Residential developers are “relentlessly under-supplying housing” by sitting on plots which have already gained planning permission, according to a new report by the Policy Exchange think-tank.
Developers are propping up land prices and exploiting an outdated planning system, actions that were expected to lead to the second lowest annual build of new homes since the Second World War, the report added.
The argument from developers that they are not building homes because they can’t secure enough credit “is false”, it said.
“Between 2000 and 2007 new lending doubled but all that happened was house prices and land prices soared – the number of new housing built barely rose,” according to the report, entitled Why Aren’t We Building Enough Attractive Homes: Myths, misunderstandings and solutions.
The paper’s author Alex Morton said that rising house prices were “really about a rise in the value of land with planning permission, not some magical process of wealth creation”.
“This rise should mean more homes are built, but our existing planning system instead allows councils to decide where and how many homes need to be built,” he added.
“Developers know land release will always be inadequate. They therefore hold onto land because it rises in value and it takes a long time to get hold of, meaning that they don’t build enough new housing.”
The report follows a series of measures announced by the government last week designed to boost housebuilding and construction by loosening planning requirements and underwriting developments.
A total of £10 billion in housing guarantees will be made available alongside £40bn for infrastructure projects.
The Local Government Association said earlier this month that about 200,000 home builds have been approved but have not been started, while another 200,000 developments have begun but remain unfinished.
Policy Exchange recommended that new short-term measures should be applied to “get Britain building without causing political turmoil”.
It declared its support for self-build schemes and new urban developments by local people outside the current planning rules, and said the government should reduce brownfield requirements “to help regenerate existing cities to allow commercial land to become homes”.
In addition, it said long-term reform “needs to allow people living close to proposed new developments to be able to vote directly on any proposed scheme”.
“For greenfield, there should be compensation from the rise in land values to those nearby,” it continued.
“Local control, not planning rules, would drive up the quality of the development and strip out pointless or unpopular requirements.”