05 August 2023 , 21:55
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Housebuilding is slowing down as construction firms struggle with “planning issues” after Rishi Sunak tore up rules setting local targets for new homes, the Bank of England has warned.
The warning came in a report from the Monetary Policy Committee (MPC), released after the Bank increased the base rate to 5.25%.
The typical mortgage holder is now paying an extra £220 a month when they go to re-mortgage, according to the Bank of England’s number crunching. The MPC report stated that “construction output remained at relatively low levels and had declined further” and “rising costs, labour shortages and planning issues in particular were still delaying or disrupting building projects”.
Lisa Nandy, Labour’s Shadow Housing Secretary, hit out at Sunak's current and proposed policies (PA)It went on to say that “some house builders were downgrading build plans and pausing some schemes” and, as a result, there was an increase in the number of construction firms “entering insolvency procedures”. The bleak assessment comes after more than 200 housebuilders last month delivered a devastating warning to the Prime Minister, saying that “it has never been more difficult to be an SME developer than it has at the present time” and that they are “facing multiple existential threats to the survival of our businesses”.
In a letter to Rishi Sunak, they wrote: “Prime Minister, your government’s current and proposed policies are devastating our industry”. Lisa Nandy, Labour’s Shadow Housing Secretary, said: “On the Tories’ watch, the housing crisis is going from bad to worse.
London flat for rent for £1,400 a month with bed tucked away in kitchen cupboard
“Not only are mortgages and rents going through the roof, but Rishi Sunak’s reckless decision to scrap housing targets to appease his own party is pushing housebuilding off a cliff – driving up costs, making the dream of homeownership ever more distant, and threatening vital jobs and investment.”
She added: “That’s why Labour will restore local housing targets and build more homes. We will bring down bills by stabilising the economy, support first-time buyers with a comprehensive mortgage insurance scheme, and take the tough decisions to get Britain building.”
Last month the Sunday Mirror revealed nearly 1 in 10 small housebuilders had gone bust since 2010. The housebuilders particularly criticised the government’s changes to the National Planning Policy Framework, saying they will be “catastrophic for the housing industry”.
This refers to Sunak’s decision in December to make local housing targets advisory, rather than mandatory, after he caved to a rebellion by backbench Conservative MPs.
In the wake of that decision, 58 local authorities have delayed their housebuilding plans, and experts have forecast that housebuilding will fall to its lowest level since the Second World War.
This week’s MPC report also warned that “acute supply shortages” were forcing private rents to rise “sharply”, particularly for new lettings. Private rents rose by 5.1% in the year to June, according to the ONS, an increase on the rate recorded in May.