Developers have been made the whipping boy for alleged land banking
Leading land agent Aston Mead has questioned new recommendations to penalise developers who fail to build new homes on sites they have acquired, despite having been given planning permission.
The suggestions have been made in a wide-ranging report on the government's proposed planning changes, published by the Housing, Communities and Local Government (HCLG) Committee.
The report urges the government to ‘set a limit of 18 months following discharge of planning conditions for work to commence on site’, after which permission ‘may be revoked’. Following a further 18 months for development to be completed, the local authority ‘should be able to levy full council tax for each housing unit which has not been completed’.
Aston Mead Land & Planning Director Adam Hesse said: “Firstly, the idea of charging council tax on uncompleted homes is a complete non-starter. Any barrister worth their salt working on behalf of a developer would be able to point out that this would be charging for services – like maintaining roads, collecting bins, and cleaning streets – which were not yet being provided. They would have to create a new levy instead, but it wouldn’t be council tax!
“Secondly, all of this presupposes that developers are deliberately sitting on land they’ve acquired and doing nothing with it – or what has become known as ‘land banking’. But to be honest, we are at a loss to see where these claims are coming from.
“As land agents for the past twenty years, we’ve been working day in, day out, with people who buy and sell land. That’s what we do. And I can honestly say that for every single site that we’ve sold in that time, I don’t know any company which hasn’t built out as quickly as possible.”
An investigation into land banking in the housing industry conducted by Sir Oliver Letwin under Theresa May’s government and published as recently as 2018 concluded that it was not an important factor in slow build rates.
Adam Hesse says the perception that developers are land banking demonstrates a fundamental misunderstanding about how housebuilders run their businesses.
He explains: “Housebuilders’ profits are generated from selling homes, not from an increase in the value of land they own. The idea that they spend their time acting like financial investors, speculating over future land values is a myth.
“If anything, it’s the absorption rate which is slowing delivery; most housebuilders simply build out sites at the pace demanded by local market conditions. Admittedly, they could help themselves by producing a wider variety of homes in each development, differing in size, design and setting, to increase the appeal to a range of markets. That could accelerate built out rates substantially.
“But the truth is that developers have been used as the whipping boy for the slow pace of development, when actually it’s the planning system which is at fault. One minute it’s Nimbys protesting about development, the next it’s MPs saying you’re not building fast enough!
“So rather than beating developers with a stick, time and money would be better spent on making sure planning departments were fully funded, to enable permissions to be given more quickly. That’s the only way we’ll get to building the target figure of 300,000 homes per year the government are demanding.”