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‘Govt must free LAs to build more homes’ – Lords
July 2016

The Government has been told it must empower local authorities to build more homes to help lift the UK’s house building target to 300,000 a year.

That is the warning from the House of Lords Economic Affairs Committee which this week set the new target – 50% higher than previous – to tackle the UK housing crisis.

In its report ‘Building More Homes,’ the cross-party House of Lords Economic Affairs Committee criticises the Government’s housing policy for not only setting its target too low to meet demand but also for restricting local authorities’ funding for building more social housing.

It also accuses the Government of “Creating uncertainty in the already dysfunctional housing market by frequent changes to tax rules and subsidies for house purchases, reductions in social rents, and the extension of the Right to Buy.”

By coincidence, the findings were published just days before Gavin Barwell was appointed Housing and Planning Minister in Theresa May’s new Government.

Committee Chairman Lord Hollick, summarising the report in a video, said local authorities can – and have the skills and ambition to – build more homes but he added: “The rules surrounding how much they can borrow should be changed so that they can enter into the house building market in a big way, either on their own or in partnership with others, particularly the housing associations.”

https://www.youtube.com/watch?v=L2xwZUkP7oI&feature=youtu.be

The Committee makes wide-ranging recommendations to address the housing crisis, including:

· Restraints on local authority borrowing should be lifted. Local authorities should be free to borrow to fund social housebuilding as they are other building programmes. This would enable local authorities to resume their historic role as one of the major builders of new homes, particularly social housing. The current historically low cost of borrowing means local authorities could make a large contribution to building the houses we need for the future. Further, the new Prime Minister has announced that the Government will abandon their fiscal target. This paves the way to increase local authority borrowing powers.

· Council tax should be charged on development that is not completed quickly. The Government’s reliance on private developers to meet its target of new homes is misguided. The private sector housebuilding market is oligopolistic with the eight largest builders building 50% of new homes. Their business model is to restrict the volume of housebuilding to maximise their profit margin. To address this the Committee recommend that local authorities are granted the power to levy council tax on developments that are not completed within a set time period.

· Maximise the use of public land. The Government must take decisive steps to build on the very substantial holdings of surplus publicly owned land. The Committee recommends that a senior Cabinet minister must be given overall responsibility for identifying and coordinating the release of public land for housing, with a particular focus on providing low cost homes. The National Infrastructure Commission should oversee this process.

· Local authorities should be given the power to increase planning fees. Local authorities should be able to set and vary planning fees to help fund a more efficient planning system and the upper cap on these charges should be much higher than the current limit.

Lord Hollick said in the report:

"We are facing an acute housing crisis with home ownership – and increasingly renting – being simply unaffordable for a great many people.

"The only way to address this is to increase supply. The country needs to build 300,000 homes a year for the foreseeable future. The private sector alone cannot deliver that. It has neither the ability nor motivation to do so. We need local government and housing associations to get back into the business of building.

"Local authorities are keen to meet this challenge but they do not have the funds or the ability to borrow to embark on a major programme to build new social homes. It makes no sense that a local authority is free to borrow to build a swimming pool but cannot do the same to build homes.

"The Government are too focussed on home ownership which will never be achievable for a great many people and in some areas it will be out of reach even for those on average incomes. Government policy to tackle the crisis must be broadened out to help people who would benefit from good quality, secure rented homes. It is very concerning that changes to stamp duty for landlords and cuts to social rent could reduce the availability of homes for rent. The long term trend away from subsidising tenancies to subsidising home buyers hits the poorest hardest and should be reversed.
"If the housing crisis is to be tackled the Government must allow local authorities to borrow to build and accelerate building on surplus public land."

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