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A stronger role for councils in boosting housing supply Matthew Warburton - 07/11/2014

Strong_house_300The second major issue addressed by the Lyons report is who will build and commission the extra new homes we need. It argues that we cannot rely on the volume housebuilders, which have never supplied more than 100,000 homes a year, and have adapted to the volatility of the housing market by developing a business model in which homes are only built as fast as they are sold.


Action is needed to boost both the number of new homes commissioned and the capacity of the housebuilding industry by attracting new entrants. There should be a particular effort to encourage more small builders, who supplied half the houses built for sale 30 years ago, but less than a quarter now.


The challenge is to boost the number of new homes commissioned without relying too heavily on additional public investment. What Lyons proposes is a stronger role for councils to enable them to capture the uplift in land values from housing development and use it to finance infrastructure investment and subsidise affordable housing. There is also scope, he argues, to mobilise more private investment, particularly through joint ventures with local authorities and others.


Drawing on the example of Dutch local authorities and Milton Keynes, Lyons proposes that councils should be able to designate Housing Growth Areas in which stronger powers would be available to councils acting either individually or jointly or to New Homes Corporations.


These would involve making a call to landowners to release land for housing, either by selling it or transferring to a Joint Venture as an equity stake. Cooperation would be encouraged by reserve powers of compulsory purchase, similar to those that already exist but updated and streamlined. Purchase prices would be based on existing use value plus a reasonable return to the landowner. This would ensure that the lion's share of the uplift in land value from housing development would be available to meet infrastructure needs.


New Town Corporations would be joint ventures between local authorities, individually or jointly, and others including housing associations and private investment and development partners.


The idea is that these bodies could operate as delivery agents on a scale larger than some local authorities, bringing skills and economies of scale to bear. They would be able to operate more or less in the same way as New Town Development Corporations but across a number of areas not large enough to justify description as a New Town or Garden City.


These proposals include numerous recommendations that would require primary or secondary legislation. But, arguably, local authorities already have powers enough to move ahead with some elements of this approach, and there are already some examples of successful initiatives - which may, indeed, have influenced Lyons' conclusions. There is no good reason to wait and see whether a Labour Government is elected and takes up Lyons ideas; councils can make a start now.

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