The report suggests that local authorities and housing associations must be freed to build substantial numbers of homes for rent and for sale and points out that the current targets will fail to meet the demand for new homes or moderate the rate of house price increases.
It also says that current policy is restricting local authorities' access to funding to build more social housing and 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 and a narrow focus on home ownership neglects those who rent their home, the report adds.
The Committee makes wide-ranging recommendations to address the housing crisis, including charging council tax on development that is not completed quickly and not relying solely on private developers to meet the target which the report describes as misguided.
Indeed, it points out that the private sector house building market is ‘oligopolistic’ with the eight largest builders building 50% of new homes and their business model is to restrict the volume of house building to maximise their profit margin. To address this the Committee recommends that local authorities are granted the power to levy council tax on developments that are not completed within a set time period.
It also suggests that the Government must take decisive steps to build on the very substantial holdings of surplus publicly owned land and that a senior Cabinet minister should be given overall responsibility for identifying and coordinating the release of public land for housing, with a particular focus on providing low cost homes while the National Infrastructure Commission should oversee this process.
It also wants local authorities to be given the power to increase planning fees. Local authorities should be able to set and vary 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.
‘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,’ said Lord Hollick, Chairman of the Committee.
‘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,’ he pointed out.
‘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,’ he added.
He also pointed out that the Government is 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,’ Hollick added.
‘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,’ he concluded.
Nick Marr, co-founder of property classifieds site, TheHouseShop, believes that the report’s strong criticism of the Government’s constant intervention in the private rental sector should be addressed.
‘The report is not very complimentary of the government’s attempts to curb the growth of the buy to let sector and the committee heard evidence from the Council of Mortgage Lenders who predicted that the overall effect of these changes would be counterproductive and, in fact, increase the cost and limit the availability of private rented sector homes,’ he pointed out.
‘In particular, the higher rate of Stamp Duty for second homes has been seen as a significant barrier to the development of a thriving Build to Rent sector. The committee heard during evidence that an estimated £30 to £50 billion worth of investment into the PRS could be available from institutional investors, but that the prospect of higher Stamp Duty charges and the fear of further changes to rules and regulations in the PRS have scared off large scale investors,’ he said.
‘The best thing that the Government can do for the UK’s tenants and stakeholders in the private rental sector would be to reverse, or at least reduce, the higher Stamp Duty charge and to reassure both individual landlords and institutional investors that the UK PRS is a safe and secure place for their money, and that conditions will remain as they are for the foreseeable future,’ he explained.
He also explained that a positive point for landlords from the report was that even if we meet the ambitious home building targets set out in the report, this would only have a moderating effect on house prices and rents.
‘Many of the landlords we speak to are concerned that attempts to boost supply would result in house prices and rents decreasing as a result of less demand, but, as this report shows, landlords should feel confident that they can sustain the value of their properties and their annual rental incomes for many years to come,’ he added.
