Land hoarding by builders?

 

There is a clamour to build more homes. All parties agree we are short of homes, and hope that building more will meet demand and reduce house price rises. Today I wish to look at this without reproducing the long debates we have already had about migration which of course also is part of the picture. Whatever the outcome of the stricter controls on migration there is unsatisfied demand for homes.

Some now say we have a problem with builders and speculators sitting on land which has planning permission to build. They think that if we have new laws or rules to make them build we can solve the problem. As part of Labour’s wide ranging attack on the private sector, or attempt to remodel it, they are talking of penalising developers who do not get on with developing.  The truth is more complex than this.

The English planning system is driven by a most important requirement placed on each local planning authority. They need to demonstrate there is a five year supply of land in their area at any given time. The local plan specifies the build rate on which this is based. This in turn is partly a reflection of past experience of demand, and partly a planning judgement made by the Council subject to review by an Inspector.

This means that under planning law at any given time the government requires the private sector to “hoard” or sit on a lot of land with planning permission. There is good reason for this. A housebuilder with a large site may take three years or so to move from putting in the detailed planning application to selling the last completed home. He is not hoarding the site, but proceeding as fast as planning applications, building work and buyers will let him. Time is money for the builder, and turning the land over quickly improves profits.

The same housebuilder will probably want the security of another large site to start work on when he has completed his present projects. He may decide the best way to secure it is to buy it outright, or he may buy an option from the owner who then has to hold it for a further period of years until the builder is ready to work on the development.

If a future government now wants less land holding then it could of course remove the requirement for a five year supply. That might reduce the total amount of land with permission held in the system, but there will still need to be quite a lot given the nature of the housebuilding industry. When trying to intervene like this there is always the possibility that the intervention will work in a perverse way. In this case it could reduce the amount of land where planning permission is sought.

There remains the issue of the gain that occurs when land without permission is granted permission. This is partly a reward for ownership and partly a reward for whoever goes to the trouble of preparing the land for development and applying for permission. However, increasing amounts of the gain are taken by local and national government through requirements on the developer to provide public facilities or a cash sum for such facilities. The arrangements amount to a development tax that is negotiated on a case by case basis in the light of final values of the properties and local infrastructure and service needs.

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64 Comments

  1. lifelogic
    Posted January 19, 2014 at 6:00 am | Permalink

    Indeed and full planning consent lasts only three years now, without renewing it. It used to be five but one assume the council get more fees now and waste more developers time.

    Delays can be due recently to a lack of bank lending or the fact that the construction costs might well cost more than the finished value, often due to a absurdly over the top planning requirements, council and utility fees and OTT building regulations. Utility connection charges which are also often absurdly high with a virtual monopoly supply.

    Developers do not usually want to hoard land for long. It usually give no income and even costs money, until developed. They usually want their investment back as soon as possible.

    Of course Cameron’s & Osborne’s idiotic minimum wage proposed increase will make matters worse pushing up building costs and making some sites less viable.

    Reply You can extend your planning permission by starting work on the site in a modest way.

    • Lifelogic
      Posted January 19, 2014 at 8:52 am | Permalink

      To reply: true but sometimes extensive planning pre-start planning conditions can make this quite expensive too.

      Most developers will build as soon as they can. It they want to hoard property it is better to do it when built and then let out, then it produces an income. Letting land with existing planning sit empty rarely makes much financial sense unless you just cannot get the funds/builders to finish it off for some reason.

      The only other reason to sit on it is if you think you can improve on the existing planning consent, and thus get more profit from the site.

      • House
        Posted January 19, 2014 at 5:39 pm | Permalink

        Tories changed the law so there is a presumption to grant permission even if it against local wishes. The localism act is a nonsense. This is an immigration problem not housing problem. Although the government knows there is not the money for infrastructure to match the housing boom it is creating. The Tories have cut local authority grants and they in turn use NHB money to make up for the shortfall instead of spending it on infrastructure. Therefore the public services become worse as the LA cannot even match demand against increase in population through immigration. Clegg is now saying that Cameron should come clean and tell the public about the two garden cities he intends to build in Kent and Buckahamshire.

        He could help by cutting or stopping immigration, it would help our public services, save our green open spaces, provide food and water security etc. he is using our land to house the hairs world and over stretch our public services by the same demand.

    • Hope
      Posted January 19, 2014 at 10:10 am | Permalink

      The biggest issue is that the Tory government has changed the law so there is a presumption to grant planning and in tandem knowingly allows it continue at a fast pace when there is not the money for infrastructure. Therefore they continue with the mass immigration which is causing a housing problem yet do not provide the infrastructure for it despite this being a main issue everyone is already crying about.

      The stupidity and short term gain to the economy for the election is not worth jepordising our food, water security, our heritage, national culture or values to be superseded by culture from around the world.

