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Housebuilders 'exerting stranglehold' on supply of new homes

Published 29/08/2016

Housebuilders are drip-feeding the market, a think tank said
Housebuilders are drip-feeding the market, a think tank said

New houses are being approved in much greater numbers than homes are being built with developers "drip-feeding the market in order to push up prices", a think tank has said.

Planning permission has been awarded in England for 2,035,835 houses between 2006 and 2015 - an average of 204,000 new homes a year, according to Civitas.

But analysis shows that during the same 10-year period the number of homes started was 1,261,350 - an average of 126,000 a year.

Civitas said this shortfall has been growing wider over the past five years, and that a significant increase in the number of planning permissions granted since 2011 has not been matched by a comparable increase in starts or completions.

In 2015 there were 261,644 homes permitted for development - but just 139,680 recorded starts, leaving a deficit of 121,964.

In its analysis, the think tank said: "The number of homes approved for development has far exceeded the number of starts every year for the past decade - and the gap has been growing rapidly since 2011.

"The building industry casts doubt on the veracity of the starts data - but even allowing for a reasonable margin of error the overall picture is clear.

"So is the trend that this is getting worse not better. Even allowing for some delay between permission being granted and 'spades in the ground', it is clear that new housing units are being approved by planning departments in much greater numbers than homes are being built.

"Any strategy to secure a step-change in housebuilding output must address this discrepancy and the factors which are dictating the rate of development once planning permission is granted."

Daniel Bentley, editorial director at Civitas, said: "The planning system and the potential for communities to frustrate new homes developments are frequently blamed for the housing shortage.

"But it is increasingly evident that the brake on development is being applied by those who are sitting on land which is ripe for new homes and has been given the all-clear by planning authorities.

"This includes land speculators, who are content to sit tight while their holdings spiral in value, but is mostly housebuilders, who lack any incentive to get on and build the homes the country needs.

"Housebuilders are drip-feeding the market in order to push up prices and maximise their profits. This is great for their shareholders but it is Generation Rent that is paying the price.

"David Cameron's relaxation of the planning rules has so far only been to the advantage of developers, who have banked the additional planning permissions and topped up their pipelines for future years without increasing output.

"The challenge for Theresa May's government now is to break the stranglehold that the major housebuilders are exerting on the supply of new homes."

A Department for Communities and Local Government spokesman said: "We've got Britain building again, with almost 900,000 homes delivered since the end of 2009 and the number of new housing starts up on last year.

"Councils have a range of powers to speed up house building, including reducing the amount of time developers have to start building after getting planning permission.

"We are working with industry to boost the rate of building and have been clear that house builders need to do more to deliver the homes this country needs."

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