We must tackle the housing crisis – Lords economic affairs committee

The Government must lift its target by 50% and build 300,000 homes each year to tackle the housing crisis, says Lords economic affairs committee.

In their report, Building More Homes, published today, the cross-party House of Lords Economic Affairs Committee have stressed that Local authorities and housing associations must be freed to build substantial numbers of homes for rent and for sale. The report criticises the Government’s housing policy for:

Setting a new homes target which will fail to meet the demand for new homes or moderate the rate of house price increases.
Restricting local authorities’ access to funding to build more social housing.
Creating uncertainty in the already dysfunctional housing market by frequent changes to tax rules and subsidies for house purchases, reductions in social rents, and the extension of the Right to Buy. All of these changes reduce the supply of homes for those who need low cost rental accommodation.
A narrow focus on home ownership which neglects those who rent their home.

The Committee makes wide-ranging recommendations to address the housing crisis, including:

Restraints on local authority borrowing should be lifted. Local authorities should be free to borrow to fund social housebuilding as they are other building programmes. This would enable local authorities to resume their historic role as one of the major builders of new homes, particularly social housing.

The current historically low cost of borrowing means local authorities could make a large contribution to building the houses we need for the future. Further, the new Prime Minister has announced that the Government will abandon their fiscal target. This paves the way to increase local authority borrowing powers.

Council tax should be charged on development that is not completed quickly. The Government’s reliance on private developers to meet its target of new homes is misguided. The private sector housebuilding market is oligopolistic (An oligopoly is a market structure in which a few firms dominate) with the eight largest builders building 50% of new homes.

Their business model is to restrict the volume of housebuilding to maximise their profit margin. To address this the Committee recommend that local authorities are granted the power to levy council tax on developments that are not completed within a set time period.

Maximise the use of public land. The Government must take decisive steps to build on the very substantial holdings of surplus publicly owned land. The Committee recommends that 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. The National Infrastructure Commission should oversee this process.
Local authorities should be given the power to increase planning fees to help fund a more efficient planning system and the upper cap on these charges should be much higher than the current limit.

Lord Hollick, Chairman of the Committee, said: “We are facing an acute housing crisis with home ownership – and increasingly renting – being simply unaffordable for a great many people.

“The only way to address this is to increase supply. The country needs to build 300,000 homes a year for the foreseeable future. The private sector alone cannot deliver that. It has neither the ability nor motivation to do so. We need local government and housing associations to get back into the business of building.

“Local authorities are keen to meet this challenge but they do not have the funds or the ability to borrow to embark on a major programme to build new social homes. It makes no sense that a local authority is free to borrow to build a swimming pool but cannot do the same to build homes.

“The Government are too focussed on home ownership which will never be achievable for a great many people and in some areas it will be out of reach even for those on average incomes. Government policy to tackle the crisis must be broadened out to help people who would benefit from good quality, secure rented homes. It is very concerning that changes to stamp duty for landlords and cuts to social rent could reduce the availability of homes for rent. The long term trend away from subsidising tenancies to subsidising home buyers hits the poorest hardest and should be reversed.

“If the housing crisis is to be tackled the Government must allow local authorities to borrow to build and accelerate building on surplus public land.”