Call over housebuilding policy

A study commissioned by the Campaign to Protect Rural England (CPRE) tracks house prices, completions and housing land supply over periods of 10 years or more in a range of localities, including growth areas and areas with high and low house prices.

The CPRE said its recommendations - published in advance of the Government's Housing Green Paper - need to be reflected in future Government policy if the nation's housing needs are to be met at the same time as protecting the environment.

Neil Sinden, CPRE policy director, said: "Evidence uncovered by this study suggests the Government needs to rethink its planning policies for housing.

"The relaxation of planning controls which it is pursuing will encourage builders to use more greenfield land rather than redevelop more difficult urban sites. This could unleash a new wave of urban sprawl across the countryside and deprive our towns and cities of continued investment in regeneration."

The results confirm the findings of economist Kate Barker's 2004 report that housebuilding rates have responded only very weakly to rising house prices. But the study demonstrates, contrary to Ms Barker's assumption, that a shortage of building land is not the cause of high house prices.

Most authorities studied had large land supplies - enough for more than 10 years' supply. All had either constant or rising amounts of land available.

The study found the size, type and quality of homes built have the greatest influence on local house prices, which are heavily influenced by the quality of the environment. New homes which improve an area create value but homes which damage an attractive location can bring down prices. And if local house prices fall following development this may reflect damage to amenities and a decline in the quality of the neighbourhood, rather than a response to a greater supply of new homes.

Even with much higher building rates, the impact on house prices would be very small, delayed and hard to detect. Any reduction in price resulting from increasing housing supply would be swamped by other factors. The study also found house prices are controlled not by land supply but primarily by ability to pay. Rising house prices reflect an era of rising incomes, greater wealth available to many buyers as deposits and mortgage lenders offering much higher loans than was considered prudent only a few years ago.

According to the study, affordability as measured by the ratio of house prices to incomes has worsened. However, the proportion of income that first-time buyers spend on mortgage repayments remains less than it was for the most of the 1980s. Serious affordability problems are concentrated among those with lower incomes and little wealth.