Land banks

There’s a good piece in The Guardian today on the land holdings of the major housebuilders.  As I’ve mentioned before, to call them house building companies is a slight misnomer.  They are also land investors and site promoters.  The Guardian investigation found that

The nine housebuilders in the FTSE 100 and FTSE 250 hold 615,152 housing plots in their landbank, according to financial disclosures. This is four times the total number of homes built in Britain in the past year.   

I’m not sure how much of the ‘housebuilding’ market that they account for but there’s likely to be at least another few hundred thousand plots in house building companies outside the FTSE 100 and 250.

There’s another source of underestimation.  Another thing that I learned from the article was that many of the companies don’t include sites that don’t have planning permission in their financial disclosures.

Some housebuilders do not publicly disclose all the land they control, meaning their total landbank could be even bigger. For example, Bellway does not report land that has not got planning permission for house construction, while Persimmon says it controls 18,000 acres of “strategic land” on top of more than 90,000 plots that already have planning permission.

In reality the numbers are probably much greater than indicated by the land banks of the house builders.  It could be the tip of the iceberg.  There are plenty of other land owners.  Data (provided by Savills) in the Callcutt Review in 2007 relating to the proportion of land with planning permission owned by house-builders suggested that they owned a relatively small proportion – less than 10%.

How did the housebuilders respond to the largely implied accusations in the piece?  There was the standard response – blame the planners.  Remember – these are sites WITH planning permission but the ground has been shifted to an implementable planning consent.  A less hackneyed and more balanced response involved labour and materials shortages.  Planners must tear their hair out at the cheek of the housebuilders claiming that it is shortages of planners that are partly to blame.

Berkeley, whose chairman, Tony Pidgley, netted a £23m payout in 2015, said the company was building on all sites that have an “implementable planning consent”. In a statement, the London-focused company said cuts to local planning departments was partly to blame for the fact that it was not building faster: “The challenge is often around getting conditions cleared for development, particularly on major regeneration sites, and the capacity within local planning authorities to work alongside us. In London, planning departments have been cut by more than 50% over the last five years.”

Barratt said it was building 40% more homes than four years ago, when the industry was still recovering from the financial crisis, but that shortages of skilled workers and materials were hampering progress. “This has been achieved whilst overcoming a number of well-publicised housing market challenges, particularly brick and labour shortages,” a spokesman said.

 “We have an extensive programme of recruitment and we now have more apprentices in training than at any time since 2007. We have virtually no sites that have an implementable planning consent that are not in production.’’

Taylor Wimpey also pinpointed the “slow and complex” planning process and said all sides of the housing debate needed to be patient if more homes were to be built. A spokesman said: “As one of the UK’s largest housebuilders, Taylor Wimpey is committed to delivering quality and much-needed homes across the UK through the housing cycle and it is pleasing to see the government’s continued commitment to housing delivery.

“Whilst it is improving, the planning process is slow and complex and a number of conditions need to be fulfilled before development can commence on our sites. A shortage of resources in planning departments also often means that delays occur in this process. We therefore need to be patient and constructive on all sides of the debate in order to sustainably build the homes that the country needs. We continue to work closely with local authorities and communities to secure planning approval and as soon as we have an implementable permission we begin development without delay.”

So why wouldn’t a planning consent be implementable?  It’s only coming out now but in work with Peter Wyatt and Emma Street looking at what were known as stalled sites in 2012, we found that planning permissions could be unimplementable for lots of reasons.  Stalled projects were more likely to be found in low house value areas and/or higher risk projects and/or projects in sectors that have experienced the largest house price falls.  In many areas of the UK outside London and the South-East, overarching shifts are that house values have fallen in many areas, developers’ and lenders’ risk aversion has increased and, as a result, once viable financially feasible projects are no longer feasible.  We concluded in 2012 that at current market prices and taking into account development costs, housing development is not viable on a substantial proportion of what is often defined as housing land supply.    Furthermore, strongly echoing research on non-implemented planning permissions from the 1970s, our research suggests that the reasons for many stalled projects may be more nuanced than simply financial viability.  For operational reasons, house-builders DO need to maintain an inventory of sites in order to manage their workflow.  Problems with stalled projects cannot be wholly attributed to house-builder behaviour.  Although a site may appear inactive, it is clear that the lack of physical development may be due to ownership conflicts, problems of land title, land transfers, etc.  In addition, we found evidence of landowners ‘banking’ permissions in order to protect themselves from changes in policy.  For this type of scheme, planning permissions need to be re-negotiated before development can commence.  In particular, when the government seems to be constantly moving the goalpost in terms of planning obligations (affordable housing in particular), for many sites it may well make sense to simply wait and see and enjoy the bonus payments resulting from rising land values.


One thought on “Land banks

  1. And don’t forget that 75% of people won’t buy from any volume builder because they don’t like the product. For the limited house types on a particular site that % is in the high 90s. Hence the glacially slow sales, and therefore build, rates of around 2.6 per site per month. Faster housing supply requires different business models, market rent and custom build, as seen in other countries (where 50% of home building is CustomBuild and build rates are twice as high).


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