Labour to Ensure Small Builders Get Access to Land – Independent – Will it Work?

Independent – Comments on the proposal below.

Nearly a quarter of a million jobs will be created under a Labour government by giving greater freedom to smaller firms to build homes, the party will claim this week, as Ed Miliband sets the stage for Labour’s 2015 election campaign.

Emma Reynolds, the shadow Housing minister, will unveil measures to guarantee access to land for smaller firms and custom builders rather than construction giants and say that up to 230,000 jobs could be created. Her speech tomorrow is the first of five from the Shadow Cabinet in the next few weeks on how a Labour government would tackle the cost-of-living crisis, including a set-piece address from the Labour leader on the economy later this week. With just over a year to go before polling day, Mr Miliband intends to step up the “cost of living” campaign with fresh policy ideas on education, housing and jobs.

In her speech, Ms Reynolds will pledge that a Labour government will ensure a proportion of homes built in new towns and garden cities will be built by smaller firms; force developers to register the land they own or have options on, creating greater transparency in the land market; and require local authorities to include a higher proportion of small sites in their five-year land supply.

The long-term decline in small to medium sized builders has caused a decline in competition and had a “serious impact” on the number of homes being built, their price and quality, Ms Reynolds, MP for Wolverhampton North East will say.

The latest figures show that between 2010 and 2012 there was a loss of nearly 3,000 smaller builders from the construction industry, with thousands of jobs disappearing.

The measures flesh out further the detail of Mr Miliband’s pledge at his Labour conference speech to boost housing supply, including granting “use it or lost it” powers for councils. Sir Michael Lyons, the former BBC chairman, is conducting a review for Labour on housing, amid fears that demand is outstripping supply and causing the property market to overheat.

Ms Reynolds will say that the building industry in England “has a broken gearstick – when the time comes to shift up a gear our housebuilding industry is found wanting”. She will add: “The housing shortage is central to the cost-of-living crisis that Ed Miliband and the Labour Party have been talking about for months now.

“It is putting at risk what Ed Miliband has called the promise of Britain. A promise that each generation will pass to the next a life of greater opportunity, prosperity and wellbeing.

“And we must face the fundamental problem that there are simply not enough homes for people to buy and rent affordably.

“To achieve our ambition of doubling housebuilding and then going further to meet need, we need a thriving building sector.

“Building those extra homes could bring up to 230,000 jobs to our construction industry and I want to see many of those jobs created by small and medium sized builders.”

The shadow minister will say that the number of homes being built through self- and custom-build – where the builder works with the householder to design their own home – has fallen to their lowest level in 30 years under the coalition government, despite the then Housing minister, Grant Shapps, claiming in 2012 that the Government would unleash a Grand Designs-style “self-build revolution”.

In the UK, self- or custom-builders only make up 9 per cent of the market, while in the United States it is around 45 per cent; in France it is over 60 per cent; and in Austria it is more than 80 per cent. Allowing more diversity in housebuilding in this country would drive up competition and quality of housing, Ms Reynolds will say.

The Labour-run Oldham Council in Greater Manchester has developed a custom-build project, working with residents to design 37 new detatched homes and regenerate the run-down area of Werneth. The Community Build Werneth project will create affordable housing for locals. The council-owned land was developed with homes on sale for 20 per cent below market value.

Later this week, Tristram Hunt, the Shadow Education Secretary, and Mr Miliband will give separate speeches on the cost-of-living crisis, while the Shadow Work and Pensions Secretary, Rachel Reeves, will unveil new policies on jobs next week. Ed Balls, the shadow Chancellor, will make a speech on the issue later this month.

Most of this seems sensible, but it is difficult to prioritise small and self builders unless you have a zoning and subdivision based planning system.  In such systems plots are sold off individually.  In oyr system land is sold off then divided by the housebuilder.  Housebuilders can generally outbid individual housebuyers and force prices up. Imagine this scenario.  100 plots where the seller is looking for 100k a plot. There are 90 potential buyers with bid prices of `110k, but 10 potential buyers with bid prices of 90k.  Along comes a housebuilder offering to buy every plot for 101k, and then they sell 90 completed houses for 110k.  Each of those 90 houses has to pay 10l more than what would have happened if individual plots were sold.

So would the measures work.  Yes though I am cautious about the rule on 5 year supply.  That was tried in the early 1980s for only 2 years and didnt really work as unless you set figures on it it is unenforceable and it is impossible to set a general nationwide rule.  I am also cuatious about mixing up competition tests with planning law which as a fundamental principle – de novo – treats all applications alike.  Similar problems exist with ‘hameplate’ tests for retail.   I would much rather have the competition commission look at how much land is held by ‘the big 6’ housebuilding firms and when planning permission is granted for them to be required to auction some plots off to those outside the big 6.

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