50,000 new homes needed for renting

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Despite recent increases in spending, rates of building are unlikely to reach this level, and the Government must be prepared to raise its investment further, said the House of Commons Communities and Local Government Committee.

In a report, the committee also called for action to ensure that council and housing association homes are spread throughout communities, rather than concentrated in estates which become areas of deprivation.

And it said that councils should be granted greater freedom to build on land which they own and to use money raised from the right-to-buy scheme to construct new homes. Restrictions on right-to-buy should be allowed in neighbourhoods where it is causing problems.

The committee also raised concern about the growth of the "buy-to-let" market, which made it harder for first-time buyers to purchase homes in areas like London, where around two-thirds of new-build properties in 2005 were bought by investors.

The MPs said they were "particularly concerned" by the so-called buy-to-leave phenomenon, which has seen wealthy investors snap up houses and flats, then leave them empty to earn money through capital appreciation.

While recognising that the credit crunch may put an end to the trend, the committee said that action should be taken through the tax system to discourage buy-to-leave landlords, whose activities have left as many as 30% of new apartments lying vacant in central Leeds.

"Given the shortage of housing, the implications of buy-to-leave for the supply of rented housing and the Government's aims to improve affordability through new developments are potentially serious in those areas where it is happening," the committee warned.

The committee's chair, Labour MP Phyllis Starkey, said: "Compared to ownership, renting is often seen as second best; but this perception is unhelpful. A lot of people rely on the rented sector and their needs and aspirations are every bit as important as those of homeowners."

Responding to the report, housing minister Caroline Flint said: "Last year was the first time since 1983 that we built more social houses than we lost through right-to-buy, and we are going further with a major package of reforms backed up with £8 billion of investment to increase the number of social homes to 45,000 a year by 2011, with a goal of 50,000 a year in the next spending review."