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Land banking review kicks off but broker admits ‘significant barriers’ persist

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  • 15/01/2018
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Land banking review kicks off but broker admits ‘significant barriers’ persist
The government has kicked-off its land banking review potentially bringing new opportunities for smaller developers - but land availability is not the only barrier to faster builds, says Piotr Twaits of Synergy Finance.

The independent land banking review was originally announced at the Autumn Budget, with Sir Oliver Letwin to chair the effort in examining the gap between the number of planning permissions granted against the number of houses built.

According to the Department of Housing, Communities and Local Government (DHCLG), just over half of the 684,000 homes with planning permission had been completed as of July 2016 – with 270,000 residential planning permissions unbuilt in London alone.

The DHCLG published a list of panel experts who will assist Sir Oliver in reviewing the main causes of the gap, and make recommendations on the practical steps to increase the speed of build out.

 

Other barriers

However, while the review may allow smaller developers access to more to building sites, land availability may not be the only issue facing builders, according to Piotr Twaits of Synergy Finance.

Twaits said that releasing land held by large developers can “only help stimulate house building in the UK”, but there are other barriers in sight.

“Planning and local councils can add many stipulations to planning applications, and this can take years to process” said Twaits.

Twaits continued: “This will still remain a significant barrier to the smaller house builders in the UK as they don’t have the manpower and resources to be able to manage this process.

“Other considerations also need to be made – a large portion of the land banked is significant sized sites – and smaller developers may not have the experience in developing larger projects.”

 

Simplifying planning

Indeed, the DHCLG acknowledged that a “variety of factors” can prevent development from starting, and the government is already taking steps to address delays caused by too many planning conditions and simplify developer contributions.

Meanwhile, other brokers have expressed their skepticism on whether the review will bring about the expected opportunities.

Twaits added: “Challenger banks and bridging companies provide more flexibility and can offer terms to less experienced developers with lower upfront cash requirements.

“The government needs to give support at this level to ensure that when land becomes available, developers can build on it quickly.”

 

Over-reliance

The review also comes as the liquidation of the UK’s second biggest construction company, Carillion, is raising concerns about the government’s use of major contractors.

Commenting on the development, chief executive of the Federation of Master Builders (FMB), Brian Berry, said: “Carillion’s liquidation raises serious questions for the government, not least about its over-reliance on major contractors.

“The government needs to open up public sector construction contracts to small and micro firms by breaking larger contracts down into smaller lots.”

He continued: “That way, it can spread its risk while also reaping the benefits that come from procuring a greater proportion of its work from a broad range of small companies.

“Construction SMEs train two-thirds of all apprentices and are a sure-fire way of spreading economic growth more evenly throughout the UK,” Berry added.

 

Compulsory purchase

In his November budget speech last year, chancellor Philip Hammond said that compulsory purchase powers will be applied “as necessary” when land is found to be withheld for commercial, rather than technical reasons.

However, the DHCLG said that it will consider how to avoid such drastic interventions, which might “discourage house building or hinder the regeneration of complex sites.”

Sir Oliver commented: “This government is serious about finding ways to increase the speed of build out as well as tackling the complicated issues surrounding it.”

The team to assist Sir Oliver in the review will include Richard Ehrman, former special adviser to the secretary of state for employment; Lord Jitesh Gadhia, House of Lords member and investment banker; former secretary of state Lord John Hutton; Baroness Usha Prashar; and Chrstine Whitehead, professor of housing economics at London School of Economics.

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