- Independent.co.uk. 17/03/04

A government-commissioned review today called for an extra 100,000 new homes to be built each year in a bid to meet rising demand.

Kate Barker, a member of the Bank of England's Monetary Policy Committee, said new homes needed to built annually on top of current levels to meet demand and reduce house price inflation.

Her report into housing supply said just three new homes were built in the UK every year for every 1,000 people, and building levels had now reached their lowest level since the end of the Second World War.

Ms Barker said the shortage of homes had led to property becoming increasingly unaffordable over time, with only 37 per cent of new households in England able to afford to buy a house in 2002, compared with 46 per cent in the late 1980s. She added that rising numbers of people were also in temporary accommodation, with 93,000 households in this position in 2003, more than double the 46,000 in 1995.

She said: "I believe that continuing at the current rate of housebuilding is not a realistic option, unless we are prepared to accept increasing problems of homelessness, declining affordability and social division, decline in standards of public service delivery, and increasing costs of doing business in the UK.

"Creating a more flexible housing market is a considerable challenge that will require concerted action by all players: Government at national, regional and local level, the building industry, and those engaged in social housing provision."

In a bid to increase the supply of housing, and therefore its affordability, Ms Barker suggested a series of reforms to the current planning system.

She said planning bodies should take greater account of the market when setting targets for new homes and allocating land, such as changes in house prices and demand.

She said there also needed to be stronger, more strategic regional strategies for housing, and new Regional Planning Executives should be set up to provide independent advice on the scale and allocation of new developments within regions.

She said planning authorities should also allocate buffer zones of additional land around developments which could be released to builders if there was "unexpectedly high demand".

But Ms Barker said incentives also needed to be put in place for local authorities to support developments and ensure they were not held up by delays in creating infrastructure such as roads and water supplies.

She suggested local authorities should be allowed to keep council tax revenues from new housing for up to three years, rather than pass it on to the Treasury.

She added that a Community Infrastructure Fund of between £100 million and £200 million should also be created to help facilitate developments and the infrastructure they needed.

In her report, which was commissioned by Chancellor Gordon Brown in last year's Budget, Ms Barker also suggested introducing a tax on the windfall gains landowners and developers made on land that had planning permission for housing.

She said land which had planning permission was usually worth around 300 times more than agricultural land, and the community should share in this increase.

She said the money could be used to fund other policies which were necessary to increase the overall supply of housing.