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The scandal of land-banking

The scandal of land-banking

Land-banking. A phrase that a few years ago would have been met with a quizzical, confused look is now on the lips of many housing commentators and policy-makers. It’s also shaping up to be the next big battle in the effort to tackle Britain’s housing crisis and prevent the unnecessary loss of countryside.

The government is waking up to the idea that the country’s biggest housebuilders are hoarding land. Secretary of State Sajid Javid wants Westminster to play a ‘more active, muscular role’ in tackling land-banking, and Tory grandee Sir Oliver Letwin MP is leading a review into the topic, to which I submitted evidence on behalf of the Campaign to Protect Rural England (CPRE).

So far, it has been Britain’s volume housing developers that have proved the most ‘muscular’. As reported in the FT last month, we’ve compiled evidence that shows the UK’s ten biggest housebuilders have increased the number of plots with planning permission they hold by a fifth in the past ten years, by two-fifths since 1998. Meanwhile, the number of homes completed each year has fallen by 13%. Alongside this, industry profits have skyrocketed, and the loss of our countryside accelerated.

This represents the tip of the iceberg; these figures only show plots with planning permission – we know that the developers hold wider, ‘strategic’ banks of land that do not yet have planning permission, the size of which is difficult to establish.

Developers maintain that they need a pipeline of land to maintain their profitability and ride out market volatility. This is true to some extent, but they restrict this pipeline at will, drip-feeding homes into the market at a pace that best serves their profits. Their swelling holdings are exacerbating the crisis of supply and affordability that has seen millennials pushed increasingly far away from owning their own home.

The hoarding of land also has a pernicious effect on our countryside. The dominance of the biggest developers means the market is increasingly geared towards the types of development they want, not what communities need. They are free to cherry-pick land that will make them the most proft - large tracts of undeveloped land carved out of the beautiful patchwork of English countryside we know and love.

This land is cheapest for them to develop, and allows them to focus on building sprawling estates of large houses at the expense of smaller, more affordable homes: 26% of all new houses and flats were three-bed in 2007; 19% were four-bed or more. By 2015 they were 34% and 29% respectively.

Local authorities, housing associations and other smaller builders are often prepared to build more quickly, are better placed to provide affordable housing, or redevelop existing brownfield sites rather than our green spaces, and they need to play a greater role. But, they are being squeezed out as the biggest builders consolidate their grip on the market; the volume builders now have 59% market share, up from 31% in 2007.

This is taking place in the context of the government’s drive to relax planning rules and release more of our countryside for development, and constant calls from developers to relax the rules further. However, despite this relaxation, the supply of housing has not kept pace with the number of planning permissions granted, demonstrating that the planning system is not a barrier to tackling the housing crisis – the biggest housebuilders are.

We really shouldn’t be surprised - the largest developers are FTSE250 companies that exist to maximise returns for their shareholders. But there are two key reasons we cannot rely on the biggest housebuilders to tackle the housing crisis or safeguard our great green outdoors:

  1. These developers are unlikely, under current planning policies and regulations, to boost housing supply to the level that ministers want and the public needs. This is unless action is taken to make them more responsive to social need, and level the playing field to allow local authorities and smaller players to regain the ground they have lost.
  1. Without reforms to the planning system to increase build out rates and reduce the pressure to release more land for development, the threat to our treasured landscapes will only increase.

We need action. We need stronger powers for local authorities to compel builders to build out sites with planning permission. We need strong ‘use it or lose it’ measures for large housebuilding schemes, with exemptions that incentivise a role for councils and small or medium-sized builders, and for building affordable housing first.

The Government should also explore reforms that make it easier to channel the rising values of land given permission for housing, towards funding infrastructure to serve that development – schools, healthcare and public transport.

These reforms will help to combat the increasingly distorting effects of land hoarding on the housing market - and our countryside.

The dominance of the biggest developers means the market is increasingly geared towards the types of development they want, not what communities need.




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