Once again more than a little misleading from Shelter

Shelter tells us that all those nasty building companies are just buying land to sit on it. To watch it rise in value without their having to do any actual building of houses. Landbanking that is:

The UK’s 10 biggest house builders are sitting on 14 years’ worth of land, on which almost one million homes could potentially be built, Shelter has claimed.

Research carried out by the housing charity found that the listed firms control 404,000 plots through their current land banks, and a further 558,000 plots in so-called “strategic land banks”. 

Much of this land does not have planning permission yet, but will have been chosen in areas likely to gain it. Strategic land banks are not always owned by the house builders, but held with ‘Option Agreements’ with the landowner, which gives the builder the exclusive right to buy the land when they are ready to do so. 

So, it's not in fact 14 years of land at all.

There is a basic logic problem with he initial allegation of course, which is that a company needs income and income is gained here by actually building a house that someone then buys. There won't be any profits or dividends unless something is actually sold.

The number to look at properly here is that current land bank number. At the (total, not just these large companies) completion rate of perhaps 130,000 houses a year this is some four or five years supply of land with planning permission. And it can, and often does, take 5 years or so to be able to move land without planning permission into being land with planning permission. 

Yes, of curse, there are those 8 week targets for the council to decide and so on but that's absolutely not the actual time elapsed between asking whether some houses can be built on previously unbuilt land and being allowed to do so.

The stock of land therefore seems to be, around and about, sufficient to cover the time it takes to gain more land upon which to build. Just as if it takes a factory a week to gain more of a supply then it will tend to hold about a week's supply of that thing.

However, let us assume that landbanking is actually a thing. People really are holding land with planning permission off the market in order to speculate upon price rises. If this is so then what should we be doing about it?

Issuing more planning permissions of course. The increased supply will mean the speculation doesn't work and thus people will build not speculate. That is, the solution to our housing woes is, as it always is, simply to issue more planning permissions.  

 

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