Summary of conclusions and recommendations
The Problems
Chapter 1: The State We Are In
1.Demand for housing fuelled by demographic change, immigration, rising incomes and greater access to finance over the last few decades have made a substantial contribution to rising house prices and worsening affordability. (Paragraph 31)
2.If immigration remains at current levels, it will be a large factor in the future demand for housing, especially in the London private rental sector. (Paragraph 32)
3.The planning system, in restricting the supply of land for development, has an obvious effect on land prices. This is demonstrated by the huge differences in price between agricultural land and residential land on the edge of some cities. (Paragraph 35)
4.The Government should assess why there is a large gap between the number of planning permissions granted and the number of homes actually built. In particular it should identify who is holding permissioned land that is not developed. (Paragraph 49)
5.Since the 1980s we have been relying on the private sector to provide the homes that are needed. The sector, especially since the financial crisis, has all the characteristics of an oligopoly: there are high barriers to entry and the large housebuilders are responsible for a substantial proportion of output. It is rational for private enterprise to optimise profits rather than volume, limiting their uncertainty in a market characterised by constant Government intervention and cyclical risk. The sector is largely focused on building for sale and is not providing for the rental sector which is over a third of the market. (Paragraph 52)
6.The Department for Communities and Local Government told us it is examining incentives to get the private sector building more homes. Encouraging smaller builders back into the market and promoting greater use of modern construction techniques may help. But the Government cannot rely on the private sector alone to build the homes the country needs. The gap between what can realistically be expected and what is needed is simply too large. (Paragraph 53)
7.Local authorities and housing associations need to make a much bigger contribution to housebuilding if it is to reach required levels. (Paragraph 56)
8.Government must recognise the effect that constant changes in public policy have on the housing market; housebuilders, housing associations and local authorities are unlikely to commit to large building programmes amid such uncertainty. (Paragraph 61)
9.The construction of houses is affected by macroeconomic policy. Nevertheless a robust programme of continuing, uninterrupted development by local authorities, housing associations and private investors in the rental sector would provide a more stable output of new homes across the economic cycle. (Paragraph 62)
10.The price of housing is determined by the balance in demand and supply for the entire housing stock rather than the supply of new homes alone. A higher rate of construction will need to be sustained over many years to have a substantial effect on prices. (Paragraph 67)
11.The existing stock of housing in England is not used particularly efficiently. While new construction is important, the Government should not overlook the role the existing housing stock plays and consider ways of stimulating the market for existing homes. (Paragraph 72)
Chapter 2: The Government’s Response
12.The Government’s target of one million new homes by 2020 is not based on a robust analysis. To address the housing crisis at least 300,000 new homes are needed annually for the foreseeable future. One million homes by 2020 will not be enough. (Paragraph 84)
13.To achieve its target, the Government must recognise the inability of the private sector, as currently incentivised, to build the number of houses needed. Government action is required to address this, including helping local authorities and housing associations to increase their housebuilding. (Paragraph 85)
14.The Government has chosen to promote the expansion of owner occupation. This reflects the aspiration of many people to own their home. However, it must be recognised that home ownership, whilst a wish for many, is not achievable for all. (Paragraph 104)
15.The Government’s focus on home ownership neglects other tenures; those on the cusp of ownership are helped and those who need secure, low cost rental accommodation are not. Opportunities to increase investment and funding in the private rental sector are potentially undermined by policies designed to assist owner occupation. (Paragraph 105)
The Solutions
Chapter 3: Planning Reform
16.Adequately resourced planning departments are crucial to the effective delivery of development. It is possible to mitigate the effects of reductions in local authority spending on planning by increasing the fees that can be charged for planning applications. Builders and developers are willing to pay more. (Paragraph 127)
17.We recommend that the Government:
- allows local authorities to set and vary planning fees in accordance with the needs of their local area. To prevent abuse there should be an upper limit or cap on the level of fees. To allow sufficient discretion to local authorities, this cap should be significantly higher than the current fees that can be charged; and
- provides that the money raised from these fees is ring-fenced for expenditure on planning and development. (Paragraph 128)
18.We recommend that local authorities are granted the power to levy council tax on developments that are not completed within a set time period. This time period should be negotiated when planning consent is sought and be varied according to the size and complexity of a development. To ensure that the local authority also has an incentive to accelerate the process, the clock should start to run only when the local authority has signed off all conditions and obligations. (Paragraph 139)
19.We recommend that as part of its ongoing reviews of planning obligations and the Community Infrastructure Levy the Government aims to achieve a system that is:
- Simple, so time is not wasted negotiating consents and delaying building.
