Sir Oliver Letwin has published a preliminary update of his independent review of build out rates and it doesn’t make easy reading for large house builders. He dismisses a long list of factors, including limited availability of skilled labour, building materials and capital; logistical challenges; and hold-ups in relation to local transport and utility infrastructure as subsidiary factors. Instead, argues Letwin, the main cause of slow build out rates is the house builders’ reluctance to release homes faster than they believe can be sold on the local market without affecting prices. In other words, house builders artificially keep house prices high by holding back homes for sale.
It is a damning accusation and plays well into the heated political arena of discussions about the housing crisis, or ‘challenge’ as it appears to have been renamed. But are his accusations fair?
Conversations I have had with many of my clients suggest that the factors Sir Oliver discounts are genuine issues facing many house builders and they are only likely to get worse following Brexit. These challenges must be addressed by Government and the blame for slow build out rates cannot simply be laid at the feet of house building companies. Government must work constructively with the house building sector if they are to have a hope of meeting their target of adding 300,000 new UK homes per year by the mid-2020s; scape-goating won’t help anyone, least of all the many would-be first-time buyers yearning for their own home.
The fundamental driver of build out rates once detailed planning permission is granted for large sites appears to be the ‘absorption rate’ – the rate at which newly constructed homes can be sold into (or are believed by the house-builder to be able to be sold successfully into) the local market without materially disturbing the market price.