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UK housing market may never meet need

According to a new report commissioned by housing charity Shelter and carried out by FTI Consulting the system by which new housing is produced is fundamentally flawed and has resulted in major shortages of housing in the UK. The report emphasises the time lag imposed upon the house building industry by the planning system, and this delay makes house building a risky business. The restrictions on planning permission and building regulations has led developers to focus predominantly on land management rather than building new homes. The supply constraints has made it increasingly difficult to produce an “economically (or socially) efficient level of housing”. The report notes that: “The planning system therefore not only constrains the supply of a key factor of production, but it also significantly distorts behaviour in the market.”

FTI Consulting advocate making the market more competitive by, for example, limiting the number of units on sites above which planning permission cannot be given to a single firm. Linked to this issue is the call for the government to make entry into the market and the growth of small firms easier.

To read the full report click here.

Last updated: July 2012

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