End of house-building targets will cost economy £17bn, OBR told
THE abolition of house-building targets will deal a £17bn blow to the economy and deprive the Treasury of vital tax revenues, major developers have warned the spending watchdog.
In a letter to the Office for Budget Responsibility (OBR), Britain’s biggest builders say a proposal to drop targets will cause the annual number of new homes delivered to plunge by 100,000.
They claim local councils, which are responsible for allocating land for development, will “significantly reduce” planning permissions when pressure from Whitehall is removed.
The letter from the Home Builders Federation (HBF), seen by The Sunday Telegraph, argues that the resultant drop in house building will gouge out £17bn worth of economic activity and £1.2bn of government tax receipts.
It will be seen as a further challenge to Conservative ministers and MPs, with any blow to economic growth likely to make efforts to plug a £70bn hole in the public finances even harder.
Senior Tories have argued that centralised housing targets are no longer necessary for more homes to be built per year, with Liz Truss and former chancellor Rishi Sunak both having argued against them in the last Tory party leadership election.
Under the governments of David Cameron, Theresa May and Boris Johnson, the Government aimed for 300,000 new homes to be built per year, in an attempt to address an acute shortage that is making it difficult for first-time buyers to get on the property ladder. However, Ms Truss proposed to abolish the “Stalinist” target and the change is included in proposed planning reforms by Simon Clarke, the Levelling Up Secretary, who has vowed to “create incentives for residents to support development” instead.
In the letter, sent to OBR chairman Richard Hughes, the HBF said the shake-up would result in annual housing completions plunging by as much as 100,000 to just 140,000 – the lowest level since the 2008 financial crisis.
Stewart Baseley, the industry group’s chief executive, told Mr Hughes: “As you will be aware, the economic footprint of the house building industry is vast due to its significant contributions to GDP, employment, and public finances.
“It also has an important role in stimulating demand and economic activity through its extensive supply chains and networks. If housing delivery declines significantly, as is anticipated due to the Government’s upcoming reforms, the economic consequences will be substantial.
“HBF and its members would appreciate any attention the OBR can bring to these issues in its upcoming forecast.”
The HBF’s intervention creates yet another potential headache for the Treasury as the Chancellor, Jeremy Hunt, seeks to balance the nation’s books and reassure financial markets.
On Friday a Treasury spokesman declined to comment on the OBR’s work but said the Government was working with house builders “to deliver the safe, green, and affordable homes that people need”.