The Government is prepared to use “carrots and sticks” to “disrupt” Britain’s house-building industry and break the “stranglehold” of the big developers, to encourage smaller developers and the faster building of more new homes.
Calling for “far more competition” to change “a market that is not diversified enough”, Communities Secretary Sajid Javid has escalated his criticism of the UK’s large house-builders and developers, ahead of a Government white paper on housing supply expected next month.
“I’m a former business person, I know how businesses work,” Javid said. “But I also know how to disrupt business models and change things and that’s the sort of experience I’m going to bring to bear down on this.”
With local councils granting planning permission at “a record rate” according to Javid, large developers stand accused of using their market dominance to increase housing supply slowly, keeping prices as high as possible to maximize profitability.
Asked if he would consider using fines to incentivize developers to build more quickly, Javid said: “Well, there’s lots of ways, a process of both carrots and sticks, and that’s exactly what I’m looking at”.
With the numbers of housing units granted planning permission each year “up 60pc since 2010”, according to Javid, ministers and local councils are increasingly criticizing large house-builders for not building more quickly.
“People can’t live in a planning permission – what we need is to find ways to incentivize developers to use planning permissions,” said Javid, in an interview for a Channel 4 Dispatches programme, to be shown on Monday tonight.
“I’m determined that we really get a grip on this and do something about it, that’s going to last for the long term and make a difference.”
The UK’s biggest three housing developers currently build over a quarter of all new homes, with the largest eight building half. A recent Parliamentary report said the industry “has all the characteristics of an oligopoly”.
Javid recently told the Conservative party conference “the big developers must release their stranglehold” on housing supply. “It’s time to stop sitting on land-banks and stop delaying build-out – the homebuyers must come first”.
Amid rising unaffordability, particularly among young adults, the government last year said it wanted to see a million new homes built by 2020 – or 200,000 per year. Official figures recorded 133,000 new homes in 2013 – the lowest peacetime number in almost a century – rising to 152,520 two years later. The latest numbers show that during the second quarter of 2016, house-building fell 2pc year-on-year.
The Home Builders Federation, whose members currently each year build 80pc of new homes each year, rejected Javid’s criticism. “The house building industry is increasing production and makes money by selling houses – there’s no reason we’d delay or artificially reduce the amount of houses we sell,” said Andrew Whittaker, the head of planning for the HBF.
Calling the slow pace of house-building over many years “atrocious”, Whittaker said there is “always a lag between getting a planning permission granted … and then starting on site”.
Responding to the idea of fines on developers which, having been given planning permission, don’t complete homes during a certain time frame, the HBF said: “The house building industry will react by reducing output – we’ve got an increase in housing output at the moment and we need to build on that.”
Sean Hannaby, the head of planning at Cheshire East Council, said: “In the last five years we’ve granted over 20,000 planning permissions. There’s been just over 5,500 built. But there are still over 17,000 live planning permissions just waiting to be built. It’s quite frustrating because you see the call for more housing and you see the need nationally and we know the need’s out there and it is frustrating when house builders or the government are pointing the finger at local authorities and saying you’re not delivering planning permissions and we are”