      It is also not worth giving up our green pleasant land that should be used for farming to produce food or water collection. The dou oughta gave up our fishing rights to the EU for nothing in return and we do not benefit from the fish in our seas or the jobs lost. The CAP has increased food prices and we will have much less land to grow our own food.

      The NHB, AKA the Boles bung to councils, should be stopped or made law that it is only used for infrastructure. The NPPF Tory policy is further wrecking our public services. Also LA do not have the money, like developers, to oppose refused planning permissions. So it steam rollers on with EU directives attached like the nonsensical Climate change! Cameron needs to go ASAP before he wrecks every part of our country.

    • Timaction
      Posted January 19, 2014 at 11:31 am | Permalink

      I’m sorry Mr Redwood I have just read my own Councils latest Core Strategy based on the National Planning Policy Framework. I have then read the appeals process to Mr Pickles department. It’s a total sham to build as many houses as quickly as possible regardless of the long term consequences, especially a free for all building on the greenbelt. This despite frozen or reducing public sector budgets and services.
      The whole point is that this article and government policy hides its real strategic intentions to only discuss the tactical consequences of that policy!
      The cake keeps getting smaller for the British people. We are struggling to access health, housing, education and other public services for our own and this is only going to get worse.
      In a local document that exceeds 150 pages the causes for this need to build are limited to ONE LINE. An aging population (small part) and IMMIGRATION and their consequent children. Climate change religion/obsession was discussed more than the reasons for the build!
      Logic dictates that the EU Government with the connivance of the Westminster Council intends to further increase our population and change the (British) English demographic by continuing to allow over 500,000 people to settle here each year. Politicians hide behind the NET figure as it masks the true huge scale of our replacement and the problem. In the mean time we loose our young talent and entrepreneur’s. The debate is still focussed on EU migration which is actually dwarfed by those from the rest of the world (185,000 V 318,000). The latter if there was a real political will could be stopped overnight. It has been reported that once here 97% of overstayers and illegal immigrants are never removed. The unreformed Human Rights Act prevents criminal removal and always overrides the interest of the indigenous population.
      Serving Governments should never be allowed to make policy that make permanent changes to our culture, heritage and way of life for the indigenous population without mandate. They have got away with it for too long.
      I’m afraid we need a national Government that looks after the needs of the indigenous population and not everything foreign. The one party LibLabCons have had their day and have been found sadly wanting.

      • Posted January 20, 2014 at 9:55 am | Permalink

        Agreed. But I spotted the problem you refer to ten years ago and supported the BNP. How about you?

    • uanime5
      Posted January 19, 2014 at 5:00 pm | Permalink

      Of course Cameron’s & Osborne’s idiotic minimum wage proposed increase will make matters worse pushing up building costs and making some sites less viable.

      The majority of builders don’t work for minimum wage and most charge more than £7 per hour so increasing the minimum will have little effect on the construction industry.

      • ian wragg
        Posted January 19, 2014 at 6:11 pm | Permalink

        Usual rubbish Uni. Wages have been pushed down to £50 per day for many on site due to mass immigration. This means that where before someone earned £100 per day and paid tax, 2 people now pay less tax and claim credits. Law of unintended consequences you see.

        • alan jutson
          Posted January 19, 2014 at 7:39 pm | Permalink

          Iain

          …..”Wages have been pushed down…..”

          Absolutely agree, its been happening for nearly a decade now, and been getting far worse in the last 5-6 years.

        • yulwaymartyn
          Posted January 19, 2014 at 9:28 pm | Permalink

          Ian: sorry but where I live you won’t can’t get a contractor to turn up to estimate. We have been trying to get specialist external rendering done and have managed to get only two estimates in three months. Endless begging phone calls, failed appointments etc. Hopeless. THEY DON’T TURN UP.

          Finally some friends of ours recommended a Polish contractor who arrived the next day, prepared and returned the estimate in two days, and completed the job in seven days. Also he was the only one who didn’t ask for cash.

  2. alan jutson
    Posted January 19, 2014 at 7:38 am | Permalink

    I take your points, all of which are very valid.

    Do also remember National Government is also involved, as has been the case here in Wokingham, where the Council were forced under Government instruction (that wonderful Mr Prescot I believe) to designate areas for thousands of houses to be built in the next 10 -20 years.
    We then have the Appeals system, where Local Authorites can also be overuled.

    Other bodies also get involved which can delay/complicate planning.
    English Heritage.
    Listed Status.
    Sites of Scientific Interest.
    Common Land.
    Green Belt Land.
    Bat surveys.
    Highways
    And so the list goes on.

    A builder must retain some sort of land bank for continuity of work. just like a shop keeps a certain amount of stock in keeping its shelves full.
    No point in waiting for the shelves to be empty before re-ordering stock.

