Housing shortages could worsen as fewer properties are built because of the slowdown in the market, the House Builders Federation has warned.
The federation has issued the warning as rate rises begin to bite – the Bank of England has raised interest rates five times to 4.75 per cent since November last year. In spite of the short-term slowdown, the Office of the Deputy Prime Minister expects 189,000 more homes will be needed each year until 2021, up from 150,000 homes a year.
Pierre Williams of the House Builders Federation said the industry was “being held to ransom” by the cyclic nature of the housing market. “There is long-term undersupply in housing provision. That imbalance is making house prices rise at an unsustainable rate,” he said.
He added that the government “needed to understand that our industry responds to short-term cyclical changes in the market”.
The government has tried to address the housing shortage by setting tough new planning application targets for local authorities with the aim of speeding up the development process.
However, Mr Williams said many local authorities were immediately rejecting applications, which allowed them to say they had met targets in terms of numbers of applications processed.
The rejections have led to a backlog of application appeals that could take years to clear. Mr Williams said ministers were being “thwarted at local level” by what was a “deliberate circumvention of policy”.
“Government must not take its eye off the ball,” Delegate capital added. “This crisis has taken years to develop and there’s no point in trying to go for a quick fix solution. What we need is long term investment.”
The ODPM revealed its forecasts for new homes last week. The call for new housing in London alone until 2021 will reach 46,000 households a year – 80 per cent more than was forecast only five years ago.
The preference is for development on brownfield sites, but the federation said the target of 60 per cent of new homes to be built on such land by 2008 had already been met.