Further findings in June with final report out this autumn
Oliver Letwin鈥檚 review of planning and housebuilding is looking into whether housebuilders can speed up the rate at which they build homes without pushing prices down.
The former Conservative minister鈥檚 full review will be published at the time of the autumn Budget, following further findings due in June, but in his spring statement today, the chancellor of the exchequer Philip Hammond told MPs Letwin had concluded his preliminary research and had made a number of initial findings.
In a , the secretary of state for housing, communities and local government, Letwin said a number of issues were considered in his research, including what he called a 鈥渨eb of commercial and industrial constraints鈥�, including labour and material shortages, limited capital and a lack of local infrastructure.
But Letwin (pictured), a former policy minister in David Cameron鈥檚 government, said: 鈥淭he fundamental driver of build out rates once detailed planning permission is granted for large sites appears to be the 鈥榓bsorption rate鈥� 鈥� the rate at which newly constructed homes can be sold into (or are believed by the housebuilder to be able to be sold successfully into) the local market without materially disturbing the market price.鈥�
He went on: 鈥淭he principal reason why house-builders are in a position to exercise control over these key drivers of sales rates appears to be that there are limited opportunities for rivals to enter large sites and compete for customers by offering different types of homes at different price-points and with different tenures.鈥�
Letwin asked whether the absorption rate 鈥渁nd hence the build out rate, be different if large sites were 鈥榩ackaged鈥� in ways that led to the presence on at least part of the site of other types of house-builder offering different products in terms of size, price-point and tenure, or the major house builders offering markedly differing types of homes and/or markedly different tenures themselves?鈥�
He also questioned whether the absorption rate would be different 鈥渋f the reliance on large sites to deliver local housing were reduced? And what are the implications of changing the absorption rate for the current business model of major house-builders if the gross development value of sites starts to deviate from the original assumptions that underpin the land purchase?鈥�
Letwin said he would investigate what effect faster build out rates would be likely to have 鈥渙n the 鈥榣and banks鈥� held by the major builders鈥�.
Responding to Letwin鈥檚 report RICS鈥� Parliamentary affairs manager Lewis Johnston said increasing the speed of building and delivery after planning permission had been granted was an 鈥渁bsolute necessity if the housing target and subsequent backlog is to be tackled.
鈥淚f the private sector is not delivering the volume of homes needed then ultimately it鈥檚 the government鈥檚 job to widen participation as a means to find other ways of plugging the gap. We can鈥檛 simply implore and rely on volume housebuilders to build more.
鈥淭he only proven way the UK has ever built anywhere near 300,000 new homes a year is when the public sector has been fully enabled as a key delivery agent. That鈥檚 why RICS has called on the government to fully lift the borrowing restrictions that are currently holding back local authorities.鈥�
In his statement earlier today, Hammond reiterated the government鈥檚 commitment to build 300,000 homes by 2020, and said London would receive an additional 拢1.7bn to deliver 26,000 affordable homes.
He also announced a funding scheme to build 215,000 homes in the West Midlands, while local authorities would be invited to bid for parcels of 拢840m-worth of government cash to deliver transport initiatives.
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