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31 Jan
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We Need To Talk About Land Banking

Ed Miliband’s announcement today of measures to increase the number of new homes being built has brought the practice of ‘Land Banking’ into the spotlight once again.

In this article, we consider whether there is any substance behind these alleged practices, and what the numbers really tell us.

What is Land Banking?

Every house builder in the country carries a stock of land on which it has not yet started to build homes.  This is referred to as a ‘Land Bank’ and its size is usually listed in the annual reports of the main listed developers.  The existence of Land Banks isn’t disputed – what is often debated is the reason for their existence.

On the one hand, developers say it is a logical response to a planning system that makes it difficult to secure implementable planning permissions.  As with all manufacturing industries, the rarer a commodity is, the larger stocks of it will be held.  On the other hand, politicians and the Local Government Association (LGA) claim developers avoid building new homes in order to restrict supply, push up prices and make more profit.  But who is right? Let’s see what the numbers tells us.

Numbers in the Bank

In August 2013, the LGA announced that there were some 400,000 unbuilt homes with planning permission.   This lead Councillor Mike Jones, Chairman of the LGA, to claim the planning system was functioning fine and that:

“The challenge now lies in actually getting houses built. Government schemes to help buyers access finance risk creating a bubble if there isn't an increase house building to match it.”

But the figure of 400,000 home has been hotly disputed.  Nick Boles, Minister for Planning, had some research carried out into the claims, the results of which are enlightening.  This revealed that the LGA claims were based on an update of a report originally dating from 2011.  Of the 400,000 unbuilt homes, 191,000 were under construction and 83,000 were affordable housing dwellings.  So only 126,000 were actually unimplemented private consents – or a Land Bank, in other words.

Given the age of the LGA data, Boles had the information updated by his Whitehall team.  According to his figures, as of October 2013, 507,000 homes had planning permission with the breakdown as follows:

  • 249,800 had started on site (49%)
  • 184,600 were progressing towards a start (36%)
  • 13,500 were being sold or there was no available information (3%)
  • 59,100 were ‘on hold’ or shelved (12%)

That doesn’t seem to suggest wide-spread Land Banking.  In fact, the evidence shows that the opposite is happening with the percentage of units ‘on hold’ declining by around a third since December 2011.  Similarly, the Home Builders Federation (HBF) reports that Land Banks have fallen by 20% in the last five years.

So What’s The Answer?

So if we are to build the circa 221,000 new homes we need every year to meet our housing need and Land Banking isn’t the problem, what is?  Unfortunately, the blame seems to fall largely at the door of the planning system.

The National Planning Policy Framework (NPPF) requires every Local Authority to have a five-year supply of deliverable housing sites “to ensure choice and competition in the market for land.”  This is an explicit recognition that it is unrealistic to expect every last home that is granted planning permission to be built out. 

The onus is therefore increasingly being placed on Local Authorities to grant planning permissions in the first place – the NPPF’s “presumption in favour of sustainable development.”

How Can You Benefit?

Despite the impression you may be getting from the press, there is still an urgent need for new residential development sites.  These are currently taking all forms from green fields on the edge of towns and villages through to sites with existing uses that have come to the end of their economic life.

So if you’re interested in how your property could be turned into a residential development site, get in touch with us today.

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