Is housing crisis really caused by developers “land banking”?

The blame game of the UK’s housing crisis is ongoing, with little agreement on what is causing the shortage. Many point the finger at developers land banking, but a new study identifies a different culprit.

The government has been making moves to tackle the country’s housing shortage for many years. A target currently exists to create 300,000 new homes per year, but so far this goal is not being met.

Last year, around 250,000 new homes materialised. While this falls short of the desired figure, it is in fact the highest rate of housing creation in a decade, according to Centre for Cities. The think tank also points out that the so-called shortage is by no means national, with some areas having more than enough housing stock while others fall short.

Land banking: are developers to blame?

One idea regularly touted is that housing developers are responsible for much of the dearth in supply. These developers are allegedly “land banking” to make hefty profits without actually having to build on the land in question.

This is where undeveloped land is purchased purely as a speculative investment. Landowners hold onto this land as it rises in value, without any action on their part. They can then sell the land, or get planning permission and sell for an even greater profit. During the time the developer owns the land, it sits empty. In theory, this land could be hugely valuable in tackling the housing shortage.

However, a new study exploits this theory as false, and proves there are other, bigger issues. The Land Promoters and Developers Federation (LPDF) teamed up with Lichfields to “debunk” the land banking myth. Their research found that the UK planning system is actually causing serious delays to housing delivery, and the actual incidence rate of developers hoarding land for profit is questionable.

Planning system needs an overhaul

The report explained that the existing planning and development process is complex and “with risk”. It states the mismatch between planning permission granted and housing output can be explained by the following issues:

  • The time it takes to progress development through the regulatory stages
  • The risks of small site delivery and by small builders
  • The overall phasing of build-out on larger site
  • The role of the planning system in facilitating changes to planned development schemes to reflect practical requirements.

Paul Brocklehurst, chairman of LPDF, says the research shows the need for an increase in planning consents. He says there are signs that “planning consents for new sites suitable for all housebuilders to build on may be declining”.

There are also labour and supply chain issues to add to the mix, he adds.

“With that in mind, we would call upon the new Secretary of State, Michael Gove, to consider taking action to improve the effectiveness of the existing system along the lines of the ‘quick-fix’ solutions contained within the LPDF’s Agenda for Action released earlier this summer, all of which can be delivered without recourse to primary legislation. We should all be striving to address the housing emergency that exists in this country to provide the opportunity for all generations to have a place that they can call home. Perhaps then we can say we really are levelling up.”

Debunking the myths

One report from the Local Government Association showed 1.1 million homes with “unimplemented permission”. This type of research, says the Lichfield report, is often used to point the finger of blame at land banking.

However, the data they found shows that the method the LGA used to come up with the figure was flawed. Lichfield’s report says this is because the research “double counts schemes that are subject to multiple planning permissions”.

Planning permissions also often do not tally up with areas of greatest housing need, says the report. “Many parts of the country – where affordability pressures are greatest – have the biggest gap between homes with planning permissions and the number needed.”

The report clearly shows that the UK housing situation is complex, with many aspects contributing to supply issues. New housing secretary Michael Gove will certainly be under scrutiny as to how he plans to meet housebuilding targets.

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