A surfeit of “relatively homogeneous” new-build homes has reduced market demand and therefore diminished supply from house builders, the former Cabinet Office minister Sir OIiver Letwin has reported in his latest analysis of UK land banking.
The senior Conservative backbencher, whose work was commissioned by the government, also said he will use his final report – due to published in the autumn alongside the Budget – to recommend new policies to combat slow build-out rates.
Based on an analysis of 15 housing sites in areas of “high housing demand”, Mr Letwin found the average build-out period – the time from consent being given to the last house being completed – was 15.5 years.
Mr Letwin said he would seek to recommend “policy levers that will tend to increase the variety and differentiation of what is offered on these sites”.
While emphasising that these levers should not “throw the baby out with the bathwater”, Mr Letwin said it seemed “natural” to need more differentiation of houses on building sites.
“If this were achieved, it is intuitively plausible that a range of markets (each with their own absorption rates) could be addressed simultaneously, thereby accelerating the overall rate of build out,” Mr Letwin said in his report.
In March Mr Letwin said in a letter to the previous housing and communities secretary, Sajid Javid, that his review would focus on the “absorption rate” which is defined as the “rate at which newly constructed homes can be sold into the local market without materially disturbing the market price”.
Mr Letwin also said he had “concluded” that any attempts to force major house builders to reduce house prices would “not be sensible”, as it would create “very serious problems” for the housing market and therefore the economy.
In addressing the issue of the supply and demand of new homes, Mr Letwin said his team had found statistical evidence that smaller sites produced a faster build out rate when compared with larger sites. To this end, the report recommended two ways of increasing the number of small sites: firstly by “packaging” large sites into smaller sites, and secondly through encouraging the creation of more small sites through land supply plans.
That first option is precluded from the report’s recommendations, however, as it found that funding major new local infrastructure works through the community infrastructure levy should be done on a larger scale to minimise repeat work.
Letwin: Land-banking should be tackled through diversification