Rishi Sunak is facing a rebellion of around 50 MPs who are calling for an end to house building targets for councils, through an amendment which campaigners say would make affordable homes even more difficult.
The amendment, led by former cabinet minister Theresa Villiers, is backed by 46 MPs who have signed up to the bid to scrap mandatory local housing targets and make them advisory only.
The government is now due to withdraw from a vote on the bill on Monday amid a standoff with rebels and promises further engagement with their concerns, although ministers officially say the vote has been delayed due to of the time pressures of the Finance Bill.
The move has the support of some former cabinet ministers, including Damian Green, Esther McVey, Priti Patel, Chris Grayling and Iain Duncan Smith. Other prominent MPs who have signed up include Tracey Crouch, Treasury Select Committee Chair Harriett Baldwin, Foreign Affairs Committee Chair Alicia Kearns and Maria Miller.
The amendment would also abolish the five-year land supply rule, which determines whether enough sites have been allocated for development to provide housing for five years. Otherwise, developers can submit applications for land that has not been earmarked for housing construction.
MPs have been buoyed after both Sunak and her predecessor Liz Truss said they would relax house-building rules during the Tory leadership contest.
Truss said he would end “Whitehall-inspired Stalinist housing targets” and Sunak promised to relax the five-year rule and also stop local authorities from applying for changes to green belt boundaries.
Robert Colvile, the director of the CPS think tank, said it was “selfish and mean” for MPs to try to scrap the targets and that the proposals could reduce the number of homes being built by 20% to 40%, potentially more because the industry was already affected by the recession and rising interest rates.
“The real effect would be to enshrine Nimbyism as the guiding principle of British society: to take the levers that force councils to build and leave every proposed development at the mercy of the privileged and the landlords,” he wrote in the Times.
Former level clerk Simon Clarke also said he was alarmed by the amendment. “There is no doubt that this amendment would be very wrong. I fully understand how inappropriate development has poisoned the debate on new homes in constituencies like Chipping Barnet [Villiers’ constituency]but I don’t think abandoning all housing targets is the right answer,” he tweeted.
“We must also recognize the fundamental intergenerational injustice that we will worsen and perpetuate if we destroy what are already too low levels of housebuilding in this country. Economically and socially it would be disastrous. Politically it would be madness.”
Labor will not support the amendment, The Guardian understands, but the scale of the rebellion could leave the government reliant on Labor votes to block it.
Green wrote in ConservativeHome defending the amendment that the aim was to “take power away from central government planners and distribute it to local people”.
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He said the current rules did not incentivize home building, but instead made land banks more profitable for developers. “Instead of blaming councils, we should look at the failure of the current regime to incentivize developers to build once they have received permission,” he said.
“A central goal cannot recognize the different pressures in different parts of the country. National house price averages are meaningless in the real world because the same house will be many times the price on the outskirts of Sevenoaks than on the outskirts of Sunderland.
“This is precisely why we need local decisions, expressed in local plans, about the scale of development needed in each area.”
Lisa Nandy, the shadow housing secretary, said: “This is a total disaster. The government cannot govern, the equalization agenda is collapsing and the housing market is broken. Pull flagship legislation because you are afraid of your own MPs is no way to govern.
“There is a case for reviewing how housing targets are calculated and how they can be challenged when disputed, but it is totally irresponsible to propose scrapping them without a viable alternative in the midst of a housing crisis.
“Labour will step up to keep this legislation going. There is too much at stake for communities that have already been victimized by Tory chaos and a Prime Minister too weak to stand up to her own party.”