The Adam Smith Institute (ASI) has clashed with housing charity Shelter over the contentious issue of landbanking.
The economic think tank questioned research by Shelter’s policy unit that found the UK’s ten biggest house builders are sitting on up to 14 years’ worth of land that could be used for homes.
Research by the charity found that builders own 404,000 plots through their current land banks, and a further 558,000 plots in so-called “strategic land banks”.
Pete Jefferys, policy manager at Shelter, wrote in a blog: “Like any business, developers need to have a steady and predictable supply of raw materials to feed into their business. Land is the most critical raw ingredient for house building and so it does make sense for developers to have a forward pipeline of sites with planning permission ready to go.
“But we could still question the amount of ‘current land’ that is required to be held in a land bank. Do developers really need to be holding land with planning permission which is 5 or more years away from being built on? It is very unlikely that they have contracts that far in advance for their other materials or for their contractors.”
But responding to the research, Tim Worstall, a senior fellow at the Adam Smith Institute, said: “There is a basic logic problem with the initial allegation, of course, which is that a company needs income and income is gained here by actually building a house that someone then buys. There won’t be any profits or dividends unless something is actually sold.
“The number to look at properly here is that current land bank number. At the (total, not just these large companies) completion rate of perhaps 130,000 houses a year this is some four or five years supply of land with planning permission. And it can, and often does, take five years or so to be able to move land without planning permission into being land with planning permission.”
He said the stock of land seems to be “around and about” sufficient to cover the time it takes to gain more land upon which to build.
Worstall added: “Let us assume that landbanking is actually a thing. People really are holding land with planning permission off the market in order to speculate upon price rises. If this is so, then what should we be doing about it?
“Issuing more planning permissions, of course. The increased supply will mean the speculation doesn’t work and thus people will build not speculate. That is, the solution to our housing woes is, as it always is, simply to issue more planning permissions.”
Jefferys hit back on Twitter, accusing the ASI of not reading his blog properly. He said: “We are not saying that developers buy land to sit on it and watch prices rise. Saying that land banks are symptom, not cause.”
— Pete Jefferys (@PeteJefferys) December 20, 2016