Comment – ‘Use it or lose it’

No one is quite sure where the rumour about land hoarding started, but it was certainly fuelled by figures on unimplemented residential planning permissions published in a recent report by the Local Government Association*.

This research shows that the number of unbuilt housing commitments at 31 March 2013 stood at around 380,000 - equivalent to over three years’ supply at current build rates. Unsurprising in view of the long lead-in times needed to build new houses, but this figure has actually fallen by 24% since 2008.

What they didn’t say …
What the critics didn’t say was that this figure includes those plots already under construction.

If Britain isn’t building fast enough, there has to be a scapegoat. For the Labour Party - which is launching its independent Lyons Commission looking into the delivery of housing - the house builders and developers were an obvious target. With profits generally recovering, albeit from a very low ebb - and against the background of a more favourable economic and policy climate - paradoxically, some commentators seem to want to paint the private sector builders as the problem rather than the solution.

Building companies, after all, tend to see their land holdings as a symbol of success within their company results.

The key issue, though, is whether development land is genuinely ‘ready to go’, approved in outline or maybe just ‘under option’. The long journey between promotion and permission can often take between five and ten years and indeed may never come to fruition - that is the risk the developer takes.

Lost the plot?
So has the building industry lost the plot - so to speak? Are builders actually hoarding land? Given the huge costs of promoting land to a planning consent, what possible incentive would there be to sit on consented land and waste such a precious asset when the capital return can only ever be achieved once it is developed and sold?

Let’s look at the facts
The October 2013 LGA report shows that housing completions have actually risen by 17% over the last five years from 105,000 in 2008 to 124,000 in 2013, albeit still only half the level needed to maintain the current rate of household formation. Furthermore, the number of unimplemented planning consents in March 2013 was 24% down from the position in 2008 when there were almost 500,000 unimplemented plots and the number of unimplemented schemes were 26% down - so the unbuilt schemes are on the decrease.

More importantly, of those 380,000 so far unbuilt dwellings, over half (52%) were on sites already under construction. The clue to the problem is therefore both in the speed and efficiency of creating implementable planning consents and in the pace of development once consent is granted. Tellingly, each site takes an average of 12 months to start after planning consent is granted, and whilst in 2007/8 an average scheme took around 20 months to come to fruition, five years later in 2012/3 it took more than 27 months to complete a scheme in part reflecting the state of the market during that period. So what is causing the delays?

The fact is that house builders securing sites for development must overcome many hurdles before land is ready for building, ranging from securing funding, building infrastructure, discharging the many and varied pre-commencement conditions, reaching land deals (possibly overcoming ransoms) and negotiating the land price.

Quite how a ‘use it or lose it’ approach would speed up the system or help to hasten the delivery of more new homes is a mystery. Anyone who has experienced compulsory purchase procedures will know it is a slow process - and a change in ownership would not remove the normal legal, technical and administrative hurdles - it would just add to them.

Sadly a ‘use it or lose it’ policy wouldn’t help achieve a single extra home.

*An analysis of unimplemented planning permission for residential dwellings 2013. Local Government Association. October 2013.

For further information please contact:

John Acres
Director of Residential Business
0121 233 0902
[email protected]

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Use it or lose it December 2013