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Sir Oliver Letwin’s review of faster building rates should lead to increased investment in social rented housing, the National Housing Federation (NHF) has said.
Alongside yesterday’s Spring Statement, the Conservative MP published a letter setting out his initial findings into the gap between planning permission and actual development.
He focused on the ‘absorption rate’ – the speed at which homes can be sold into local markets without reducing their value – as the primary reason for delays.
Reacting to the letter, Adam Morton, policy leader at the National Housing Federation, said: “The review is right to recognise that increasing the number of affordable homes is one of the key ways of building faster. Research shows that a development with 40% affordable housing will be built out 40% faster than one with less than 20%.
“However, as the review also notes, there is a limit to what can be achieved by our current approach to housebuilding.
“We think there are two initial steps the government can take. The first is to focus on investing directly in affordable housing, especially social rent. And the second is commit to bringing forward its land at a lower price – rather than simply selling to the highest bidder – so more affordable homes can be built on it.”
Sir Oliver will publish his findings by the end of June in the form of a draft analysis, with a full report before the November Budget.
In his letter, he said the “fundamental driver” behind slow build-out rates “appears to be the ‘absorption rate’”.
The “principal reason” why developers can “exercise control” over sales rates appears to be because there are “limited opportunities for rivals to enter large sites and compete for customers”.
He added that he has seen “ample evidence” that the speed at which affordable and social rented homes are completed on large sites is “constrained” by the requirement to cross-subsidise the affordable housing through open market sales.
He said: “Where the rate of sale of open market housing is limited by a given absorption rate for the character and size of home being sold by the house builder at or near to the price of comparable second-hand homes in the locality, this limits the house builder receipts available to provide cross-subsidies.”