Local authorities should be given more powers to set the rules about who can buy properties in particular areas as one measure to tackle ‘exploitative lets’, think tank says.

A new report from the progressive think tank Joseph Rowntree Foundation (JRF) says the housing market is facing a ‘worst of all worlds’ situation as rising interest rates and high inflation create the conditions for a housing market freeze.

It describes the market as one where building stops, transactions stall, cash rich investors ‘swoop in to buy up properties’, rents spiral and homeowners are stuck in unaffordable homes.

In order to fix the market, JRF proposes that councils, housing associations, charities and community groups should be empowered and funded to acquire stalled sites from developers and redesign schemes to include more affordable housing.

The think tank also argues that local authorities should be able to apply to declare Housing Pressure Zones where they can set the rules about who can buy properties in particular areas. This would enable them to restrict investor activity where high demand for second homes or low demand is fuelling what JRF call ‘exploitative lets.’

Among a whole raft of proposals to fix the housing market, the Joseph Rowntree Foundation also proposes giving councils the power to levy council tax on homes in new developments 18 months after planning permission has been granted whether built or not.

The think tank also called for the unfreezing of Local Housing Allowance (LHA).

Darren Baxter, principal policy adviser at JRF, said: ‘We are facing a housing downturn that will put vulnerable families and our country’s economic prospects into serious difficulty. The Government must confront this head on and recognise that past approaches will not work this time.

‘Instead, the Government must tackle both the short-term fallout from the housing downturn we find ourselves in and the deeper problems within our housing system. By acting now, and doing both at the same time, Government will ensure we are better placed to come out of this downturn with a fairer, more secure and more affordable housing system in reach.’