THE average price of a house in Britain has doubled since 2000, as supply has lagged behind demand. Successive governments have aimed to put up 250,000 dwellings a year, but none has done so since 1980. Some blame housebuilders for this sorry state of affairs. The firms are accused of “land banking”, hoarding undeveloped plots to push up prices. Last month Sajid Javid, the communities secretary, told builders to “stop sitting on land banks, delaying build-out: the homebuyers must come first.”
There is plenty of unused land. The Local Government Association, which represents councils, recently identified sites for half a million homes in England which had been given planning permission but were yet to be built. Three of the largest builders, Persimmon, Taylor Wimpey and Barratt, have 200,000 plots of land that are “ready or close to ready” for development, according to an official report. Last year in England permission was granted for 250,000 housing units—enough to meet the target—but only 140,000 got under way.
To some, all this looks like anti-competitive behaviour by the big developers, eight of which build over half of Britain’s houses. A report from Sheffield Hallam University found that in 2012-15 the biggest private housebuilders increased construction by a third, but their profits trebled.
The builders protest that their critics misunderstand the economics of housing. Some land banking is inevitable: in order to show shareholders that their business has viable prospects, builders need a stock of land for future development. Builders’ profits have risen partly because they acquired land when it was cheaper than it is now, and the price of houses has increased.
Furthermore, the builders say, they are victims of bureaucracy. Even after planning permission is granted, there are conditions to meet, such as outlining plans for flood defences. “Back in my day, you only had to tell the council the colour of the bricks you planned to use,” says Ian Burnett of United Living, a property firm. Planning departments have shed staff following deep cuts to councils’ budgets. The lag between receiving planning permission and building being completed has risen by 12 months since 2007.
All this does not entirely exonerate the builders. Lately the government has become keener on large-scale housing developments. They tend to be farther from NIMBY-ish residents, and local authorities find it easier to manage one big project than lots of small ones. But they can give large builders local monopolies. To maximise profits on a plot, the builder may ration supply, putting up houses gradually rather than completing them all at once.
There is circumstantial evidence of this process at work. One study in 2014 looked at sites in London where more than 500 homes were earmarked and found that it was rare to build more than 100 of them a year. Research by Nathaniel Lichfield and Partners (NLP), a consultancy, suggests that as the size of a plot goes up, the annual rate of building gets relatively smaller. One development of 3,000 homes near Winchester, managed by two firms, saw only 526 constructed in six years, according to NLP (the companies insist they are developing the sites without delay).
These problems are not intractable. Councils could allocate smaller plots to a bigger range of builders, making the drip-drip style of construction more difficult. Andrew Lainton, a planning consultant, says that an obligation to build within a given deadline could be attached to planning permission. And ministers could get their own houses in order: one of the biggest hoarders of land suitable for residential development is government itself.
Source: The Economist, 24 November 2016 via Timekeeper newsfeed