    One of the major problems a Developer has, is to attempt to identify land for suitable development, this takes time, research, negotiation with owners, before even a plan can be worked up to design stage, let alone be submitted to the local authority.
    The more land that is built on, the more people want to protect what is left.

    Somehow we have to find a balance.

    At the moment our population is growing, and whilst this continues to outstrip supply, demand for somewhere to live will be high.

    The trick is also to match infrastrucure capability with that increased housing demand.

    • Lifelogic
      Posted January 19, 2014 at 8:58 am | Permalink

      Indeed an endless list of government busy body organisations largely parasitic and with often very silly & even conflicting demands. All serve to push up the finished costs of property, render them inferior in utility terms (often) and delay the completion of developments for the end user.

      As does all the green crap.

    • Hope
      Posted January 19, 2014 at 10:15 am | Permalink

      Look at the cases which tried to oppose planning, it is virtually impossible. Boles wants to build on very piece of land and made it clear that includes national parks or they could become museums! What planet is he on? However, most Tory support comes from the rural areas and let us hope they vote with their feet. It was reported that no. 10 told Boles to tone down his speeches, a bit like keeping secret the advice on state press regulation or keeping secret the names of donors to Chequers. All the hall marks of a sleazy Major government.

    • James Sutherland
      Posted January 19, 2014 at 11:39 am | Permalink

      It’s high time a lot of that red tape got streamlined. Scrap the “planning gain” horse-trading, have a fixed charge formula which goes to the council to use towards the costs of providing the roads and other infrastructure: a year’s extra Council Tax, perhaps. (That way, larger or more expensive developments contribute more, without any questions over more opaque deals.)

      Cut all those other bodies out in most cases: require them to designate any restricted areas with the local council in advance, so the council is a single point of contact with knowledge of which places have restrictions applied.

      Better still, move towards a “zoning” approach, where each part of a council’s territory is pre-designated for housing, industrial, farmland etc – so, I could buy a plot of land knowing it’s zoned for low-density housing, so I can build up to, say, a five bedroom house on the plot and will pay £3,000 to the Council for doing so. No haggling with them, no “gain” deals, just a nice straightfoward payment.

    • Barbara
      Posted January 19, 2014 at 3:36 pm | Permalink

      ‘Do also remember national government is also involved …’

      Indeed. Our local newspaper this week pointed to the ‘amusing’ sight of Tory councillors ‘squirming’ as they had to defend the avalanche of development which is threatening to swamp the countryside round our small market town, knowing that they themselves didn’t agree with it, but had to ‘represent’ their national party’s line back to their own irate local communities.

  3. Mike Stallard
    Posted January 19, 2014 at 7:41 am | Permalink

    My son is an architect. The final year of his course was, he tells me, almost entirely devoted to Planning Rules and Permission. Of course builders know the complicated, unfair and hopelessly bureaucratic system best! It is their job to make money out of this Byzantine situation!
    A friend at the gym tells me that it is really dangerous to buy properties to do up. You do not know what you are getting and can lose a very great deal of money. Hence the state of our town centre. He is, by the way, a property developer. What they want, he says, is a nice field somewhere…
    In Spain, where the planning rules are, shall we say, slightly more flexible, little houses spring up all over the once pretty countryside and small villages are simply lost under a mass of unused tower blocks. What was once delectable is now, frankly, a ghost town full of graffiti.
    Why do we need more houses, by the way? And is there any means of getting people to see that the North of England is where we all ought to be living?

    • Mike Wilson
      Posted January 19, 2014 at 3:43 pm | Permalink

      @Mike Stallard In Spain, where the planning rules are, shall we say, slightly more flexible, little houses spring up all over the once pretty countryside and small villages are simply lost under a mass of unused tower blocks. What was once delectable is now, frankly, a ghost town full of graffiti.

      Whereas in this country we go from one extreme to another. Here we pretend there are not 65 million of us on a small island and we pack people in like sardines to awful cities and housing estates. Surely one of the most basic of human rights is the right to build oneself a shelter from the rain? But government, in its finite wisdom, has taken this away from us and now most people spend most of their life working to pay off a mortgage just for a thing that takes about 50 man weeks to build.

  4. David in Kent
    Posted January 19, 2014 at 8:21 am | Permalink

    One measure which could be adopted and would produce a surprising number of new houses quickly, would be to allow Personal Development.
    Under PD a person would be allowed to build a house for himself on a piece of land s/he owned without getting permission from anybody or paying a development tax. In order to discourage serial development S/he would be required to have it as his principle residence for 5 years or pay a 60% tax on the proceeds of sale.

