First stage of 'housing gap' report to be delivered by Letwin in June

A government investigation into the gap between completed new homes and the amount of land with planning permission owned by housebuilders has already made some initial observations and will publish a first analysis in June.

At November's autumn Budget, Tory grandee Oliver Letwin was given the task of conducting a review to “explain the significant gap between housing completions and the amount of land allocated or permissioned in areas of high housing demand, and make recommendations for closing it”.

Letwin, in a letter to PM Theresa May and Housing Secretary Sajid Javid on Tuesday, said he has narrowed his entire focus at this early stage into considering the question "why, once major house-builders have obtained outline planning permission to build large numbers of homes on large sites, they take as long as they do to build those homes".

By the end of June he said he would publish his initial analysis of the problem and its causes, before seeking comments from interested parties and experts before completing this analytical section, in order to come up with some "robust recommendations" in time for the next Budget.

One initial point Letwin noted was that once detailed planning permission is granted for large sites, the main driver of build-out rates "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".

Letwin said the absorption rate of homes sold on the site appears, in turn, to be largely determined at present by the size, design, context and tenure of home being constructed and the pricing of the new homes built, with housebuilders able 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".

He pledged to investigate what constraints would be imposed on build out rates by the supply of finance, the supply of skilled labour, the supply of utility-infrastructure, the availability of building materials and logistics if constraints currently imposed by the absorption rate were lifted.

"I shall investigate what effect faster build out rates would be likely to have on the 'land banks' held by the major builders," he concluded, with views sought from industry participants, planners, NGOs and others.