Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Written Evidence


Memorandum by the National Federation of Builders (NFB) (AH 34)

INTRODUCTION

  1.  The NFB is the construction industry's longest established trade association, and represents some 2,000 builders and contractors across England and Wales with an aggregate turnover of more than £10 billion (over 10% of the industry's total gross turnover). 800 of its members are housebuilders.

  2.  We wish to make two specific observations about issues that will affect housebuilding rates, which are particularly relevant to our predominantly small and medium sized members (SMEs).

MORE LOCATIONS AND MORE SITES

  3.  We welcome the Government's intention to increase housebuilding levels and support the proposals in "Planning for Housing" to increase the number of available sites. This explicit recognition of a connection between site availability and housebuilding output has been absent from policy since the late 1980s.

  4.  However there are potential conflicts between these proposals to require local authorities to make more sites available and another major policy plank, aimed at increasing housing output; Growth Area policy.

  5.  Growth Areas policy involves a very high degree of concentration in major locations, and this policy is taken forward in the RSS for the East of England (the East of England Plan). While. in the long run. it is undoubtedly helpful to have these long term major allocations because they can help infrastructure planning, they are not the whole answer. Indeed, the degree of concentration and the resulting high levels of output that are assumed will follow, are themselves likely to lead to an under-performance against Plan.

  6.  This is because any individual housing market has a finite size and each site within that market only sells at an average of 50 units per year. Thus there must be sufficient sites and markets to sustain a policy level increase in output. This point was recognised in DoE Circular 44/78, "Private Sector Land: Requirements and Supply", which said:

    "The phasing of development, for instance, is one kind of marketing constraint which is commonly overlooked. There is a limit to the rate at which dwellings can be sold on any one site. Rarely, if ever, would a site be capable of generating more than 100 sales a year. Typical annual production on a large site is unlikely to exceed 50 houses. A site with a capacity of (say) 1,000 dwellings should be seen, therefore, as providing 100 dwellings a year (at best) over 10 years; the site's entire capacity is in no real sense immediately available for development."

  7.  Similarly, the Growth Areas are characterised by long lead times and by heavy infrastructure requirements, which raises a real risk that instead of increasing output and providing a step change, they will actually delay housebuilding and reduce provision. It is therefore essential that PPS 3 and RSS policies in the Growth Areas address the question of how to ensure a sufficient flow of sites, including what are termed "oven ready," easy-to-develop sites, both in the short term, in order to avoid a hiatus in supply and in the longer-term, to complement the mainly large and difficult-to-develop sites in the Growth Areas.

HOME INFORMATION PACKS (HIPS)

  8.  We would invite the Committee to consider the impact of the proposed HIPs on housebuilding output. There has been a great deal of publicity about the cost of HIPs and their relevance and value to the consumer. However there has been little discussion of their effects on the size of the total housing market.

  9.  ODPM has itself acknowledged that their introduction could deter "casual" sellers and might reduce the total size of the housing market by 10%. Estate agents who recognise the role of the vendor who wants to test the market and withdraws if the house does not sell, have estimated the reduction could be as great as 30%.

  10.  This is enormously significant for new housebuilding, because 50%-70% of new home sales, depending on the market cycle, are dependent on a second-hand sale. If that market is slowed down and is reduced in total size, it will inevitably reduce effective demand for new homes. In turn, this means that other Government policies to improve planning policies or performance will be thwarted by the downsizing of the total market.

  11.  However, on the wider question of the value of the Packs, we totally reject the premise on which they have been promoted by Government; namely, that they will increase the likelihood of transactions completing because, at present, they fail due to lack of information. All the evidence clearly shows this is a very insignificant cause of failed transactions.

  12.  Given that the Government intends to pilot the Packs sometime in 2006, before introducing them in 2007, we would urge your Committee to hold an Inquiry into the results of the pilot and to instruct the Government that sufficient time must be allowed for that Inquiry to be completed and its findings to be considered before introducing the Packs.





 
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