ING house builders are exploiting the planning system to boost their profits, according to a paper released today by the think-tank Policy Exchange.
It claims that residential development is delayed by an outdated planning system, rather than an inability to access credit.
The organisation says that 2012 is on course to be the year with the second lowest annual level of new homes since World War II, mainly because councils only allow small plots of land to be developed. As a result it is often more profitable for developers to simply sit on land with planning permission, and watch its value rise, rather than build houses.
The report says this is why so few homes are being built, despite the fact that developers own hundreds of thousands of plots.
“The warped nature of the market is shown by the fact house prices have tripled but new homes being built have actually fallen,” author Alex Morton said.
He said the doubling in lending between 2000 and 2007 led to a boom in house and land prices but little increase in housebuilding. The report suggests that directly involving local people in planning decisions would see more developments given the go-ahead.