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Last Updated: Wednesday, 10 December, 2003, 07:42 GMT
Q&A: Housing supply review
A builder
House building is at its lowest levels since World War II
The initial findings of the Barker Review into why there is a massive housing shortage in the UK have been published by the government. BBC News Online examines the key findings of the report.

What is it?

In April's Budget, the Chancellor announced a review into the causes of inadequate housing supply in the UK.

Kate Barker, an economist and a member of the Bank of England's Monetary Policy Committee, was appointed to collect views and write a report.

This is only the interim report. The final report, outlining conclusions and recommendations will be published in at the next Budget in 2004.

This is the second of two reports into the UK housing market.

On Tuesday the Treasury released a report from Professor David Miles into the UK mortgage market.

The boom and bust cycle of the housing market has been identified as a major barrier to early UK entry into the single european currency.

In the past the Chancellor has implied that bringing the UK housing market into line with its major continental counterparts was key for successfull euro entry.

What's the problem?

There are a series of short-term and long-term factors playing their part.

The government wants to stabilise the UK's runaway housing market, and end its boom and bust housing cycles.

The nature and extent of the housing shortage in the UK

The consequences of housing market behaviour on price levels

How this impacts on market efficiency, land use, distribution of resources, economic growth, productivity and macro-economic stability, affordability and public service delivery

Causes of unresponsiveness in housing supply: the economics and behaviour of the house building industry, competition, availability of land, access to finance and availability of skills

Why private housing supply has not expanded to replace the provision of social housing

Policy constraints including the interaction of the industry with the planning system and tax regime

House prices in the UK have doubled since 1995 and many people are now unable to get a foothold onto the housing ladder.

There is also a lack of affordable or social housing, particularly for key workers.

This problem of high house prices is compounded by the shortage of houses being built.

In 2001 house building fell to its lowest level since 1924 excluding the war years and its immediate aftermath.

New housing now accounts for less than 10% of residential property transactions in England and Wales, compared to 40% in 1965.

Will it get worse?

The situation is likely to get worse before it gets better.

According to estimates, there are between 220,000 and 230,000 new households being formed annually.

Yet, only 165,000 homes were built in 2002.

A 10% increase or 2.5m extra homes are needed to push the UK housing stock to the average levels in Germany, France and Italy
Growth in the number of households is now outstripping that of new homes built
165,000 new homes were built on 2001
Between 220-230,000 new households each year

The population is increasing, while the average size of households is declining.

This is caused by a range of demographic factors, such as increasing life expectancy, and more divorces.

All in all, it adds more pressure to housing supply.

Who is to blame?

The report lays much of the blame at door of the UK's planning authorities.

Many who have tried and failed to obtain planning permission in recent years may echo the reports findings that the system is complex and takes an "unacceptably long" time.

All in all, the report calculated that refusals for planning permissions in major housing developments increased from just 15% in 1996-1999 to 25% in 2002.

The report also points out that if house building was to take-off in the UK skills shortages are likely to come into play.

At present more than eight out of ten construction firms report skill shortages - even modest growth would require 70,000 new workers the report concludes.

As a result thousands of badly needed homes are not being built.

However, at this stage the report makes no recommendations as to how the planning process can be quickened up.

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

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