Austin Macauley 31 March 2016

Report: Public sector must intervene to solve housing crisis

The Government should abandon its over-reliance on the private sector to solve the housing crisis and commit to substantial public investment and a bigger role for local authorities, a new report has warned.

A paper by the think tank Civitas argues housing supply has only ever been adequate when private sector output is ‘topped up’ by backing from the public sector.

It proposes placing a statutory obligation on local authorities to acquire sufficient land to ‘top up private sector housebuilding to the required levels’, funded by central government borrowing, with the proceeds of sales reinvested.

The report also suggests introducing ‘a contract between planning authorities and developers in which permission to build residential property is time-limited and granted on a use-it-or-lose-it basis; failure to build out sites within agreed timescales would result in the forfeiture of the land at half its residential use value’.

There remains an in-built lack of incentive for private sector developers to guarantee to meet the country’s housing needs, according to the report.

‘Private sector housebuilders cannot, having purchased land based on projected future values, build so many homes that housing costs fall; to turn a profit on any given project, homes can be released into the local market only as quickly as they can be sold at or above current prices. When prices fall, builders stop building until prices recover.’

Author David Bentley, editorial director at Civitas, concludes: ‘There is no solution to the housing crisis that does not involve a large increase in the rate of housebuilding. The evidence suggests we cannot afford to leave this challenge to the market any more.’

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