.”

The reports come as Nationwide Building Society provided the latest snapshot of an abruptly slowing housing market, with annual growth now at its lowest in four years and prices falling for the second month in a row.

The society’s economists also highlighted the fact that while mortgage rates continue to reduce sharply, the “affordability” of property, measured by the income borrowers commit to mortgage repayments, is not improving. In some areas it is deteriorating.

Nationwide said house prices declined 0.4pc in April following a fall of 0.3pc in March, which had been the first fall since mid-2015. In annual terms, house prices were 2.6pc higher, the weakest increase in almost four years.