The reality, it seems, is a little different. In a BBC ‘reality check’ feature, they looked at whether there is evidence to suggest that developers are ‘land banking’ in order to drive the price up or increase profits. According to their data, roughly half of all planning applications that are granted are then enacted into building, which isn’t a great deal. However, they also add that there is little evidence to suggest that there is a significant benefit to land buyers in doing this.
As Dan Lewis, a senior infrastructure advisor at the Institute of Directors, said in conversation with the BBC: “The last thing you want to do if you are a housing company is develop all your land at once, because then you’ll go bankrupt.”
Lewis explains that the key to success in many development companies is to have a ‘pipeline’ of developments in order to sustain profitability and demand.
Another issue raised by Lewis is that there is currently a large number of planning applications that have been made but remain incomplete due to staffing and funding levels at local authority level. Many developers must then shift their resources around in order to maintain land that they know has been approved or will be approved shortly.
One person who feels he might have the solution to these problems is Liberal Democrat leader Sir Vince Cable, who recently spoke to the Royal Institute of British Architects in London. Cable proposed a government led agency which would purchase land without the need for approval solely for the purpose of building new houses.
Further to that, he also proposed new measures to allow developers to use land on green belt sites which have been protected.
“The aim would be to acquire sites at a price as low as 40% of land acquired in the open market without paying the ‘hope value’ which attaches to those sites currently earmarked as having development potential,” Cable said.
Whether the proposals would work in practice will be the subject of fierce debate, as there are concerns that if land owners know about government plans to essentially acquire the land by force that they’d seek to offload or avoid ownership altogether.
The facts don’t seem to support the view that developers either benefit from such a practice or even purposely enact it, so it would appear that talk of any such government body is more of a PR stunt than something to take seriously.
It does add to the debate regarding the purchasing of land, however, and how we might go about making that process easier and encourage quicker building of new homes. Certainly an obvious quick win would be to provide more funding to the planning departments of local councils, and it would also make sense to provide more government assistance to stimulate property development.
What we can probably say with some certainty is that a government based land buying agency, operating through force, isn’t a great idea.