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August 07, 2007

Neal Lawson on Housing

Yes, yes, it's all those evil bloody builders, wouldn't you know:

But it is also an example of market failure. The private sector has born most of the responsibility for building new housing stock since the introduction of right to buy and the end of new council housing in the 1980s. The market has failed to match supply with demand. The reasons are complex, much of it to do with the hoarding of land banks.

It would be interesting to see some evidence of this hoarding of land banks. You know, that they are held for longer than they were in the past? Any and every business needs to plan for its future production, after all. So, how long does it take to go from virgin land with no planninng permission at all to being able to break ground on a project? Is that period of time longer or shorter than the period of time that builders hold on to their land banks? Add in a little for a safety margin as well perhaps?

OK, from what I understand land banks are some 5 years worth of building land (no source, hearsay) and that hasn't changed much over the decades. I've no idea what the time to get planning permission is but I wouldn't be surprised at all to find that it is some low digit number of years: two or three perhaps, what with possible appeals and the general sluggishness of the planning bureaucracy.

So, anyone actually know these numbers?

And if the above is even roughly right then we're back to what is causing the high cost of homes in England: the planning system itself. The difference in value between a field and a field with planning permission is vast and in the South, certainly, is more than 50% of the value of a house. (You can build a house for £100,000, fields are £8 k a hectare, you can't buy a house with garden in the South for less than £200,000.) Thus the problem is in the planning system: we need to have more land being built on.

August 7, 2007 in Idiotarians | Permalink


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If I were a farmer I'd want to get the most for the land and have it evolve organically, so I'd ask for planning permission directly then sell off the land in small plots to private builders and small specs, not some monolithic tikky-tac housebuilder.

I am sure some arrangement can be made with the council regarding the creation of roads and utilities.

Posted by: Roger Thornhill | Aug 7, 2007 9:46:17 AM

This is a job for Land-Value-Tax-Man.

Posted by: Mark Wadsworth | Aug 7, 2007 9:54:40 AM

"sell off the land in small plots to private builders and small specs": yeah, and that way you avoid the dreaded "affordable housing".

Posted by: dearieme | Aug 7, 2007 12:09:45 PM

'the dreaded "affordable housing"'

Only dreaded by idiots.

Posted by: Jim | Aug 7, 2007 4:49:43 PM

I seriously doubt there is much land banking going on at all, for the simple reason that most developers will have bought the land with credit rather than cash and so need to turn it around quickly in order to maximise their profit. The councils are always unresponsive in whatever they do and have absolutely no reason not to process planning applications quickly. In some cases they will have a definite incentive to process it slowly if it could be politically inconvenient.

Posted by: chris | Aug 7, 2007 6:27:10 PM