    • alan jutson
      Posted January 19, 2014 at 8:24 pm | Permalink

      David

      I do not think you would like the result.
      Shanty towns spring to mind !
      Some of these type of structures have been constructed in the back gardens of the Home Counties.
      Slough Local Authority (Press reports recently) only just made aware that some 6,300 people are living in such establishments after their own survey.
      Its been going on for 20 years or more.

      I assume building standards would be required ?

      Who would put in the main sewerage runs, or would they all be septic tanks.

      • David in Kent
        Posted January 20, 2014 at 9:22 am | Permalink

        Alan, thanks for your interest in my proposal. I agree with your implied suggestion that sewage and access would need to be addressed properly. I have some doubts about the need for most building regs as the only person to suffer from any failure would be the occupant.
        It might be wise to designate minimum density levels but I’m not too worried about ‘shanty towns’ if they help young people get a start building sweat equity.

        • alan jutson
          Posted January 20, 2014 at 6:19 pm | Permalink

          David

          Perhaps you may be worried about shanty towns if such structures were built in your area, or close to your property.

          Do remember that whilst building regulations can sometimes be a pain in the backside.
          A property built next to yours which had dodgy electrics and gas installation, or undermines your foundations, may prove not only to be a fire risk to the owners, but also their neighbours.

          I fully support the idea of building ones own home, I did so over 30 years ago (in which we still live), but please we do need some sort of control, if for no other reason to protect existing residents.

  5. Andyvan
    Posted January 19, 2014 at 8:25 am | Permalink

    Just another example of regulation producing unforeseen or undesirable results in the housing market. I am at a loss to know why so many people think that central planning works when all the evidence in this country and every other that tries it is that it doesn’t. Let land owners decide what is best for their land, they have far more knowledge and capital invested than bureaucrats. If Labour get elected we can look forward to exactly what is happening in France. Flight of capital, stagnation and all the trappings of soviet style micro management, even worse that we have now.

  6. petermartin2001
    Posted January 19, 2014 at 8:35 am | Permalink

    You’ve got to ask why builders are hoarding. The answer I would suggest is that there is another credit fuelled housing boom on the way and the builders are hanging back to time their sales to the best advantage.

    It’s all about having base interest rates at close to 0% of course. As the banks have started lending again the boom will get underway in the rest of the country having already started in London.

    Monetary policy needs to be tighter meaning base rates need to be higher. On the other hand , to prevent a new recession, fiscal policy needs to be looser. Ie Lower taxes and/or higher government spending. Which is the complete opposite of what the government is supposedly working towards!

    Following the GFC there was an inevitable process of automatic stabilisation. Tax revenues fell, government spending rose everywhere. It had to as workers lost their jobs, stopped paying income tax and started to receive state benefits. Instead of going with the flow, politicians decided they didn’t like the idea of large budget deficits and tried to cut them . There is no virtue in doing that, driving the economy towards recession, which forces the central bank to lower rates, and then saying – look our fiscal policy is really good because it results in lower interest rates!

    All that will be achieved is yet another boom and bust.

  7. Old Albion
    Posted January 19, 2014 at 8:41 am | Permalink

    “The UK planning system is driven by a most important requirement placed on each local planning authority. They need to demonstrate there is a five year supply of land in their area at any given time”

    It may be the (dis)UK system? But surely it applies only to England as this legislatiion is devolved ?

    Reply Good correction.

    • Old Albion
      Posted January 19, 2014 at 5:51 pm | Permalink

      I shouldn’t have to correct you or any MP. It’s almost as if Westminster wants to conceal the extent of devolution. To keep the masses in England believing that (dis)UK, Britain and England are the same thing.

      • Posted January 20, 2014 at 6:51 am | Permalink

        @Old Albion,

        What about Wales? Are their planning regulations devolved too? Or are they the same as England?

        To be fair to Mr Redwood, its easy for anyone to get it wrong. MPs included. I’m sure there is no hidden agenda.
        The structure of the UK is such a hotchpotch , GB is the UK without NI although at least part of the NI population like to think of themselves British. England and Wales are usually grouped together for legal purposes, but sometimes they aren’t. Some aspects of Scottish law are devolved but not all. Cornwall is legally part of England but many of the Cornish would have their own opinions about that!

        • Old Albion
          Posted January 20, 2014 at 7:54 am | Permalink

          petermartin2001 “I’m sure there is no hidden agenda”

          I have to suggest you are somewhat naive.

  8. Barry
    Posted January 19, 2014 at 8:42 am | Permalink

    There is plenty of space to build left in this country (just look down next time you fly in). The problem is that it is all controlled by government. I heard someone saying on Newsnight that you simply wouldn’t get the picturesque villages that have evolved over time any more because of this centralised control which is really just there to rig the market. Look at how they cracked down on those companies that were buying land and selling it on as plots with potential planning permission. They had found a way to convert £5,000 per acre to £250,000 without any government involvement and we can’t have that can we?

