Originally posted on my blog for Inside Housing on September 24.
While all eyes were on the prime minister’s speech at the National Housing Summit you may have missed news that landowners are now making an astonishing £13 bn a year pre-tax profit just from getting planning permission for housing.
That is the estimate in a new report from the Centre for Progressive Policy (CPP) and the National Housing Federation (NHF) published on the same day as Theresa May was telling housing associations what they wanted to hear.
The £13 bn profit made by landowners in England in 2016/17 is up £4 bn on 2014/15 thanks to a huge increase in residential land values in the last two years.
Seen from one end of the telescope, that was already more than the profits of the entire UK housebuilding industry and it is now more than the global profits of Amazon, Coca Cola and McDonald’s combined.
But the impact can also be seen from the other end of the telescope, with housing association after housing association quoting examples of where they have been outbid by private developers for land.
The sites are often public land but individual associations report examples of developers who bid a higher price than them only to do nothing with it or sell it on for a profit shortly afterwards.
Originally published on September 13 on my blog for Inside Housing.
How does land worth £21,000 or £482,000 per hectare suddenly become worth £1.95m? And who should get the windfall?
The answer to the first question is, of course, when agricultural or industrial land is granted planning permission for residential use (all three figures are estimates in government statistics).
The answer to the second is much more complicated – getting it right could boost construction of new homes and provide a new source of funds for infrastructure and affordable housing; getting it wrong could destroy incentives for landowners to bring land forward and mean housebuilding dries up.
Now the all-party Housing, Communities and Local Government Committee has published a report on an issue that has a long history dating back to Winston Churchill’s criticism of the ‘unearned increment’ made by landowners following public investment in infrastructure – and even right back to Henry VIII.
Support for reform has grown across the political spectrum and even the last Conservative manifesto promised to ‘work with private and public sector housebuilders’ on the issue.
Supporters note, correctly, that the success of the post-war new towns was based on their ability to buy land at existing use value and use the uplift to fund infrastructure but that all this was stymied by legislation such as the 1961 Land Compensation Act that entitled landowners to the ‘hope value’ after their land is developed.
At the same time history is littered with examples of governments introducing uplift levies and tariffs and supplements that failed to deliver and sceptical landowners and housebuilders argue that reform will be prove much more complicated than supporters make out.
Originally posted on September 10 on my blog for Inside Housing.
So what is the state of the private rented sector – and what can be done about it?
Ten years on from their official review for the government, Julie Rugg and David Rhodes of the University of York are back with an update for the Nationwide Foundation.
Despite finding some progress – the average condition of rental property has improved, the average tenancy has got longer and Build to Rent investment is at long last producing results – the problems remain depressingly familiar and in many areas things have got worse.
The private rented sector is now 40% bigger but that growth is more down to the decline of home ownership and social renting than a wave of new construction or an expansion of choice. Perhaps half a million homes sold under the Right to Buy are now private rentals.
Thanks to Buy to Let, the sector is even more dominated by individual ‘investors’ looking to boost their wealth by getting tenants to pay the mortgage – mainstream commercial property companies account for just 3% of the stock.
The review estimates there are now 2.3m adults in England who are landlords – of those, 9% are themselves also private tenants and (surely some mistake?) 1% are social tenants.
And the bottom end of private renting – the only option for tens of thousands of tenants on benefit – is under such pressure from welfare reform that it is becoming ‘a residual slum tenure’.
Originally published on September 6 as a blog for Inside Housing.
Take a quick look at any of the results published by the major house builders this week and it becomes clear just how dependent most of the industry still is on Help to Buy .
Barratt relied on Help to Buy equity loans for 36% of its sales in the year to the end of June – to put that in perspective all its other private sales only accounted for 31%.
In the past six months, Help to Buy accounted for 39% of sales at Taylor Wimpey and 36% at Bovis.
And a presentation to analysts by Redrow showed that 40% of its sales came via Help to Buy in the year to the end of June.
No wonder its chair Steve Morgan calls it a “godsend”and wants clarity about what happens when the scheme expires in March 2021.
A report from the Home Builders Federation (HBF) this week claims that Help to Buy has been an “unmitigated success”, ensuring the construction of 170,000 new homes in its first five years, while supporting 150,000 jobs and helping 137,000 first-time buyers on to the housing ladder.
But increasingly hostile coverage in the national press concentrates far more on soaring profits, pay and shares at the major house builders and wealthier buyers taking advantage of interest-free loans that they do not need.