The economic impact of building hundreds of thousands of new homes on local house prices will be one of the main focuses of a government independent review into slow build out rates.
Sir Oliver Letwin MP (Con) announced in a letter to the communities secretary and chancellor on Tuesday that he will concentrate the review’s attention on large developers and focus on the effect of building new houses on local house prices.
Sir Oliver wrote: “I have decided to focus, in the first stage of my work, exclusively on analysis of the reasons why – against the background of the current planning system – build out rates are as they are,” adding that he would not yet make recommendations on how to increase build out rates.
Sir Oliver said he was “not persuaded” by submissions from the building industry over seven key ‘constraints’ on the rate of house-building, including the “limited availability” of skilled labour, building materials and capital.
The West Dorset MP said, however, he felt the main driver to be the “absorption rate” which was defined as the “rate at which newly constructed homes can be sold into the local market without materially disturbing the market price.”
Other reasons given by builders include “constrained logistics”, the “slow speed of installations by utility companies”, “difficulties of land remediation”, and the “provision of local transport infrastructure”.
Over the coming 12 weeks the review panel will seek evidence through an information gathering visit to Germany and the Netherlands to examine how increasing the variety of housing stock can increase house-building.
Housing minister Dominic Raab, who was also copied into the letter dated last Friday, said at a Communities and Local Government select committee hearing on Monday that the government was looking to increase the different types of housing being built to achieve the same goal.
“Ultimately what I care about is building homes, carrying communities forward and delivering homes or people who find them currently beyond reach,” Mr Raab said.
Sir Oliver wrote that major house-builders referred most frequently to “differences in the size and style of the products being offered” in affecting absorption rates on large sites.
“Even these relatively slight variations are clearly sufficient to create additional demand – and hence additional absorption, leading to a higher rate of build out,” he said.
In addressing the issue of a declining affordable homes stock, Sir Oliver reported seeing “ample evidence” from site visits that building was “constrained” by limited profits from for-profit sales.
A 2017 report by the housing and planning consultancy firm Savills found that “build to rent” was the most successful policy at providing additional housing on large sites, “where the accelerated market absorption leads to faster build-out rates”.