    Then look at a country like Germany, whose government governs for the people, not to constantly rip them off. Thousands of plots available and high quality, energy efficient kit houses which are reasonably priced and quickly erected. You can get a plot and put a good quality house on it for 150,000 Euros, pay off the mortgage in half the time you do here and enjoy life. It would be perfectly possible to do exactly the same here but would essentially mean leaving local people to their own devices, something which our big state, interfering governments will never permit because it makes life less profitable for their developer and banker mates plus you don’t need all the bureaucrats who are drawing the highest salaries in the world for inflicting debt and misery on the younger generation.

    • Posted January 20, 2014 at 8:46 am | Permalink

      Then look at a country like Germany, whose government governs for the people, not to constantly rip them off

      There might be a few Germans who would disagree with you! Have you looked at their taxation levels?

  9. Andrew S
    Posted January 19, 2014 at 9:16 am | Permalink

    Why isn’t John Redwood in a senior cabinet post? Next parliament hopefully (if he wants to be).

    • ian wragg
      Posted January 19, 2014 at 6:15 pm | Permalink

      There won’t be a Tory government for at least 10 years so he will have retired with his indexed linked pension by then.

      • Andrew S
        Posted January 20, 2014 at 9:48 am | Permalink

        Clear reasoned thinking doesn’t have to retire. Very negative undertone in your comment esp about pension. Check his CV as to achievements.

  10. Denis Cooper
    Posted January 19, 2014 at 9:27 am | Permalink

    Around the corner from us there is a site which has remained derelict for some years now; there was a large house occupied by an old chap and his son, and when the father died it was sold off and quite quickly demolished to create a vacant site; in parallel with that the developer put forward plans for new housing to be built there, but those plans were rejected on various good grounds; as I recall the plans were then revised but once again rejected on various good grounds; since then the site has remained untouched and is well on the way to becoming a kind of unofficial wildlife reserve, either because the developer ran out of money or because he is waiting until prices rise so that he still make a profit from the reduced number of dwellings that would be allowed.

    Meanwhile also around the corner from us on a larger site the rented offices which had stood there for decades have been demolished, with a massive, prolonged and extremely noisy process of hammering and crushing concrete and other rubble so it can be recycled – at one time we suspected that they were actually bringing in material from another site to be processed there – and there are now fourteen top quality, very expensive homes, all of which have been sold and are now occupied.

    I can’t say why one development has proceeded apace and been completed while another just down the road has stalled for so long, I guess that it comes down to money.

    In any case we do not welcome these changes, not because we are opposed to any change but because since we moved here we have seen change almost entirely in a direction that we don’t particularly like, with more or more houses crammed into every available space and the gradual disappearance of the large gardens and open spaces and trees that had made it an attractive environment, and of course with increased road traffic and more pressure on local services.

  11. Brian Tomkinson
    Posted January 19, 2014 at 9:40 am | Permalink

    JR: “All parties agree we are short of homes”
    I seem to remember that you used to argue against that thesis. Anyway, we are always told by politicians that we need to be building so many hundred thousand new houses each year. What is the basis for this? Can anyone provide figures for supply and demand for houses? How many houses are there already and how many are empty? How many people who haven’t already got their own housing want houses? Does anyone in government know how many people now live in the UK? In the absence of such data the effect of relentless immigration must be the overriding factor if there is a shortage of homes.

    Reply I am not a “party”!

    • Brian Tomkinson
      Posted January 19, 2014 at 5:28 pm | Permalink

      Reply to reply,
      Of course, but do you now support LibLabCon on this or your own views, as previously expressed?

      Reply I still hold my own views. This is a critique of current party thinking, where Labour are saying there should be a hoarders tax without thinking through why people hoard land.

  12. The PrangWizard
    Posted January 19, 2014 at 9:43 am | Permalink

    State threats and socialist planning of the economy is a dangerous game, we saw that a few decades ago in the dark days. People and families will be the losers. Builders won’t build houses until they can see a fair prospect of being able to sell them, and they need to get their investment back, so I don’t go with this land hoarding nonsense. What happens to the land under threat of confiscation?

    I live on the Oxfordshire/Wiltshire boarder and most of the villages and small towns near me are having houses built. My village of 250 is to get another 39, – a good number of which must be ‘affordable’. In the nearest town a site to contain 250 has had about 50 built so far, and there’s another site lined up for a further 200, and this just after a site of 500 is almost complete. Numbers for elsewhere nearby total around 3000 I think. They are coming onto the market now, so a year from now it will be hard to maintain accusations. If this does not satisfy the market, I weep for England. We are not properly represented. Where are our champions?

    So I’m not at all convinced about this accusation that builders are sitting on land. I think this government should drastically reduce its intervention in the market, here and elsewhere.

