Writing for this site last month, Damien Green, one of the MPs who helped frighten Michael Gove off even de minimis planning reform (for the sake of passing which, remember, the Government had supposedly sacrificed Robert Jenrick’s full-fat version), wrote the following:
“It’s much more profitable to build up an increasingly valuable land bank than to flood the local market with new homes in a short space of time. So permission should be time-limited or become increasingly and painfully expensive over time if the option to build is not exercised.”
Similar claims are made by pretty much everyone who believes that the solution to the housing crisis does not involve building lots (and lots, and lots) of new housing. The problem isn’t the planning system, nor NIMBYs exploiting it to block much-needed development, oh no. It’s dastardly developers, clogging up the system by hoarding land!
The reach of this conspiracy theory – and that’s what it is – is worryingly broad in Conservative circles. Indeed, during the leadership campaign Rishi Sunak himself indulged it, when he outlined a plan to bring in a use-it-or-lose-it rule for developers with planning permission.
As I explained at the time, this would very likely have been entirely counterproductive, causing housebuilders to play it safe and cluster around those sites which are easiest to develop, rather than take a chance on a more challenging location which could see them lose it altogether if, for entirely practical reasons, construction could not proceed as originally envisioned.
There are also perfectly sound reasons why developers might seek to have more plots on their books than they can actively develop at any one time.
Housebuilders, especially smaller ones (of which the UK has, by no coincidence, relatively few), need a steady supply of work. Under the present arrangements, planning permission is very expensive, time-consuming, and difficult to get, and the discretionary system means there is no certainty that any project won’t get called in and spiked for political reasons.
Therefore, as the Centre for Cities explains here, the only way for a developer to be sure that they have another project to go to once they complete their current one is to have an envelope of permissions on the books.
Given that, any policy aiming to force developers to use all their permissions would backfire, and badly. In the short term, there would be a labour and materials shortage as the industry was brute-forced into trying to increase output. Then, if they overcame that, there would come a crash, as the planning system – which, remember, Tory backbenchers are trying to make even stickier – failed to produce adequate new permissions to sustain the industry.
Moreover, the actual data does not suggest that land-banking is occurring at any sort of scale in any event. Lichfield’s, the planning and development consultancy, has produced several reports which look much more closely at the detail than do the conspiracists. What did they find?
In Stock and Flow (2017), they explain how the economics simply don’t stack up: “housebuilders are already incentivised to increase their earnings i.e. build and sell homes as quickly as possible”, whilst the the value of land seldom rises fast enough to make speculation on it, rather than building and selling for a guaranteed return, worthwhile.
They also explain why construction starts so often lag behind new permissions, namely that construction at large sites often has a long lead-in time and will be built out gradually, even though the entire site may receive permission in one go. This point is reinforced by Tracking Progress (2021), in which they look at five local authority case studies and find that:
“The research shows that – based on the five case studies – when looking at the number of units granted any type of permission (both full and outline), after five years, only a small percentage (3-5 per cent) have actually lapsed, with the vast majority of homes either having been built (35-50 per cent) and a similar proportion on larger sites that are being built out but being delivered on a phased basis beyond the initial five year period. A sizeable proportion – 10-15 per cent – required a fresh planning permission to address amendments to the scheme.”
And as ever, throwing around national figures for things such as planning permissions is just a way of trying to evade the fact that the problem is most acute in certain parts of the country (often parts with Conservative MPs who really want the homes built somewhere, anywhere, else). From Taking Stock (2021):
“Two-thirds of HMAs with a shortage of permissions (including London, as a single HMA) are in the south of England and over 80 per cent have a median workplace affordability ratio that is higher than 7.0. This tends to suggest that the areas with the greatest shortfall in permissions are the areas where housing need pressures are greatest.”
If four reports isn’t enough, you can also listen to the case against land-banking in this podcast. Or read Anthony Breach’s recent article for us. But however you choose to take the evidence, the comforting conspiracy theory about wicked speculators fouling up the system does not survive contact with it.
The politically-inconvenient truth is that solving the housing crisis means building millions of new homes, and building them in the parts of the country where demand is highest. That needs to happen whether or not the individual communities affected – or rather the asset- and time-rich minority who have time to engage endlessly with the planning process – want it to.
This is partly because the Conservatives have a responsibility to take on the so-called local patriots, for whom a community exists only for the benefit of its current residents, on behalf of the not-yet-propertied. But it’s also just a fact that many NIMBYs aren’t even serving their community’s long-term interests even as they perceive them – hence the absurdity of a village, having priced out young families by blocking construction, campaigning to save a school with no children.
It would be nice if we lived in a world where the UK’s problems could be explained by the plotting of pantomime villains, rather than deep-rooted structural problems and the long-standing political preferences of a dominant section of the electorate. But we don’t.