Chamberlain Walker

New report on land banking for Barratt Developments

The topic of ‘land banking’ has become increasingly politicised as the housing crisis has worsened. Housebuilders stand accused of not building on the land for which they have planning permission and of not building out as quickly as they could. Critics point to bourgeoning planning permission numbers – well ahead of the building numbers – suggesting housebuilders are to blame for Britain’s housing shortage.

However, it is far too simplistic to say that ‘the permissions are there, the builders just aren’t doing their bit’. Our new report The Role of Land Pipelines in the UK Housebuilding Process, commissioned by Barratt Developments, presents new data for 2017 showing that housebuilders’ land banks are reasonable given a number of factors. To gain an appreciation of these requires a fuller understanding of what planning permissions are (and are not).

First, planning permissions are not always a green light to build and there are many different types, including ‘detailed’ and ‘outline’. Not all ‘detailed’ planning permissions are ‘implementable’ – for example, they often come with strings attached by planning authorities, notably ‘pre-commencement conditions’, or other non-planning requirements must be fulfilled before a single brick can be laid.

The data presented in the report imply that many detailed planning permissions are not implementable: at any one time builders have started to build 60% of their detailed planning permissions, suggesting hold-ups with the remaining 40%. The data also show a large number of ‘outline’ planning permissions, i.e. planning approval just in principle. Of a total 685,000 planning permissions on sites of 20 homes or more, 130,000 are just ‘outline’ approvals.

Second, not all land with planning permission is controlled (or owned) by builders. Much is controlled by public bodies, land promoters, and other businesses and individuals. Data presented in the report show less than half of all planning permissions are held by builders. ‘Non-builders’ control the majority (55%) of planning permissions overall and a massive 87% of ‘outline’ planning permissions.

These points go some way to explaining why not all planning permissions are being built out.

But how big do land banks need to be and what is reasonable? The size of a land bank depends mainly on the length of the ‘development pipeline’ which includes four phases: (A) pre-planning application; (B) planning application to planning permission; (C) planning permission to start on site; and (D) under construction (build out) to completion. These phases take time and so the pipeline is usually expressed in the number of years it takes to navigate land through them. Previous estimates suggested it took up to 3.2 years to navigate land through ‘post planning permission’ phases (C+D), i.e. the ones concerning outstanding planning permissions.

New data in the report, for 2017, indicates that ‘post-planning permission’ development timescales (C+D) have increased markedly in recent years. On sites of 20 homes or more it now takes 4.0 years on average from the grant of detailed planning permission to site completion, versus up to 3.2 years before.

The findings imply it is taking longer to deliver new housing in the ‘post-planning permission’ phases (C+D). This could be the result of (i) an increased burden of pre-commencement conditions (Phase C), amongst other things, and (ii) an increased reliance in England for housing delivery on ‘large sites’ that take longer to build out (Phase D).

Various other studies have shown larger sites take much longer to build out than smaller sites, suggesting the increased reliance on large sites for our nation’s housing delivery is an important policy failure. But this has been the case for several years.

An increasing burden of pre-commencement conditions could reflect another more recent policy failure: whereas planning reforms in recent years have focused almost entirely on speeding up planning decisions (Phase B) and hitting targets, this has led to problems further down the pipeline as under-pressure (and often under-resourced) planning departments have struggled to cope. In other words, policy makers should now shift their focus from phase B to C.

Reinforcing this, another worrying observation by the report is the huge number of planning permissions that never even make it to a building start – which again concerns mainly phase C. Official Government estimates are that 10% to 20% don’t make it to a start because they lapse (expire). A further 15% to 20% are re-engineered as a fresh application in a planning merry-go-round. This can happen when a house builder buys permissioned land off a land promoter and re-plans it, for example.

This goes some way to explaining why new planning permissions are higher than new builds. It also explains why ‘land banks’ need to be higher than the pipeline to allow for planning permissions that don’t make it through. Data in the report suggest – alongside a post planning permission pipeline now of 4 years – a post-planning permission land bank of 5.4 years.

These findings, which challenge the conventional wisdom, chime with those of Sir Mark Boleat’s recent report on the housing problem in London.

There are necessary business reasons for housebuilders to hold land banks. We can always ‘blame the builders’, but housebuilders do not operate in isolation from Government policy, local authorities, the planning system and the market. All need to do their bit, notwithstanding there are a lot of ‘non-builders’ in the equation too.

Our new report The Role of Land Pipelines in the UK Housebuilding Process, commissioned by Barratt Developments, can be downloaded here.

Selected media coverage:

Telegraph

Planning Portal

Planning Magazine

The Planner