Give councils 'use it or lose it' powers, says think tank

However, a planning expert has said that concerns regarding land banking are "generally overstated".

The report (39-page / 2.66MB PDF), which was launched at a private event with Local Government Minister Brandon Lewis, looks at how to grow the country’s economy by devolving powers and responsibility to local areas.

It said that the Government should introduce 'use it or lose it powers' to allow councils to revoke planning permissions or set a shorter default validity period for permissions to prevent developers from purchasing prime development land and then holding it undeveloped while its value rises.

The report suggested that councils should be given powers to set local charges for stalled developments and that compulsory purchase powers should be reviewed to consider whether they could be streamlined and speeded up to be used more effectively.

It said that research by the Local Government Association had found that the average period between planning permission being granted and building completion had increased by five months to just over two years since 2007.

"This not only delays development which is essential to national growth, but a shortage of viable sites can lead to speculative development, rendering the process of identifying and consulting on prime sites a wasted effort," the report said.

"Whilst there are no doubt bad examples, our experience is that the concerns regarding land banking are, generally, overstated," said Iain Gilbey, planning expert at Pinsent Masons, the law firm behind Out-Law.com.

"The two single biggest impediments to housing supply are planning, including onerous affordable housing and Section 106 requirements and lack of infrastructure, and sales rates, which in turn are linked to illiquidity in the retail funding market."

"The housebuilding business model is cash hungry and as such sales rates need to be maintained to ensure a healthy balance sheet and sensible leverage. To artificially suppress land release and sales rates, with a view to maintaining margin, would not be sustainable in the long term," Gilbey said.

The report also set out suggestions for the Government to review the standing advice for statutory consultees and to enable councils to borrow against their assets to fund construction of new affordable housing.

“It is essential that we get the maximum bang for Government buck when investing in growth," said Localis chief executive Alex Thomson in a statement. "We believe that a bottom-up approach is the best way of doing this. Our report calls for the Government to put rocket boosters on its localism agenda, and boost the national economy as a result,” he said.