Philip Barnes – Blog


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CPO, LPEG, AND THE PLAN LED SYSTEM

Just been wading through the recent DCLG Factsheet on CPO and specifically the paragraphs relating to the reiteration of the “no-scheme principle”. My conclusion is that it appears to confirm that the plan led system effectively kills off the possibility of major public sector led new settlements.

This is because it prevents land being bought by the state at existing use value and then being subject to the process of securing consent and providing infrastructure, prior to being sold on at housing value.

Why so bold?

Firstly because the plan led system is exactly that – the plan leads everything else in relation to land and planning. So land for a new settlement to be delivered will firstly need to be allocated as such in a plan before it can be considered suitable for acquisition and consenting by the state. That plan will confirm the value of the land as housing land. That is the price the state must pay.

Any other (off plan) approach would be pure land speculation by the state. Namely betting taxpayers money on the outcome of the quasi technical local plan process. In effect gambling that the state’s preferred site better meets the tests of sustainability and soundness than any others. Something that private companies do rather than taxpayers.

Secondly because the Factsheet is so crystal clear on the matter. Three quotes stand out:

“The Government is not trying to change the existing fundamental principle that compensation should be based on the current market value of the land”

 “Compensating owners at less than market value is inherently unfair and us unlikely to be compatible with the European Convention on Human Rights”

 “….actual or prospective planning permission can be taken into account when assessing the market value of land…… including any hope value for future development……”

Like many planners I can see potential merit in the state attempting to repeat the successes of the post war new towns by capturing land value and then delivering infrastructure and new settlements alongside housebuilders. The inability to do this is one of the reasons why I was so disappointed that the LPEG report failed to consider the overall pros and cons of the plan led system. Rather it simply accepted, without critique, the notion that Local Plans (which essentially cap housing numbers and restrict new homes delivery to the sites coloured brown on a Council map drawn 10 years ago) are the best way to address the housing crisis.

I recall the time when local plans were positive growth documents relating to areas of housing and economic growth. They weren’t district-wide. Outside those local plan areas land use decisions were made by planners, informed by planning judgment and criteria-based policies supported by the designated areas of development constraint (now called Footnote 9 areas). Whilst my views may be stuck in the past where is the current innovative thinking on an alternative model to the failing plan led system?

I must immediately confirm that I am disappointed that the consideration was not undertaken rather than necessarily recommending against the plan led system. However, the argument that the plan led system, since 1991, has systemically built-in housing undersupply is one that needs rigorous testing in my view. Certainly the raw statistics give it credence and LPEG was a great lost opportunity. I suggested it to them but it was made clear that was not in the brief.

Unfortunately I have neither the brainpower nor the time to answer the question but was rather hoping LPEG would do it. But what is clear is that if ever there was a space for radical thinking, really focussed on addressing the housing problems faced by thousands of middle/lower income families then this is it. The NLP report last week highlighting the frankly ridiculous length of time it takes to get large sites allocated only reinforces this view as does the recent decision by South Staffs to delay their local plan because of upcoming national policy changes.

In the meantime let’s hope we see LPEG taken up by the Government because, within a mind-set of retaining the plan led system at all costs, it’s a great piece of work. (IMHO)


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THE DANGERS OF OPTIMISM BIAS

Particularly glad to start this week. Why – because last week was a difficult one which brought home the possibility of optimism bias in the land market potentially causing Barratt’s housing delivery to stall.

The previous week I had blogged about the need for realism in the land market given the economic uncertainties over Brexit and the possibility of a market slowdown in the next 5-10 years given the current stage of the market cycle. The blog stressed that Barratt is committed to growing our volume and we want to buy more residential land. We bought more land than anyone else last year and aim to do the same this. We need more land in order to support our growth aspirations. We need to incentivise landowners to sell to us.

Just to prove I am not myopic to Barratt I then read a positive city analyst’s report (on one of our key competitors) stating that the said competitor ‘continues to be disciplined in the land market and sensibly cautious given the macro risks’.

And last week’s very positive trading statement from Persimmon nevertheless refers to, ‘uncertainty surrounding the potential impact of the EU referendum result on the UK economy may continue for some time’.

Yet last week we bid for a huge site, where we will be trading right through a possible down turn and beyond the end of Help to Buy. We considered our bid to be sensible and realistic but we were then accused by the land promoter of having submitted an “insult” rather than a bid. All very frustrating and pointless given that we don’t get upset if the site is sold to a higher, more cavalier bidder. That’s how competitive bidding works.

There seemed no recognition that high land prices in the 2004-2007 period caused significant problems to all those trying to sell homes in the 2008-2011 period following the credit crunch. We are simply not going to repeat that on very large sites today. There also seemed little recognition that the bid, of many millions of pounds, was for a site worth c£10k/acre as agricultural fields prior to the recent planning consent.

Nobody on the Barratt bid team is prepared to leave our successors with a huge financial mess for them to sort out later. We all know that Barratt, even today, is trading at a loss on some sites due to cavalier bidding in the pre-recession period.

On reflection last week was perhaps about people getting angry because a post-referendum land bid on a very large site wasn’t as high as might have been anticipated pre-referendum. Maybe that is an understandable human response and maybe everyone needs to be sharing data and information better.  Something for Barratt to consider going forward – avoiding nasty surprises is always best. We know we need to provide a best-in-class price and service to landowners if they are going to want to do business with us.

The vast majority of our land promoter and landowner partners are a pleasure to deal with and recognise that if we are to build the additional homes that the nation needs there always needs to be sufficient commercial incentive for a “willing landowner and a willing developer” – to quote NPPG. We are committed to ensuring that all our landowners have both the right price and the confidence we will deliver. Indeed the attached testimonial sheet provides evidence of that.

Barratt is doing its bit to increase volume, however we can’t prejudice our financial future in the chase for more numbers. All that glitters is not gold and actual delivery of homes driven by landowners and housebuilders working well together is what is required.

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