The practise of land banking has recently been the subject of great discussion, with prominent politicians criticising it.
Earlier this week, in his 2020 Vision document, Boris Johnson set out plans to do more to combat land banking and stalled developments, while last month Ed Miliband, the Labour leader, announced potential plans to give councils more powers to penalise firms that do not proceed with building projects, despite having planning permission.
Milliband feels that corporations are “sitting on land” as it acquires value, and that they should “use it or lose it”. He also suggested that the dearth of house building cannot be put on local councils, with planning approval previously granted for over 400,000 dwellings across the country.
If a council wants to reclaim land that has been banked, Miliband says it should be given “compulsory purchase” rights.
The administration denied the suggestion, arguing rules that are already in place encourage builders to start construction.
Councils do not have to renew most conventional planning permits after three years, according to Minister of Planning Nick Boles. Confiscating any property from development will not help build a single house.”
We’re already encouraging developers to build 170,000 new affordable homes for hardworking people through our Getting Britain Building scheme, freeing development on delayed sites and renegotiating planning permission for places that weren’t previously commercially viable,” said Mr. Hammond.
Developers and homebuilders reacted angrily to Milliband’s proposal to penalise “land bankers,” arguing that the focus should be on incentivizing construction projects rather than penalising those that have stagnated.
Developers have a responsibility that extends beyond simply developing new homes, even if Milliband’s approach may work in theory. They must assess the sale value of the land and the economic benefit that will be acquired by the area as a whole from the regeneration.
To quote Assad Maqbool, a lawyer at law firm Trowers & Hamlins: “Commercial developers have a duty to their investors and shareholders to make decisions based on their own commercial interests — and do not have the same responsibility as the government to resolve housing shortages.”
“As soon as it is in a developer’s commercial interest to develop land, they will do so,” he adds.
The author also says “public sector bodies” should consider engaging into development agreements with private developers on terms that are “commercially viable for the developer” going ahead, if they possess land that can be developed.
But, while land banking in the broad sense entails projects being postponed, land banking investment schemes can involve the deliberate sale and purchase of land which is notoriously difficult to acquire planning permission on, such as green belt area or conservation sites.
Just this week, five directors – who between them controlled three land banking firms that raked in over £7m from roughly 80 investors – have been barred from being company directors for a total of 53 years.
Sites in greenbelts, conservation areas, flood plains, landscape protection zones, and land near to spectacular natural areas were among the options available from the firms. Planning authorization was never going to be granted for any of these sites due to their unique characteristics.
Many of the plots were sold to investors for more than ten times their original purchase price, despite being sold within a few months after purchase.
While this is an extreme example of land banking and much different to developers waiting on land till it improves in value, many believe that the practise is eventually contributing to the nation’s housing shortfall. And this comes at a time when it’s being said that the UK needs an extra 250,000 homes a year to help tackle the current housing crisis.
But, as Town and Country Planning Association chief executive Kate Henderson points out, we can’t deal with the magnitude of the housing crisis plot by plot.
In terms of future housing, “we need cross-party consensus,” she argues.
“Times are hugely uncertain, it’s really difficult to plan but it’s crucial to the future of communities. We need vision and to evaluate how we ensure growth and regeneration in the sector.”
As a result, while Miliband and Johnson are making progress, it is evident that a more coordinated and thoughtful strategy is required.
For a better coordinated strategy to addressing the housing problem and economic woes in the United States, policymakers and developers must collaborate from the outset to the end to build more homes that are both economically feasible and purpose-built.