Property Developers Forced to Build and Not Hold Land as an Asset
The Prime Minister has been calling out to developers who profit from building expensive properties and those who profit by not building at all. She is calling on the developers to “do their duty for Britain” and build more affordable homes rather than sitting on their land as an asset.
There is a large gap between planning permissions granted and how many properties are actually built. Over the last decade, figures show that fewer than 45% of planning permissions granted actually broke ground. The Local Government Association revealed that more than 420,000 homes that received planning permission last year are waiting to be built, and 342,000 were not built out of the 684,000 planning permissions granted in 2016.
The shortage of houses has made it impossible for young people to buy a property and Theresa May has said they have every right to be angry about it. The increasing cost of rent and ownership have paralyzed social mobility with public sector employees unable to relocate for work. Furthermore, regardless of how hard people are working, they are still unable to climb onto the property ladder. Government Help to Buy initiatives are not always as helpful as they may seem with many people finding it tricky to exit a scheme when they need to sell. Online property buyers have said that they often receive enquiries from owners of a new build property who need to achieve a quick house sale because they are unable to sell their home. Often due to many other identical builds being on the market at the same time and also having to sell below the market value because they are competing with deposit and discount incentives offered by the Government and property developers who continue to add new phases to the development.
Ms May suggested that part of the blame is pointed at developers. She claimed they have a perverse financial incentive to hold land rather than to actually build housing. Lord Porter agreed with May, stating that The Local Government Association approves 9 out of every 10 proposed developments but they need more power to act where property developers are not actually building.
The Prime Minister is targeting property developers and closing loopholes by “rewriting the laws on planning” and to introduce “use or lose” planning permission. She said that the existing National Planning Policy Framework is being revamped with key measures including:
- 10% of homes on major property sites must be available for affordable home purchasers
- Councils must adopt a new nationwide standard and set targets on how many properties each council needs to plan for
- Infrastructure needs to be considered during pre-planning stage
- Woodland and Coastlines will have new protections
Although the Prime Ministers message has been widely accepted as overdue, not everyone agrees that it is enough. The Resolution Foundation said that the government needed to take more action, not just rely on public speaking and discussion, many of her ideas were published in a white paper on housing more than a year ago. Some news outlets have commented that the real alternative reason behind the governments push for housing is the opportunity for the Government to raise money from selling off public land to builders.
The Institute for Economic Affairs said that the Prime Minister is only “tinkering at the edges” at what really needs to be done to increase the supply of housing. Labour has said May’s measures were insufficient and that the Tories need to back the Labour’s plan to build affordable housing.
Housing Secretary, Sajid Javid has vowed to work with May to pressure councils to ensure that they are meeting their home building targets. He called for a housing revolution and while there is no shortage of ideas surrounding the housing strategy, there remains a constant shortage of housing. The Prime Ministers commitment to solving the UK housing crisis will have to be comprehensive and rely not only on local councils and developers, but also her own government.
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