The Telegraph recently ran a piece looking at the accusation that developers deliberately restrict the supply of new homes to keep prices high. The main argument pointed to the fact planning is now in place for 750,000 homes across the country, and that have yet to start. However, as we know due to the irregularities and huge uncertainty that surrounds applications and the process of getting them through the system, developers need a five year land bank.
With a country wide target of 250,000 new homes being built every year, the actual land bank to operate efficiently would be closer to 1.25 million. Incidentally a multiple of five on the number of homes currently being built each year (150,000) equals 750,000, so it would be quite harsh to say developers are holding homes back. If they had a bigger pipeline, they’ll most likely be building more.
In really simple terms, a newsagent will always stock way too many chocolate bars than what it would sell, as they won’t want to be in a position where they run out and can’t sell any. It’s exactly the same with housing and planning consents. A developer with no land and no consents that they can ‘bank’ on in years to come, is simply not a developer at all.
So then, with that in mind, let’s take a look at London’s numbers.
As you can see the combined planning consents across all London boroughs has been trending well over the past decade, with it growing pretty much, year on year. The year-end figures in 2015 now mean that close to 250,000 homes have planning consent, but have yet to start. Also, with a target of 50,000 new home completions every year, that holy grail of a 5 year land bank looks to be in place.
What’s even more intriguing is the breakdown of the pipeline.
This graph looks at the split between private and social consents, on the left axis, with the total combined (the grey line, on the right axis). As can be seen, the social/affordable units in a state of ‘consented, but yet to start’ remains fairly similar and hasn’t really grown at all since 2009. On the contrary, the private pipeline in the same amount of time has nearly doubled.
So now planning is not at fault, what is? Well as Tony Pidgely of Berkeley Homes quite rightly pointed out this week (EGi News) it’s transaction taxes which are having a negative effect. Get that right, diversify tenure split, with more PRS/Build to Rent stock, and split large sites up with a greater pool of developers, all of which will accelerate delivery, and London might just get nearer to that 50,000 new homes per annum.