Ed Miliband's ignorance of the housing market
Posted on 17 December 2013 by
Ed Miliband’s outburst yesterday criticising the major housebuilders for hoarding land and threatening that a Labour Government would give councils power to compulsorily purchase land was the worst kind of political spin because it fails the basic test of being honest criticism. He claimed housebuilders are sitting on land where “up to” 1 million new homes could be built.
Apart from the fact that a claim that somewhere between nil and 1 million homes could be built on this land is completely meaningless, either Miliband is just plain ignorant of the facts or he is prepared to ignore them for a cheap headline. Land which Miliband claims is being hoarded is in many cases in the pre construction phase, which I suppose an economically illiterate person might define as hoarding, as there is no physical evidence of activity on the site.
Taking a 50 unit site of a major developer as an example the timeframe from start to finish for the development would typically be 148 weeks, of which the first 77 would be in the pre construction phase. This covers everything from preparing the planning application, the planning process, including negotiating the Section 106 agreement and pre start conditions with the local authority, and the site preparation. Thus for more than half of the period needed to produce the homes it might appear to the uninformed observer that the site is being “hoarded.”
Furthermore as Liberum Capital ( firstname.lastname@example.org ) points out in a research note today the hoarding debate was resolved by a couple of lengthy investigations in the previous decade, both of which were commissioned by the Government of which Ed Miliband was a member. Having a short memory is not an asset most people would consider helpful for anyone aspiring to become Prime Minister one day!
The 2004 Barker Report and the subsequent OFT investigation in 2008 both concluded that, contrary to what the authorities believed, the industry was not hoarding land.
In her report Kate Barker said “Evidence suggests that housebuilders' land holdings are primarily operational. That is, they hold enough land with planning permission (and in some cases less) to deliver planned housing output over the next 11-16 months. The Interim Report did not consider this excessive, or indicative of significant land speculation."
Likewise, the OFT Enquiry (Homebuilding in the UK, 2008) said: “We have not found any evidence that homebuilders have the ability to anti-competitively hoard land or own a large amount with planning permission on which they have not started to build. Apart from the homebuilding firms, the available information suggests that the largest ‘landbank’ may be that held by the public sector.”
This last sentence rather begs the question that if Miliband gives councils the power to compulsorarily acquire land which is being hoarded who will acquire the land councils are hoarding.
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