Believe it or not there are still many people actively involved in delivering new housing development who are not yet on Twitter and don’t have a blog! Also some of them are extremely intelligent and have very useful perspectives to bring to the on line discussions.
One such player is Mark Dickinson, Land Director at Banks Property. Mark is a developer NOT a housebuilder. Developers (a) contract land for sale then, (b) promote it through the planning system (hopefully to a consent) then (c) purchase the land, and then (d) sell it to a housebuilder, at a profit, to allow houses to be built. Generally, they don’t actually build and sell houses.
Developers are the middle men between the landowner and the housebuilder. They exist because they often show greater risk appetite and forward funding capability than housebuilders to address the UK planning system. Remember it will take at least 2 years of advance funding from contract to consent. Often much longer. For some housebuilders, still recovering from the recession, that forward funding is too hard at the moment. This is demonstrated by research undertaken by Savills which indicates the developers control around 80% of land allocated for housing in emerging plans.
Developers are therefore able to present a consented “shovel ready” site to a housebuilder at a price, hopefully, which (a) incentivises the landowner, (b) makes a profit for the developer and (c) allows to housebuilder to build and sell on the basis of a development appraisal showing a 20% margin. Without at least 20% in the appraisal the housebuilder is unlikely to be able to secure the funds to secure the purchase and build out the site.
Across the country developers are becoming much more important in securing the vitally important permissions to get houses built to address the housing crisis. That said I suspect we may see housebuilders returning to that space as their results and risk appetite improves. Across the North, for example, prominent developers are, inter alia, Commercial Estates Group, Hallam Land, Dransfield, Banks Group, St Paul’s, St Modwen, Gallagher Estates, Theakston Estates, Northumberland Estates, Gladman Group, ASL, Peel Holdings and Newby Land Management.
Banks Property are a very successful, well-funded, developer working across the North East and Yorkshire. They are part of a larger group with commercial interests across the mining and energy sectors. Mark’s views, in response to my recent post on Housing, Housebuilding and Planning are set down below in italic.
Regarding land banks, I think the problem (certainly in our case) is often very complex. The main reasons why our ‘legacy’ or ‘locked up’ sites – which have planning permissions totalling several thousand units – are not coming forward:
1. Wrong location in the current market,
2. Wrong mix i.e. urban site with high density development which would be unviable with lower density,
3. Current values are not sufficient to justify remediation of many brownfield sites,
4. Price paid pre recession now exceeds current value.
5. Planning obligations too onerous in a changed market
Usually legacy sites become locked up as a result of result of a compounding of these factors. I applaud you shifting the debate to highlight that national landbanks only represent a small proportion of what is needed, particularly given the huge backlog of demand and many years of under provision.
Land Banks are often quoted as a reason why new permissions should not be granted, but when we undertook an analysis of ‘landbanked’ sites in our region, most were actually locked up due to a combination of the above factors.
It’s clearly very difficult for local authority planners to juggle current viability problems whilst trying to look over the horizon and produce a 20 year plan. My view is that without the introduction of financial incentives to encourage brownfield development it just won’t happen on any significant scale for at least 5 years. Also with NPPF changes to exclude gardens as brownfield, professionals and public are going to have to face up to the fact that under the existing framework, the proportion of development on greenfield, and potentially green belt, will necessarily increase from historic rates.
For our part, we are committed to continue developing brownfield land as far as possible, but are also mindful that brownfield land cannot absorb all the development needs of our region nor provide the contributions towards infrastructure, education and affordable housing that greenfield development can generate.
Sarah Payne’s blog was a useful introduction to the key delivery issues and highlighted the need for a greater understanding of the crucial commercial realities and risks affecting delivery. By any reasonable measure (and there are many as you know better than me) we’ve got a housing crisis on our hands. This is having noticable social ramifications by widening the gap between generations. Surely we have to be much bolder in addressing these issues.
Sarah made an interesting point that the conflation of many issues over time are, at the root of the crisis, mostly politically inflicted and not so much to do with demonised planners who, on the whole do a grand job of implementing government policy.
Next week I will hope to post some views from a housebuilder perspective. A sector which is often (sometimes justifiably) much maligned but, as Sarah Payne pointed out, in the current system can only operate within parameters of acceptable risk and margin. I particularly liked Colin Wiles recent comment highlighting the clash which occurs when the economic rationality of the housebuilder hits the economic irrationality of the UK planning system!