factFiction4 FactCheck: How do we solve the housing crisis?The claim

“These figures conclusively prove that local authorities are overwhelmingly saying yes to new development and should finally lay to rest the myth that the lack of new homes being built is the fault of the planning system.”
Sir Merrick Cockell, chairman of the Local Government Association, 6 September 2012

The background

Nick Clegg and David Cameron presented a united front on housing today as they launched the latest bid to get Britain building again.

As we found in a FactCheck yesterday, the Prime Minister has been somewhat defensive about the lack of housebuilding going on, and stretching statistical accuracy to breaking point in the process.

The latest quarterly figures show a dip in housing starts in the second quarter of 2012 despite a string of government policies designed to galvanise the sector.

Both sides of the House of Commons agree that too few homes are being built and that a rash of new construction projects would boost GDP and employment. But there is bitter disagreement about how to get developers building again.

Government rhetoric has tended to focus on reducing the complexities of the planning system. The war against red tape led to the streamlined National Planning Policy Framework, with the message to local planning chiefs: “Development that is sustainable should go ahead, without delay”.

Mr Cameron repeated the “red tape” line again today, saying: “This government means business in delivering plans to help people build new homes and kick-start the economy. We’re determined to cut through the bureaucracy that holds us back. That starts with getting the planners off our backs.”

The Local Government Association (LGA), who represent local councils weighed into the fray in defence of local planning department.

The LGA said that housebuilders have amassed 400,000 plots of land, where planning permission has been granted but the work hasn’t begun.

Councils are doing their bit by giving the green light to ever-greater numbers of developments, but the builders are simply storing up vast banks of empty land. So the government is off-target by continuing to weaken the planning system. Or so the LGA’s argument goes.

The analysis

The Home Builders Federation (HBF), which represents most of Britain’s construction giants, told us there was nothing new or surprising about the existence of land banks, due to the nature of the construction industry.

This is a perspective that has been backed up by independent analysts. In 2008, as building starts crashed, the Office of Fair Trading specifically addressed the accusation of excessive land banking in this report.

We can’t improve on the OFT’s explanation of why developers always seek to build up an excess of land, the raw material of the industry.

“In order to maintain an ongoing build programme, homebuilders must ensure they have a development pipeline of land – a ‘land bank’.

“The timescales to build and sell homes, and also the uncertainties in planning outcome and timing, mean that most homebuilders hold a mix of land types at different stages in the planning process. Holding sufficient land for future years serves a practical purpose in acting as a buffer for the time lag from land acquisition through to starting work on site.”

Or as a spokesman for the Home Builders Federation put it: “If you’re a baker, you don’t use all your flour and have none left, because then you’re bakery will close.”

What would be suspicious is if land banks had suddenly begun to grow as a proportion in recent years, suggesting that the practice was becoming excessive and was not merely driven by normal economic cycles.

But this is not a scenario borne out by the LGA’s statistical analysis. In fact, its report shows that land banks have shrunk over the last five years.

While newspapers have led with the headline of “400,000 plots in reserve”, they have generally failed to mention that the number was 500,000 in 2007/08.

Of course, everything was bigger then – more planning permission granted, more land in reserve, more building projects completed – but the ratio of unimplemented units to completions has remained fairly static for the last five years.

Other analysis bears this out too. The Campaign to Protect Rural England has done a similar study on land banks. The methodology is different and so are the numbers, but the ratio between the number of plots held and completions has stayed broadly similar over 14 years.

06 landbank FactCheck: How do we solve the housing crisis?

What about councils “overwhelmingly saying yes to new development”? This is based on the fact that local authorities approved 87 per cent of planning applications in 2011/12.

This is indeed a record high, as the LGA says, but not by much. Last year the proportion was 86 per cent, exactly the same figure as 2002/2003. Councils have been rubber-stamping eighty-something per cent of applications for years and slight changes are unlikely to be statistically significant.

The increase could easily reflect builders concentrating on applications that are more likely to get past the planners rather than zeal for growth on the part of local councils.

The verdict

We’re not sure that these figures mean what the LGA wants them to mean, although it doesn’t automatically follow that the government is right to blame all its woes on the planning system either.

There’s nothing new or unusual about the existence of land banks, and the fact that there are plots ready to be built on but standing empty may well be a simple matter of economics.

It’s interesting to note that the LGA and HBF, despite their very different agendas, agree that the fundamental root of the housing crisis is lack of demand caused by banks refusing to lend to sufficient numbers of aspiring homeowners.

You might expect the voice of the housebuilding industry to be lobbying hard for more planning policy relaxation, but the federation told us that further reform is pretty far down on its list of priorities.

A spokesman said: “Nothing else is going to work unless you sort out affordable mortgages. That is the be-all and end-all.”

Only one of the eight measures announced by Cameron and Clegg this morning was about lending – a £280m extension of the FirstBuy scheme, which offers an interest free loan to first time buyers.

By Patrick Worrall

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