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Monday, 16 December 2013

Miliband's 2020 vision. Should have gone to SpecSavers.

Labour leader Ed Miliband isn’t half gearing up for a fight with corporate Britain, should he gain the keys to Number 10 at the next election. First he tells the big energy companies that Labour will freeze electricity prices; now he’s threatening to get heavy with recalcitrant councils that block planning consents and builders that are too sluggish in churning out homes when they get them.

A Labour government would have 200,000 homes a year built in England by 2020 (against 99,440 starts in 2012, 79,270 of them private). In media leak of a sabre-rattling speech today he is reported to be threatening “stick in the mud” councils that oppose more development-friendly neighbours and housebuilders with “use it or lose it” sanctions if they “sit” on their landbanks. (For dramatic effect he was scripted to have a pop at the four largest builders, Barratt, Taylor Wimpey, Persimmon and Berkeley for allowing their profits to go “through the roof”, to the tune of 557% since the Coalition took office.)

Like many other politicians before him, however, Miliband appears to be suffering from restricted vision when it comes to developers’ land banks. Whether or not housebuilders are sitting on empty sites that are fully “good to go” is one issue; how fast they go at it once they actually start is quite another. Trying to speed up either threatens to turn housing sites into legal minefields.

To cloud matters, the definition of what comprises a land bank is extremely hazy. It can include anything from pasture that is a glint in Farmer Giles’ eye, sitting as a forlorn option in a developer’s strategic portfolio, to a fully owned and paid for site with detailed planning permission.  As nebulous are the terms of ownership, should planning consent be granted. Depending on the wording of contracts, a builder may have more compunction to buy land that is “under option” than a site that carries a “conditional contract”, in which a smart developer can wriggle out of if the market turns against it. (Tales of the latter occurring were legion in the depths of the recession).

Trying to judge whether a specific site has had the full green light and making the builder start on it rather than extricating themselves from the option/contract should keep many a lawyer gainfully employed.

What Miliband and the other opponents of “hoarding” don’t appear to have considered is the speed that developers actually build and sell houses when they are actually on site. Builders come in many shapes and sizes, but for the volume players, the rule of thumb for most of the life of big sites has usually been that something between half and one unit sold per site per week works out most profitably: any less and the site becomes an expensive overhead; any more and, blast, you’re undermining your pricing power and margin.

Now, try and recruit an army of site watchers with diaries and tick lists Mr Miliband …

The housebuilders are building more houses, but, despite the swathes of government backing being channelled their way, they appear to have little appetite to return to the 160,000 private starts in 2007.

If Labour wants to really boost housing starts it will have to consider more radical approaches including making “build-to-rent” more feasible, more funding for social housing and, heaven forbid, a return to mass council house building. But there’s only so far the volume housebuilders will go, voluntarily or otherwise.

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