"In a functioning market, the private sector, housing associations and local authorities would be building enough to meet anticipated demand. But they are not."
The report said that the target of one million new homes "is not based on a robust analysis" and that the Government must recognise the inability of the private sector, as currently incentivised, to build the number of homes needed.
The Select Committee on Economic Affairs said that since the Referendum, Minister for Housing Brandon Lewis has effectively abandoned the target altogether.
However after Osborne later abandoned his target of achieving a budget surplus in 2019/20, "this could pave the way for releasing restrictions on local authorities and enable them to boost housebuilding activity substantially", according to the report.
The report added that the Government is "primarily focused on building for home ownership, neglecting housing for affordable and social rent".
To tackle this, it is calling for the Government to "relax the arbitrary limits" on how much local authorities are able to borrow to build social housing.
It also believes that far more public land should be made available for housing and the large gap between the number of planning permissions granted and the number of homes actually built should be addressed.
The report said: "In a functioning market, the private sector, housing associations and local authorities would be building enough to meet anticipated demand. But they are not. The business model of the large developers looks to profit margins rather than volume, housing associations are facing loss of revenue due to Government policy on social rents and local authorities, despite some having the appetite, are not in a position to finance large housebuilding programmes.
"The Government should also provide financial support and flexibility for local authorities to enter into partnerships with housing associations and institutional investors. A sustained increase in local authority housebuilding can take advantage of historically low long-term funding rates, deliver a consistent supply of new homes across the economic cycle and bring much needed competition to oligopolistic large building firms which dominate the housebuilding market.
"The whole planning process should be simpler, more transparent and more helpful to small builders. The Minister told us that the Government is “very ambitious” about its housing policy. By implementing the recommendations in this report, the Government will show it has the political will to meet that ambition."
Andrew McPhillips, Chief Economist at Yorkshire Building Society, commented: “Given that there is a housing deficit of 1.2m properties, ramping up the country’s house building target to 300,000 properties a year will go a long way towards meeting demand and tackling the supply crisis.
“Although this is an ambitious target, it’s what is needed to rein in house price inflation and enable aspiring homeowners to buy a property. Loosening restrictions on local authority borrowing and giving them more powers to build will certainly help to tackle the crisis across housing for rent affordably, market rent and sale.
“The majority of young adults say home ownership is their number one life priority but many face significant hurdles to achieve that goal. Giving more powers to local authorities could alleviate this issue by making house price inflation more consistent across the country. Different levels of housebuilding for private sale are required in different areas to match regional variations in demand, and putting more power in the hands of those with a better grasp on the scale of the issue in their area should help to make homeownership a more achievable goal for those who aspire to it.”