- Transparent, so the value of the contribution made by a developer can be easily quantified and local communities can understand what a new development has paid for and its value. This value should be sufficient to provide an incentive to the local authority to grant planning permission.
- Responsive to the concerns of small and niche builders, which may require exemptions for certain types or sizes of development. (Paragraph 147)
20.We do not take a view on proposals to change the planning system to make it more responsive to market signals, but recommend that the Government investigates this and other proposals to improve land supply further. (Paragraph 152)
Chapter 4: Building.on Public Land
21.We welcome the Government’s wish to bring public land forward for housebuilding. It can make a useful long-term contribution towards the supply of housing but we note that these efforts have yielded very little to date. (Paragraph 166)
22.We endorse the conclusions and recommendations of the National Audit Office and Public Accounts Committee. Since the number of new homes the Government expects to be built on public land by 2020 amounts to nearly one third of their housebuilding target, it is essential that the Government should oversee the number of homes that are actually built. Such a role should be included within the National Infrastructure Commission’s remit. (Paragraph 167)
23.We welcome the trial of direct commissioning but it should be a much bigger part of the housebuilding programme. The implementation of our recommendations on the financing of local authority building would help with this. Direct commissioning would also provide opportunities for smaller builders. (Paragraph 172)
24.The release of public land provides a good opportunity to support the building of low cost homes and help smaller builders return to the market. The requirement to achieve best market value when releasing public land should be relaxed. This is only going to work however if there is a central scheme that approves and compensates public bodies who sell land below market value. (Paragraph 177)
25.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. (Paragraph 187)
Chapter 5: Building by Local Authorities and Housing Associations
26.We consider that local authorities and housing associations must be incentivised and enabled to make a much greater contribution to the overall supply of new housing. Without this contribution it will not be possible to build the number of new homes required. The likely reduction in the housing benefit bill over the long-term is a further reason to increase the supply of social and affordable rented housing through building by local authorities and housing associations. (Paragraph 201)
27.We conclude that the cuts to social rent are short-sighted. Whilst they may reduce the immediate housing benefit bill, in the longer term they are likely to deter investment and reduce the available stock of social and ‘affordable housing’, thus requiring a greater number of tenants to live in, more costly, privately rented accommodation. (Paragraph 207)
28.We support the Government’s efforts to reclassify housing associations as part of the private sector. The ability of housing associations to borrow to fund new development could otherwise be at risk. (Paragraph 211)
29.The Government states it is supportive of local authority building across all tenures. One aspect of this support must be to ensure local authorities who wish to build social housing have access to the funds to do so. The current restrictions the ability of local authorities to borrow to build social housing are arbitrary and anomalous. Local authorities should be able to borrow to build social housing as they can for other purposes. We recommend that the Government allows local authorities to borrow under the prudential regime to build all types of housing. (Paragraph 220)
30.We endorse the efforts of local authorities to innovate, co-operate and enter into partnership with others in the housing sector to increase the number of houses built. We note that these schemes are disparate and sometimes on a small scale. We encourage local authorities to share their experience and expertise to ensure the proliferation of successful schemes. As any uncertainty could deter innovation and investment, we urge the Government to provide local authorities with clear guidance about the future accounting treatment of public-private partnerships. (Paragraph 224)
Chapter 6: Use of Existing Stock
31.Local authorities have increased the size of their reserves in recent years. Their cautious attitude is understandable given the uncertainty faced by local authorities which need to adapt to financial restrictions and new sources of revenue. However, given the current levels of reserves, we agree with the Minister for Housing that local authorities should consider how some of their reserves could be used for housebuilding. (Paragraph 228)
32.The weight of evidence suggests that stamp duty land tax can deter people from moving into a smaller home, acting as a barrier to making the best use of the houses that we already have. (Paragraph 252)
33.It is wrong to create specific tax rules, as is the case with recent changes to capital gains tax and inheritance tax, around housing. (Paragraph 253)
34.Council tax is regressive. The bands should be amended so that owners of more expensive properties contribute proportionally more than owners of less expensive properties. This should be done in a revenue neutral way. (Paragraph 254)
35.Changes to the taxation system may encourage some people to move home but any such changes are unlikely to make a large difference, particularly in terms of downsizing, as there is a shortage of suitable smaller accommodation for people to move into. (Paragraph 259)