29 January 2016
The issue of land banking by developers and housebuilders has become an annual tussle between the Local Government Association (LGA) and the Home Builders’ Federation (HBF). In the blue corner, the LGA claims that housebuilders deliberately sit on land with planning permission to drive profit. In the red, the HBF argues that the issue is an anti development lobby ‘myth’, and that the problem rests with delays in the planning system.
The latest study published by the LGA shows that, in 2014/15, there were 475,647 homes with planning permission still waiting to be built - an increase from 443,265 in 2013/14 and 381,390 in 2012/13.
But a survey by the HBF, of 2,800 sites owned by 23 of the largest housebuilders and covering 220,000 plots, shows a very different picture. Only four per cent of plots were on viable sites with an implementable planning permission and awaiting construction.
Pulling no punches, the HBF argues that the majority of the 475,647 homes, quoted by the LGA, are either on sites where work has already started or where there is not a fully 'implementable' permission and it is not legal for builders to commence construction.
So what should we believe? Let’s take a look at the main players.
The ‘lifeblood’ of all housebuilders is land. They need a constant supply to build and sell homes to generate profit and returns. As commercial organisations with shareholders and investors, they require land, once it is purchased, to generate a profit quickly to meet the required targets for return on capital employed and trading profit. A delay in construction only occurs where there has been a collapse in market conditions, resulting in development becoming unviable without a write down of the land value.
Land promoters, on the other hand, will acquire land and secure planning approval for residential development to sell onto developers at optimum market conditions. This can result in delay between the planning approval and start of construction.
The public sector has a major role to play in supporting the delivery of new housing through initiatives such as Help to Buy, which accounted for 30-40 per cent of new house sales over the last year, and as land owner. The Department for Communities and Local Government estimates there are 16,600 hectares of previously developed land owned by local authorities and other public bodies, of which 7,500 ha could be suitable for housing.
Local planning authorities
In a climate of year-on-year cuts, local planning authorities are struggling to keep up with a surge in planning applications for new housing resulting from policy changes and a stronger economy. Local planning authorities must have enough resources to speed up implementable planning permissions so that work can start quickly.
So it’s clear that the debate is complex.
But all commentators agree on one thing - the UK is facing a housing crisis. There’s no easy fix - but further measures from the Government should include:
The landbanking debate is a distraction. Instead, the housing sector needs to unite to find solutions to build more homes, and fast, rather than spending time on point scoring.
Andrew Bradshaw is a WYG Director and leads the residential planning team in the Manchester office. He was formerly Senior Project Manager at Barratt Partnerships. Contact him at email@example.com or 0161 8748798.