Land hoarding and speculation – some questions and answers!

Britain has enough land to solve the housing crisis – it’s just being hoarded – Oliver Wainwright in the Guardian

Developers are sitting on land without building anything, then selling it on for profit – a vicious cycle that can make it impossible to create affordable homes. What can be done to stop this speculative feeding frenzy? “Then once you’ve bought it, sit on it for a while, apply for planning permission, and sell it on for 10 times the price!” retort the land traders.

The same old characters are relentlessly held up as the arch villains of the housing crisis; from greedy developers to bureaucratic planners, to the armies of Nimbys. But it’s fair to say that, beyond these usual suspects, one of the fundamental causes for the current lack of affordable housing, and simultaneous glut of luxury developments, is the iniquity of the land trading industry.

If you get it right, land is one of the most lucrative commodities to be in. According to the Valuation Office, the average price of agricultural land in England is £21,000 per hectare, while land with planning permission for housing is around £6m per hectare. If you have the alchemical skills to transform one into the other, as water into wine, you’ve multiplied the value of your asset almost 300 times over – and at the same time reduced the chance of seeing remotely affordable housing being built on that land.

“The problem lies at the very roots of the development system,” says Pete Jefferys, policy manager at housing charity Shelter. “Land is traded several times over before it gets to the housebuilder, then the flats are marketed and sold off-plan, and sometimes sold again and again before they’re even built. You end up with this speculative feeding frenzy of spiralling values, years before there’s even a house on the site.”

Once a developer gets their hands on the land, they’re often not in any rush to build. A Guardian investigation on “land banking” in 2015 revealed that the UK’s biggest housebuilders are sitting on 600,000 plots of land with planning permission; that’s four times the total number of homes built last year. Berkeley, Barratt, Persimmon and Taylor Wimpey (the four biggest companies in the industry) accounted for more than 450,000 of the plots – while paying out more than £1.5bn to their shareholders.

There are problems with this approach.

For a start there is no reason for developers to build more houses. 600,000 plots is equal to 3.5 years supply. We dont really want developers to build houses which are not actually needed.

There is a problem with developers selling on to other developers making profits for no good reason. A change in the law perhaps to say that if a developer cannot develop a site, then they can transfer the land but not sell it at a higher price.

The writer appears not to appreciate that the end price for development land reflects its scarcity and also the end use. If land were too cheap then there would be the incentive to develop even more land.

To reduce the end price requires reducing demand, in essence cutting out demand for luxury properties, investment properties and holiday homes!


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