House builders cutting infrastructure payments - NAO

8th Feb 2019 09:54

(Sharecast News) - House builders are cutting infrastructure payments to local councils for new developments while increasing their own profit margins and those contributions were failing to keep pace with property price rises, according to a report released on Friday.The National Audit Office (NAO) said local councils were also failing to meet house building targets, .It was looking into the planning system after the Conservative government claimed it would increase construction to 300,000 new homes a year.The NAO said that between 2005-06 and 2017-18 the housebuilding rate averaged 177,000 a year and the annual number never exceeded 224,000."Contributions to the cost of infrastructure and affordable housing agreed with developers are not keeping pace with increases in house prices," the NAO report stated."The Department (for Housing) estimates that average contributions agreed with developers remained in cash terms at around £19,000 per new home permissioned between 2011-12 and 2016-17."The NAO said in contrast, over the same period, average house prices increased in cash terms by 31% and the top five developers' average operating profit margins increased from around 12% to 21% between 2012 and 2016.The department estimated that in 2016-17, local authorities and developers agreed contributions of £6bn to the cost of infrastructure and affordable housing but warned the actual contribution developers make "will be lower" as not every approved project would be constructed and builders "may renegotiate lower contributions during the build."The NAO report also said about 50% of local authorities are likely to fail a new "housing delivery test" for building enough homes next year and could face penalties, including giving developers in those areas greater freedoms regarding where they can build.The report says only 44.1% of local authorities had up-to-date plans setting out how they could meet the need for new homes."The department holds local authorities to account for providing new homes, but this is not fully within local authorities' control," the NAO said, adding that as councils were not major house-builders the could not increase the numbers of new homes "directly through their own efforts".