Debunking the Land Banking Myth

Land banking is the idea that developers and builders are ‘hoarding’ land in order to profit from potential market value increases. Selling this on once the value has increased, rather than building according to the planning permission permitted. This theory is used regularly by government and local authorities to criticize land developers and home builders for the prevention of new homes being built across England. Critics argue that this holds the government back from achieving the goals set out to tackle the housing crisis across the country. 

Aiming to debunk the myth, those within the land development and house building industry argue the government ignores key issues within the planning system which make the development process much longer than it should be. Rosconn Strategic Land, has taken a closer look at the recent report, ‘Tracking Progress’ by Lichfields – helping to debunk the land banking myth.  

Lichfields commissioned by LPDF and HBF 

Lots of research and debate from within the industry finds evidence that shows land banking is not prevalent. Although this is not to say it doesn’t happen, it should not be considered a major factor in why enough homes are not being built across the country. 

The recent report by Lichfields, commissioned by the Land Promoters and Developers Federation (LPDF), alongside the Home Builders Federation (HBF) highlights this. Debunking the myth that land banking is to blame for the prevention of new homes being built across the country. Addressing issues within the planning system. Whilst highlighting flaws contained within the Local Government Association’s (LGA) annual reports, which often support the land banking myth. 

The Lichfields Report – ‘Tracking Progress’ 

The report by Lichfields has taken a ‘deep dive’ into the process after planning permission is granted. Reviewing data from acorss five case study local planning authorities over a five-year period. The local authorities were Central Bedfordshire, London Borough of Wandsworth, Cheshire East, Colchester, and Stratford-on-Avon. 

The report has been able to highlight the challenges, the lengthy planning and development processes raise for developers. Detailing how this process can often take a long time, progressing a development site through the various regulatory stages of the system. Which Lichfields suggest can be used to explain the gap between developers being granted planning permission and homes being built. 

From this research, Lichfields were also able to calculate that after five years since a site is granted permission, one might expect a variety of outcomes, including: 

  • 3% to 5% of homes granted permission will lapse or stall;
  • 10% to 15% of homes granted permission will be superseded at a later date by a fresh permission (and not necessarily harming the pace of delivery);
  • 35% to 50% of homes granted permission will have been delivered;
  • 35% to 50% of homes granted permission will remain extant but on sites delivering on a phased basis beyond five years.

The ‘Tracking Progress’ report also found key issues within the annual research carried out by Local Government Association (LGA). Finding the LGA to be double counting the number of development sites they believe are granted planning permission and are yet to reach the final development stages. The figure the LGA give is 1.1m (in their latest report May 21). However, Lichfields uncovered, sites which have multiple planning permissions are being double counted. A developer or builder may need to make several re-submissions before taking their site to the final development stages. Hence why this figure can not be used to criticise developers for supposedly ‘hoarding’ land. 

Regional Differences 

On top of these findings, Lichfields also discovered major differences between regions in England. Finding planning permission is much easier to access in certain regions, compared to others. Also stating that areas where planning permission is more frequently granted, people don’t consider these popular areas to live. In the South East region, in particular, the report found the local authorities do not have deliverable local plans and present the biggest gap between homes with planning permissions and the number required by the government for this area. They also face the pressures of affordability. Causing big concerns for this region being able to achieve local goals for house building and contributing to the government’s overall goal of 300,000 net additional new homes per annum in England. 

A response from HBF and LPDF 

Andrew Whitaker, planning director at the HBF said: “This myth that house builders land bank has been dismissed by a growing number of independent reviews. As this latest research demonstrates, aggregating numbers of outstanding planning permissions misses the ‘story’ behind each and every site that comes forward for development…”

“…Planning system issues remain the biggest barrier to the industry delivering desperately needed homes and the Government’s housing ambitions…” 

Paul Brocklehurst, chairman of the LPDF, said: “This research highlights the gross over-simplification in the analysis by the Local Government Association frequently quoted in the national press and by many politicians regarding the ‘stock’ of unimplemented consents. Building on Lichfields initial Taking Stock report this latest analysis further highlights the desperate need for there to be an increase in planning consents in the short term if we are to achieve the Government’s target of building 300,000 new homes per annum…”. 

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.