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Telegraph: Developers Accused Of Deliberately Restricting The Supply Of New Houses To Keep Prices High

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Developers have been accused of deliberately restricting the supply of new houses to keep prices high after figures suggested that planning permission has been granted for 750,000 homes which have not been built.

A report by Civitas, a respected right of centre thinktank, found that overall more than two million planning permits were issued between 2006 and 2015, a rate which would be enough to build average of 204,000 new homes a year.

However, foundations were only been laid on 1.26 million of them, suggesting that developers and land owners are sitting on the permissions rather than building new homes.

Theresa May, the Prime Minister, has made building more cheap affordable homes one of the cornerstones of her premiership and will chair a meeting of a new Cabinet committee on Thursday this week to discuss how to tackle the problem.

Last night MPs promised to look into the issue of whether developers should be forced to build on plots once planning permission has been granted as part of a forthcoming inquiry.

The Conservative Government controversially shook up the planning system in 2012 by writing a presumption of sustainable development into the rules, which campaigners feared would allow more greenfield sites to be built on.

The Telegraph ran a "Hands Off Our Land" campaign, which helped to persuade ministers to water down the full extent of the changes when they were introduced in March 2012.

However campaigners said that they should have included a "sunset clause" which would have forced developers to build on land granted planning permission within a set time period.

On Sunday night MPs promised a Parliamentary inquiry to see whether developers should be forced to build on plots once planning permission has been granted.

The analysis shows that between 2011 - the last full year before the changes were introduced - and 2015, the number of unused planning permits jumped by 88 per cent, while new housing starts increased by just 26 per cent.

One third of unbuilt planning permissions were thought to be held by non-builders, Civitas said, which points to land hoarding in the hope of further rises in land values.

Civitas accused housebuilders of reducing sales to a drip-feed to maintain profit margins.

Daniel Bentley, editorial director at Civitas, said: David Camerons 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 Mays government now is to break the stranglehold that the major housebuilders are exerting on the supply of new homes.

He added: 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.

Last night MPs said they would investigate the figures as part of a new cross-party Parliamentary inquiry into the UKs sluggish house building rates.

Clive Betts MP, the chairman of the Communities and Local Government select committee, said: Planning reforms will be a failure unless the Government can act and turn planning permissions into completions.

There is a real problem of large planning permissions being given and then the sites being built out at a very slow rate as developers build a number of homes to maximise profits rather than maximise supply. There needs to be a look at how we boost output rather than simply planning permissions.

David O'Leary, Policy Director of the Home Builders Federation, said: "Housing supply has increased by a third in just two years and most house builders have plans to increase output even further.

"Incentives for builders are heavily weighted towards building homes when it is legally possible to do so. "From outline permission it can take considerable time to progress through the stages necessary to be able to build, including meeting conditions imposed by local authorities.

Flawed or over-simplified analysis trivialises a serious subject. We need hundreds of thousands of new homes for households to buy and rent."

http://www.telegraph.co.uk/news/2016/08/28/developers-accused-of-deliberately-restricting-the-supply-of-new/

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They should be made liable for council tax on all homes that will fit on the site after a set time period. It is pointless pretending it is a free market when it obviously isn't; government needs to wield its stick.

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If this is true, then what about the 15000 new builds coming into the market in London that may well crash new build prices?

This site is schizophrenic - we need to make our minds up whether prices are high because it's a bubble, or prices are high because houses are a genuinely rare commodity

Edited by knock out johnny

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If this is true, then what about the 15000 new builds coming into the market in London that may well crash new build prices?

This site is schizophrenic - we need to make our minds up whether prices are high because it's a bubble, or prices are high because houses are a genuinely rare commodity

Given this site is a collection of individuals I'd be worried if it wasn't schizophrenic!

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@ knockout johnny...you are right this site does need to grapple with and debate more the supply demand v credit supply ... as the route cause of hpi. Fact is you need both. Without scarcity where is no competitive bidding and there is no mechanism for inflation...some here will say supply and demand is irrelevant...not true. Increase supply and it will ease pressure on prices...(everything else being equal)

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They should be made liable for council tax on all homes that will fit on the site after a set time period. It is pointless pretending it is a free market when it obviously isn't; government needs to wield its stick.

Perhaps. But £1k a year per home is hardly likely to be a material incentive.

