The fact that housebuilders’ shares took a tumble following the announcement that there will be a review of land banking practices signalled this is not good news for the industry.
During his Budget speech, Phillip Hammond announced that Oliver Letwin will chair a review to investigate the mismatch between planning permissions granted and housing starts. Hammond vowed that if vitally-needed land is being held for commercial rather than technical reasons, the government will intervene.
“A review of land banking practices and planning will take time and arguably create even more short-term uncertainty,” said Andrew Kafkaris, Chartered Surveyor and Founding Partner at Bruton Realty. “Another review is the last thing that will get homes built.”
The industry has worked hard to dispel the myth that housebuilders purposefully leave plots undeveloped to ensure an undersupply of homes, a monopoly on the market and inflated prices. It is a myth has served politicians well, screening off the myriad of complex reasons why land remains undeveloped.
“The issue of planning permissions not being built out is certainly not as simple as housebuilders sitting on sites,” said Jonathan Dyke Bsc Hons MRICS – Strategic Land Director – IM Land. “There are various things that can prevent consented sites being built on – such as viability and other economic issues such as existing use values and the cost of relocating businesses to unlock and assemble sites.
“For example, for brownfield employment sites, there has to be viable alternative employment land to relocate the businesses to. We may have to look again at all land for employment use to enable release of urban brownfield sites which could be redeveloped for housing.”
The reasons why sites remain static may be mired in controversy, but the fact remains vital land is sitting dormant. Surely any review with the potential to unlock more development land is welcome.
“We’re encouraged by the focus on unlocking development on potential housing sites that are now lying empty,” said Jonathan Goring, Managing Director of Lovell. “Our own research, highlighted in the recent Localis report, suggests this could play an important part in tackling the under-supply of new homes.
“We’ve particularly drawn attention to the amount of public land that’s unused, which is a big issue for the wider business. Much is in areas of high housing demand and could provide sites for the new homes that are so urgently needed. We very much hope that Oliver Letwin’s review will also investigate this issue.”
It is hoped that such a review will help to lay bare the kinks in the planning system which stall new homes, rather than point blame where none is called for. “As has been proved by numerous independent investigations in the past, housebuilders do not land bank,” said Stewart Baseley, Executive Chairman of the Homes Builders Federation. “Housebuilders have nothing to fear from a review of land banking and if it identifies non housebuilders who are sitting on land and brings that forward for development it would be a positive move.
“Any review should also focus on why so many plots that some suggest are in a builders ‘land bank’ are mired in the planning system and identify ways to process them more quickly so they can actually be built.”
In London alone there are 270,000 homes with planning permission granted, that have yet to be built. The industry will have to wait another five months for a review which will hopefully conclude what housebuilders already know; that the current planning system is not fit for purpose and a range of new measures are needed to solve the UK’s static sites.