The recent Competition & Markets Authority study into the housebuilding sector over the last year has found that there is competition in the land market, and that housebuilders do not hold excessive amounts of development land unnecessarily. 

Why maintaining pipeline is key

The study found that many different types of market participants can get access to land and the amount of land held by the largest housebuilders is proportionate to the features of the planning system, mainly driven by the time and uncertainty associated with obtaining planning permission.

This corroborates a lot of the previous work published on the topic including the 2018 Letwin Review which found that land banking is not considered an issue, concluding instead that maintaining a pipeline of land is key to the major housebuilder model (read more here). This is in line with the findings of other previous enquiries, such as the Lyons review in 2014 and the Barker Review in 2004. 

While many of us working in the industry are well aware of this conclusion, hopefully this latest report will help politicians and others better understand the real issues facing the sector.

What are the major constraints affecting housebuilders?

Despite setting out that it wasn’t going to look at the planning system, the CMA study has clearly identified that one of the major issues in the delivery of more homes is how the planning system currently works.  

The number of planning consents granted over time has been declining, and planning remains a key constraint for both major and SME housebuilders according to the Home Builders Federation (HBF) and Federation of Master Builders (FMB) surveys (which survey each of these groups respectively).

Who does control development land and why?

The CMA report found that the top 11 housebuilders controlled a total of 1.17m plots of land between them, in their long- and short-term land banks combined (long -term land is strategic land that does not yet have planning permission whilst short-term land has some form of planning permission).  Much of this land will take a significant amount of time to be ready to be built out (an average of seven years for long-term land and 2.5 to 4.5 years for short-term land, according to the CMA findings), and therefore enough land at different stages of planning is needed. 

Our previous analysis has shown that housebuilders control land at all stages of planning and hold a higher proportion of the land at later stages when it is closer to being developable.  This is required to ensure they can continue to build the volume of homes they do at a consistent rate.

Improving planning is one of the major tools in solving the housing crisis

The CMA has published some options for governments and policy makers to consider to help improve how the planning system works.  This includes more stringent use of housing targets and improving LPA capacity and resource by raising planning fees to a cost reflective level and ringfencing those fees.

These two options in particular are welcomed.  However, our own perspective is that government should also consider national policy initiatives to restore the link between planned economic growth and other growth, such as housing. And to be effective, policy will often need a larger-than-local approach. Where appropriate, either through local plans or national development management policies, specific policies to support and encourage SMEs should be considered (read more here).

In summary, it is helpful to have another study into housebuilding that helps dispel the myth about landbanking.  It is also very welcome that there is another voice to encourage Government to provide further clarity and support for planning to enable the country to plan and build the right homes in the right places.

The full CMA report can be read here: https://www.gov.uk/cma-cases/housebuilding-market-study

Further information

Contact Lucy Greenwood