A much bigger tax bill should apply - maybe if you don't build within a certain period you pay triple community infrastructure levy.

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@ knockout johnny...you are right this site does need to grapple with and debate more the supply demand v credit supply ... as the route cause of hpi. Fact is you need both. Without scarcity where is no competitive bidding and there is no mechanism for inflation...some here will say supply and demand is irrelevant...not true. Increase supply and it will ease pressure on prices...(everything else being equal)

You're not a bloody consumer of media here FFS. If you think that the forum needs more posting about supply side issues POST ON THAT SUBJECT! With 78 posts since March 2013 it's not as if you have your own nose so firmly to the grindstone that your own credentials on a willingness to post are unimpeachable. It is a forum. If you think that the balance of voices in the choir needs more Wayward on supply then man up and sing up.

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Regardless of how accurate anyone feels the content of this particular message is, I'm pleased to see increasing coverage of any failures of those with influence in the housing sector.

Even if it is credit rather than supply driving prices, I'm convinced increased supply can't harm our prospects for a significant drop in the near future.

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Even if it is credit rather than supply driving prices, I'm convinced increased supply can't harm our prospects for a significant drop in the near future.

Agree 100%.

Also a general belief that supply is actually going to expand can take the edge of sentiment, and credit is a busted flush if nobody wishes to avail themselves of it.

That said, I think that you'll need to actually see an enormous amount of supply before it influences sentiment because the trend of talking about a shortage and building sod all has been running for decades and is a socially accepted 'fact' that is not going to be washed away with a bump from 100k completions a year to 200k completions a year.

On the other hand a recession and a big BTL sell off could crush prices in a single quarter.

Ideally I'd like to see both mechanisms red in tooth and claw, as the fellah said.

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They should be made liable for council tax on all homes that will fit on the site after a set time period. It is pointless pretending it is a free market when it obviously isn't; government needs to wield its stick.

Actually, developers deciding what and when to build is a sign of a free market in operation, whereas government intervention, isn't.

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Actually, developers deciding what and when to build is a sign of a free market in operation, whereas government intervention, isn't.

An argument made by one of the historians of UK housing (Daunton) is that early in the twentieth century you had lots of small builders (and thus no coordination and no cartel). A housing boom would lead to masses and masses of building. They'd build too much and then prices would collapse as lots of unneeded supply hit the market. You could argue that this was market failure. You could also argue that we now have cartel coordination over supply and the boom-bust cycle still appears but is driven by the credit side.

[Edit: The planning regime obviously plays a massive role in the conduct of the small number of volume builders.]

Edited by Bland Unsight

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Actually, developers deciding what and when to build is a sign of a free market in operation, whereas government intervention, isn't.

Charging council tax from the date planning consent is granted wouldn't be inconsistent with having a free market.

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Flawed or over-simplified analysis trivialises a serious subject. We need hundreds of thousands of new homes for households to buy and rent."

So another report is needed on top of the thousands already published by most everyone in and connected to the housing/house price market over the years? :rolleyes: - that is the thousands already published by the time wasters.

Of course it's a serious subject and glib excuses trivialises it - if they don't know by now how to build enough new homes then they just aren't trying.

Edited by billybong

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@ knockout johnny...you are right this site does need to grapple with and debate more the supply demand v credit supply ... as the route cause of hpi. Fact is you need both. Without scarcity where is no competitive bidding and there is no mechanism for inflation...some here will say supply and demand is irrelevant...not true. Increase supply and it will ease pressure on prices...(everything else being equal)

As Spain has showed.

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Actually, developers deciding what and when to build is a sign of a free market in operation, whereas government intervention, isn't.

If it were a free market I could just go and build my own house on my own land.

Edited by doomed

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Could it be they just want the planning permission but not want to build only to store.......increases the value of the land by doing nothing. ;)

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As Spain has showed.

For every house there requires a job to pay for it......or someone who thinks there are people with a job that will pay for it. ;)

Edited by winkie

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For every house there requires a job to pay for it......or someone who thinks there are people with a job that will pay for it. ;)

In the UK you often need 2 jobs to pay for a house, in Spain you can buy with less than one full time job!

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In the UK you often need 2 jobs to pay for a house, in Spain you can buy with less than one full time job!

That's handy - in spain if you're young, you're most likely to have less than one full time job (if you're lucky)

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