In its report, the House of Commons communities & local government committee stated the eight largest companies build over half of all new homes across the UK.
With this in mind, the Committee said more should be done to support SME builders, as well as handing local authorities certain powers to help soothe the housing market, such as removing/raising borrowing caps on councils' Housing Revenue Accounts which are limiting their ability to build.
In addition, improving access to land and finance for smaller builders is another key improvement, with recommendations for the Government to examine the German model of support for SME companies by using state-owned development bank to protect lenders from liability, while providing low rates to customers.
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Other recommendations include reducing the risk for builders by preparing sites for development by providing infrastructure and planning permissions, developing more rental homes, greater assistance for Modern Methods of Construction and improvements in further education to address the growing skills gap, which was described by the Committee as the biggest challenge facing the sector.
Clive Betts MP, Chair of the Communities and Local Government Committee, said: "The housing market is broken, we are simply not building enough homes. Smaller builders are in decline and the sector is over reliant on an alarmingly small number of high volume developers, driven by commercial self-interest and with little incentive to build any quicker. If we are to build the homes that the country so desperately needs, for sale and for rent, then this dominance must end.
"A successful housing market is a competitive one and Government should support smaller developers if it wants to increase the housing stock. This includes earmarking land, improving access to finance and reducing risk by proactively preparing sites for development. Local authorities have a key role to play but have not been given the tools they to make an effective contribution to solving this crisis.
"Innovation must also be encouraged and we need to finally get to grips with the major challenge of ensuring that the industry has a much-needed supply of skilled workers, without whom this country's housing crisis cannot be addressed. The Government's promises are encouraging, but their implementation must be closely scrutinised."
(LM)
