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Landbanking: Why the controversy?

The topic of landbanking has become a political hot potato in recent years – but what is the truth behind it and how will the government act?

The Oxford English Dictionary defines a ‘landbank’ as “a large area of land held by a public or private organisation for future development or disposal”. 

So far, so uncontroversial.

However, as it looks increasingly likely that the government’s target of one million new homes by 2020 will be missed, the word ‘landbanking’ has become politically charged.

It is now frequently used as a verbal jab towards the housebuilding industry for not building fast enough. As the rhetoric is ratcheted up in anticipation of the housing white paper, the government and housebuilders look set to collide.

In its broadest sense, landbanking is simply preventing land from being brought forward for development. However, it is also used to describe a more deliberate practice of constraining supply in order to drive up demand and prices.

Supply strangled?

That constrained supply includes land that has the benefit of planning permission but where ground is yet to be broken. Clearly, the government has these sites firmly in its sights. Communities secretary Sajid Javid has made housing his top priority. He has also personalised landbanking as only a politician can, ordering big developers to “release their stranglehold on supply”.

And he has accused them of “not building homes they have permission for so that they can push up demand and prices… hoarding land rather than prioritising building… it has to stop, or be stopped”.

“Communities secretary Sajid Javid has personalised landbanking as only a politician can”

Yet the Home Builders Federation has called landbanking a myth, pointing to a range of other factors that can contribute to slow delivery. There is certainly some truth there. No two sites are ever the same and not all planning permissions are created equal – some are ‘oven-ready’, while others need fine-tuning to ensure the development they authorise is deliverable.

The reality

Historically, fingers were pointed at the planning system – it was too slow, too bureaucratic and too complicated. That led to a raft of planning reforms aimed at speeding up the process.

Most recently, the Housing and Planning Act 2016 introduced potentially radical housing-led measures, including a new ‘planning permission in principle’, disapplying / modifying planning provisions to facilitate greater housing and bringing housing within the scope of the development consent order regime.

Alongside these future changes, we have seen further relaxations to the permitted development regime to facilitate greater housing delivery.

If, as is now the case, the planning system is delivering more planning permissions for housing, why is there still a glaring gap in delivery?

“Greater clarity is expected when the white paper lands and it remains to be seen whether the proposals are genuinely as hard-hitting and radical as some have predicted”

It is said that planning permission exists for 476,000 homes that remain unbuilt. How much of the housing gap is down to housebuilders landbanking?

At one level, there is a mismatch between expectation and reality. In many cases, submitting a planning application is just the beginning of a long and torturous journey. There are several complex and interlinked factors which affect delivery rates both before and after obtaining consent, including:

  • Complex site assembly requirements, particularly with sites in multiple ownership;
  • Discharging pre-commencement conditions;
  • Negotiating complex section 106 agreements and highways agreements;
  • Overcoming construction challenges on site, including skills gaps and materials shortages;
  • Resourcing issues and varying approaches between local planning authorities.

Some of these factors are already being addressed, while others continue to cause delays in practice.

For example, the Neighbourhood Planning Bill attacks the use of “overly restrictive and unnecessary” planning conditions. It suggests the imposition of pre-commencement conditions would be contingent on the applicant’s advance agreement in writing. Similarly, the Housing and Planning Act looks to usher in a new dispute resolution procedure intended to speed up section 106 negotiations where progress has stalled.

On the other hand, inadequate resourcing of council planning departments remains a source of frustration for those negotiating on both sides of the table.

What lies ahead?

It seems likely that something will be done to tackle the perceived problem of landbanking, although the detail is still awaited in the delayed housing white paper. The talk to date has been of carrots and sticks, with possible ideas leaked to gauge industry reaction, including:

  • Penalising developers for slow build-out rates;
  • Taking into account a developer’s previous track record for delivery when determining a planning application;
  • Attaching specific timeframes to the building out of consents, possibly with the agreement of the local planning authority.

Arguably with the exception of the last suggestion, these ideas are inherently fraught with difficulty. They would be hard to draft and even harder to implement.

Greater clarity is expected when the white paper finally lands and it remains to be seen whether the proposals contained within it are genuinely as hard-hitting and radical as some have predicted.

Jamie McKie is a senior associate at Dentons

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