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Last Updated: Wednesday, 10 December, 2003, 07:00 GMT
UK home supply way below demand
The Bank of England's Kate Barker examined how the UK could build more houses.
Britain is now so short of new houses that an extra 39,000 need to be built each year just to keep up with the UK's population growth.

The Treasury's Barker Review of Housing Supply says the lack of homes has been a major cause of high UK house prices.

It says homeowners would have saved 8bn if house prices had risen at the rates seen in continental Europe.

For first time buyers, the report says each is paying an extra 32,000 in comparison to the European average.

Economic constraint

And if the UK wishes to build as many new homes as on the continent, it would need an additional 145,000 every year, the report said.

See how the UK housing market measures up

The review, conducted by Kate Barker of the Bank of England's Monetary Policy Committee, does not make any firm recommendations to the Treasury.

But it warns that the UK's lower rate of house building actually constrains economic growth, thereby "reducing standards of living for everyone in the UK".

It estimates that if UK house prices had risen in line with the European average since 1975, the UK would be 8bn better off.

The report said: "Constraining supply means that resources which would have been used for housing are instead used for other potentially less beneficial purpose or not used at all."

In 2001, around 175,000 new homes were built in the UK, the lowest level since World War II; while over the past ten years the number of new dwellings built has been 12.5% lower than in the previous decade.

'Unacceptably long'

The review, led by Kate Barker, a member of the Bank of England's Monetary Policy Committee, lays some of the blame at the UK's planning system.

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David Miles report into the mortgage market

Although the draft version doest not give any recommendations, it says: "The planning system is complex, timescales are often unacceptably long, and the requirements of planning can be used to prevent development."

It calculated that refusals for planning permissions for major housing developments went up from 15% in 1996-1999 to 25% in 2002.

Ms Barker told the BBC:"We may need to take some radical measures, but it is a bit simplistic to say we should free up planning."

She added: "I'm not saying we should just slap anything up. That would be counter-productive."

According to the review developers in the south east of England are sitting on land which could be used to build up to 40,000 homes in double-quick time as planning permission has already been granted.

However, the review points out that eight out of ten construction firms are facing skill shortages

Pierre Williams spokesman for the House Builders Federation rebutted claims that developers are sitting on excessive amounts of land.

"In total developers are sitting on a year and a half supply, not much at all. In the end in our view it all goes back to the planning system," Mr Williams said.

The review also calls for greater provision of social housing a point echoed by charity Shelter which described the lack of affordable housing as a "national scandal."

Publication of the full and final Barker review is expected to coincide with the 2004 Budget.

Kate Barker, Bank of England
"The labour market in the UK doesn't work as well as it should because people are reluctant to move between regions"

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