  13. Chris S
    Posted January 19, 2014 at 9:43 am | Permalink

    Off topic, I know but I’ve just watched the personal interview given to a few Western journalists by Putin. Watching Andrew Marr go on and on about gay rights both during the interview and in a short 1:1 discussion afterwards was hugely embarrassing to watch.

    Of all the issues one would like to hear Putin’s views on, gay rights in Russia would be very low on my list. It just shows what a strange view of what’s important in the world those running the BBC have.

    What a huge missed opportunity.

    • Max Dunbar
      Posted January 19, 2014 at 5:52 pm | Permalink

      I saw the beginning of Marr’s interview and turned it off asap. Putin seemed patient and moderate. Funny how an ex-KGB man from the Soviet Union can sound reasonable compared to a left-wing Scot from the BBC.

    • JoeSoap
      Posted January 19, 2014 at 6:49 pm | Permalink

      Indeed, but hugely important in BBC world, where no doubt courses are run to teach intelligent people to guard against the Health and Safety problems associated with hot water coming out of taps, whilst (number left out ed) children being abused over 40 years is of no great import…..

  14. Alan Wheatley
    Posted January 19, 2014 at 9:51 am | Permalink

    This was addressed on BBC Countryfile last weekend, where too the issue was one of several factors with no clear conclusion.

    Could it be that hoarding is not so much the problem as a symptom of a different problem. After all, if planning permission gives value to the land then that value will be realised at some point.

    If house building is a free and competitive market, then should it not be allowed to find its own level within parameters defined by the broader wishes of the nation as a whole, such as the green belt and infrastructure impacts?

  15. Richard1
    Posted January 19, 2014 at 9:59 am | Permalink

    Certainly there is a very wide-ranging attack by Labour on the private sector, on private enterprise and on private companies in a number of sectors. Labour are clearly establishing themselves as the party of the public sector and of welfare. Milibands attempt to ingratiate himself with the ‘middle class’ is absurd. This is the most left wing Labour programme since the disastrous Wilson Callaghan govt of the 1970s. Tax and intervention at every turn. Hollande’s France provides us with an idea what it would be like.

    • JoeSoap
      Posted January 19, 2014 at 6:55 pm | Permalink

      You don’t think we already have tax and intervention at every turn?
      This policy of a tax on unused land is only effectively a windfall tax to recoup some of the subsidised gains to housebuilders from Help to Buy.
      Probably better if neither of these manipulations happened, but don’t criticise one without the other.

  16. Alan Wheatley
    Posted January 19, 2014 at 10:02 am | Permalink

    As house building, and the construction industry in general, is considered part of growth, on the face of it more construction could be though of as good for growth, and hence good for the country. But the problem I have with this is that there is a fixed landmass on which stuff can be built. And the more stuff is built the less room there is for everything else.

    Thus it makes no sense to take as read that construction is inherently good and the more of it the better.

    Which that means that population size is a key factor and must be part of all plans.

    • Max Dunbar
      Posted January 19, 2014 at 6:10 pm | Permalink

      Don’t worry. There is plenty of space for more people in Scotland apparently.
      Just send then up here as we have thousands of square miles that they can build on, and everything is going to be perfect when we achieve the longed for goal of freedom from the hated British Colonial yoke. There will be new towns springing up all over the Highlands teeming with New Scots and everyone is going to be happy – because that’s what our politicians tell us. In fact, we will be so grateful that the burghers of these new conurbations will erect tall statues to our dear leader, statues posed with magnanimous arms outstretched. We may even have statues here of the new Dear Leader of England after May next year, just to show solidarity with our brothers in England. And every town in Scotland will have a nice bronze sculpture of children dancing in a circle to make everyone cry with joy as they wander around the new city centres desperately raking through bins for scraps of food.

  17. Another John
    Posted January 19, 2014 at 10:31 am | Permalink

    We are already a densely populated country. And London (resulting from immigration and higher birth rates) and the South East are likely to take the brunt of the very large projected population increase over the next few years. My guess is that UKIP councillors will gain by making it clear that they oppose additional house building in the south east. This is because the majority do not want it and will support them. For the most part this is not NIMBYism. It’s a wish to pass on a better quality of life and environment to their children and future generations. We are all familiar with schoolbook economics. If the quantity of houses demanded exceeds supply, then price goes up. As price goes up people make the rational decision to move to cheaper areas (or even countries) or to share with their parents which is what we have to do as my children and grandchildren live with us as they can’t afford to buy yet. On the other hand – if you build more houses (increase supply) – you attract more people – whether immigrants, job seekers or those escaping from London and the big cities. We need to break the cycle – get off the wheel of constant growth and aim for genuine sustainability, quality of life and an increase of GDP/head (not economic growth and jobs based on expanding numbers). They don’t make land any more. With a rising world population we need to value and preserve the little we have. Our ability to feed ourselves long term is made much easier if we do this.

