The revelation earlier this week that house-builders are sitting on nearly half a million unbuilt housing units has caused quite a reaction across the industry.
We reported earlier this week that a survey on behalf of the Local Government Association (LGA) indicated that there were 475,647 new homes with planning permission on which construction had not yet started. [See previous report here.]
The LGA used the data to rebut suggestions that cuts and inefficiencies in council planning departments presented an obstacle to house-builders. It suggested that developers should be made to pay council tax on undeveloped permitted sites, to make them get a move on.
The Home Builders Federation dismissed all of the LGA’s complaints, saying: “As has been proved time and time again, house builders do not landbank in terms of delaying start on site once they have an ‘implementable’ planning permission. The vast majority of the 475,647 homes quoted by the LGA are either on sites where work has already started, or where there is not a fully ‘implementable’ permission and where it is not legal for builders to commence construction.
“Speeding up the rate at which permissions are granted – i.e. the move from ‘granted’ to ‘implementable’- is one of the keys to significant, sustainable increases in house building. Too many sites are stuck in the planning system, with an estimated 150,000 plots awaiting full sign off by local authorities.
“HBF’s most recent survey, based on 2,800 sites, owned by 23 of the largest house builders, and covering 220,000 plots, found only 4% of plots were on viable sites, with an implementable permission, awaiting construction start on site.
“Contrary to frequent assertion, it is not in the financial interest of house builders to sit on permissioned, paid-for land as doing so would have a detrimental impact on the company’s finances by diluting the return on capital, a key City measure of financial success.
“The industry increased house building by 22% in the last financial year, and it has boosted housing numbers by 33% since the trough in 2010-11. The data do not suggest output is being held back by landbanking.”
The Federation of Master Builders (FMB) said that the LGA’s suggestion of charging council tax on unbuilt developments could actually lead to fewer new homes being built.
FMB chief executive Brian Berry said: “The imposition of council tax on unbuilt homes could increase the risks of bringing forward new developments by small house builders. The measure could deliver the opposite of what it hopes to achieve by reducing the number of smaller housing developments. SMEs already face serious challenges in terms of access to finance and scarcity of small sites. For small house builders to be liable for council tax on properties which can’t be built would add yet another layer of risk and act as a further deterrent to smaller developers. It is already commonplace for local authorities to start charging council tax on homes that are incomplete – sometimes before even the basics, such as plastering, have been finished. It seems there’s now a danger of council tax being charged if you do build and also charged if you can’t build. That can’t be right.”
However, trades unions had a rather different reaction, seeing all property developers as greedy fat cat Tories.
Construction union Ucatt said that property developers should be forced to pay a surcharge for land, once they have acquired it, to prevent landbanking.
Ucatt acting general secretary Brian Rye said: “It’s a familiar story, one which this union faces on a daily basis – Tory supporting property and construction companies allowed carte blanche to do whatever they like. The chancellor makes all sorts of fatuous comments about building more houses in Britain and yet he won’t address the real issues.”
Mr Rye added: “Following the results of this research we must ramp up the pressure on this Tory government to solve the housing problem and make property developers build – or they lose their planning permission. It should not be a difficult nut to crack, unless, of course, like this Tory government, you have another agenda of keeping property prices high and looking after your mates.”