    • uanime5
      Posted January 21, 2014 at 1:47 am | Permalink

      As long as there’s more jobs in the south east and London than in other parts of the UK we’ll need to build more houses or the problems will get worse, not better.

      The UK will enter terminal decline if people are unable to work simply because there’s nowhere to live near these jobs.

  18. margaret brandreth-j
    Posted January 19, 2014 at 10:46 am | Permalink

    Mike this is my question . There are so many houses empty and cannot be sold; even the less expensive ones..why do we need more?

  19. oldtimer
    Posted January 19, 2014 at 10:49 am | Permalink

    I was unaware of the intricacies of the planning system – having done nothing more than a few alterations to my house that needed to comply with building regs. It sounds as though the recent calls for developers to be compelled to develop their land banks owe more to political opportunism and point scoring than a reasoned contribution to solve a pressing problem.

    I do not doubt that regulation is a barrier. Another barrier is the cost of moving house, notably the burden of stamp duty. I guessed it would cost us a minimum of £50,000 to move, taking into account stamp duty, fees, removal costs not to mention the hassle of down sizing. My son-in-law thought that was far too low and suggested I should double the number I first thought of. He is probably more right than I am. So we are staying put.

  20. Mark B
    Posted January 19, 2014 at 11:03 am | Permalink

    John Redwood MP sir,

    Its simply a question of, supply and demand. If demand is high, prices will rise and you will get speculators moving in to cash in. When demand is low, the speculators go elsewhere.

    You need to tackle the areas which create the demand and not seek to create schemes to artificially inflate and worsen the situation.

  21. Max Dunbar
    Posted January 19, 2014 at 11:04 am | Permalink

    One of the issues which you have not mentioned is quality. Most of these standard development houses are not built to last. There is much talk of sustainability, re-cycling and reducing waste and energy consumption but very little evidence that a long term view is ever considered. Many buildings nowadays probably have about the same lifespan as a car, especially commercial developments; architects freely admit this.

    In the Scottish countryside residential buildings are of very low quality. Mainly bungalows, they are built for cheapness and utility. Visually, they ruin the attractive landscape and blight the Scottish Highlands. Standards here need to be raised.

  22. Gary
    Posted January 19, 2014 at 11:24 am | Permalink

    You have to laugh.

    The govt bureaucrats cause rates to be rigged below market levels, they underwrite mortgages and cause an artificial, non market, DEMAND stampede into property and then say the problem is housing SUPPLY!!

    Govt and its servants are terminally useless.

  23. peter davies
    Posted January 19, 2014 at 11:28 am | Permalink

    Aside from the 5 year cycle and complex planning issues, most SME developers live on credit – meaning they have to fund entire building projects by borrowing meaning they have to A. Satisfy lending criteria and B. Ensure they can come out of the other end ok – which without turning this into an issue about banks etc is a greater reason why there has been a backlog.

    As with other issues, Labour are good at making weather in politics and the media – but the vast majority of what we see today are the direct result of their policies and stewardship when in govt.

    Do people really have short memories?

  24. Anonymous
    Posted January 19, 2014 at 11:48 am | Permalink

    Two minor issues with this:

    - Should we be trying to reduce the cost of housing at the time that our nation’s ability to borrow is based upon the value of our housing stock ?

    - 5 million extra people in 10 years. A commodity crisis brought on in a rush. It really isn’t the planning law that is flawed and mass migration – despite what you say – does not feature in your postings very much.

    It’s as though we can just pretend it hasn’t happened. We are where we are sort of thing.

    I’d agree that ignoring it is what we should do – if the figures weren’t still going up and it had been dealt with with the urgency that the public demanded.

  25. A.Sedgwick
    Posted January 19, 2014 at 1:25 pm | Permalink
    • Denis Cooper
      Posted January 19, 2014 at 6:27 pm | Permalink

      Interesting, thanks. Of course the flashing is even worse if the tree-free grassland is later replaced with concrete and asphalt.

  26. Neil craig
    Posted January 19, 2014 at 2:55 pm | Permalink

    Compared to the RPI house costs have increased 4 fold over the last century. There is no way this can be explained by the technology regressing so it must be 100% the fault of political regulation. Hence if “all parties” sincerely wanted to see more housing all that would be needed would be for them to get out of the way.

    As the Broad Group in China have proven it is possible to construct massive blocks of flats at about 1/4 current UK prices, literally, in days, using mass production techniques. In Britain it takes months, if not years, simply to get planning permission and prefabricated mass production is prevented because regulators prevent unchanged designs being used widely.

  27. Mike Wilson
    Posted January 19, 2014 at 3:40 pm | Permalink

    Time is money for the builder, and turning the land over quickly improves profits.

    Not always the case. In fact, in my 20 year experience in construction and housing, generally not the case.

    Competition for land for housing projects is always intense and many developers end up buying at a price where there is potentially no profit. They have come to rely on the inevitable upward increases to provide some profit.

    I have been on many sites where the first house sold for (for example) 100k and the last, perhaps 18 months later sells for 150k. No profit is made on the first house and 50k is made on the last. That is the way development generally works.

  28. Chris Rickard
    Posted January 19, 2014 at 4:13 pm | Permalink

    I think there are a number of flaws with this article.

    1. Increasing the number of new homes built will not bring down house prices. Builders are price takers not price setters. New build is c 5-10% of the total annual market in house sales. As such, all new homes are priced relative to existing housing stock in the area. House prices increasing or decreasing just affects how much builders are prepared to pay for land as all land purchases are discounted cash flows of individual sites. That is why, in builders jargon, land is referred to as “residuals”.

    2. Builders need certainty so they need sufficient land in the land bank with final planning permission to satisfy that years plan. Land is invariably bought with outline planning permission so it is necessary to have a sufficient landbank to ensure continuity of supply through the planning process. That is not 5 years, particularly now the NPPF appeals procedure is so heavily weighted in the builders favour.

    3. Builders develop sites as the market dictates. At the moment, most builders want a lot of small sites of c 50-100 plots so that they can trade in and out within 2-3 years and not have all their investment limited to one particular site. Allowing builders to sit on large sites, particularly with 1000 plots or more is encouraging the land hoarding you are keen to say is not taking place. These sites are seldom developed except by one builder except when the market is exceptionally buoyant. All builders currently have invested capital in such sites which is inefficient use of capital unless the Gov can be persuaded, as this one clearly is, that the industry problems lie elsewhere.

    4. Local authorities rarely if ever revoke planning permission for a site that has planning permission where development has not started within 3 years.

    The solution of getting balance between supply and demand in the housing market is for Governments not to act at the behest of the HBF and let housing market operate freely.

  29. lojolondon
    Posted January 19, 2014 at 4:21 pm | Permalink

    John, the big builders buy massive parcels of land where they anticipate planning permission could be granted. But they do not want to develop all the land at once, leading to housing oversupply and a drop in prices, what they do is develop slightly too slowly for the area, keeping demand and prices high, ‘fussiness’ low (people are desperate for a place so accept lower standards, and put up with errors they would otherwise contest).
    I think that the UK should encourage owner-builders as is done in every other country in the world, and councils should charge tax on undeveloped residential land as if it was developed, that would make a huge number of houses developed in a very short space of time, a drop in the price of housing, and many more people in their own homes. Of course, we will have to tell George Osborne that the GDP number will be affected if house prices come down, that may not be acceptable for any government in power.

    Reply My new point is that the government’s requirement to have a five year supply of land determines the rate of land hoarding. You would need to abolish that first before taxing people trying to comply with it!.

    • lojolondon
      Posted January 20, 2014 at 11:27 am | Permalink

      Good point, I stand corrected.

  30. Jennifer A
    Posted January 19, 2014 at 5:29 pm | Permalink

    I fail to see how we can have serious debate on this subject without mention of 5 million extra people – and rising – due to immigration.

    It is a little bit important with regard to available housing, you know.

    • Jennifer A
      Posted January 19, 2014 at 6:08 pm | Permalink

      So now even one of our most ‘conservative’ MPs is telling us how we might change good law to build over this ‘green and pleasant land’ whilst telling us to cast aside 5 million immigration from our thoughts.

      Reply Don’t be silly. I have analysed and discussed migration many times and most agree on this site it needs to be better controlled. This is a different question arising out of Mr Miliband and others wishing to curb land hoarding. I am simply pointing out that current planning law requires land hoarding!

  31. Excalibur
    Posted January 20, 2014 at 8:28 am | Permalink

    A belated post, but Boris Johnson has again struck the right note when he suggests in today’s Telegraph building on brown field sites. There are tens of thousands of these throughout England, not only in London. These coupled with the thousands of properties currently empty would go a long way to alleviating the housing crisis. But of course making these into suitable accommodation is not the easy option.

  32. Martin
    Posted January 20, 2014 at 12:19 pm | Permalink

    What would be helpful is if adequate transport links went with the housing.

    That way places like Wokingham might not have ended up with level crossings that can’t cope and roundabouts that should have been flyovers.

One Trackback

  1. By You what? | Tim Worstall on January 19, 2014 at 10:40 am

    […] I’m sorry? The reason we’ve a 5 year land bank is because the law insists we have a 5 year land bank? […]

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  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
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