LendInvest calls on govt to intervene in ‘unnecessary’ land banking

In its response to MPs’ call for input on barriers to housebuilding the firm said the government should take action against “unnecessary” land banking and prioritise SMEs over larger players when releasing land from public ownership.

It argued numbers of SME housebuilders had plummeted in recent decades and the industry needed to be revived if the government were to meet its target of building one million new homes by 2020.

According to LendInvest, in 1988 the number of small builders (defined as those building 100 units or fewer) stood at 12,200 in the UK. This fell to 5,700 by 2006 and then 2,400 by 2014.

The lender said: “The government has a real opportunity to reinvigorate the market by putting homebuilding front and centre of its industrial policy. It is not enough, however, to set ambitious housebuilding targets without addressing the challenges in the sector that are preventing developers from delivering the targets that the government aspires to achieve. Instead, measures should be taken to address the shortages in land, opportunities for finance and the lack of skills in the sector to truly get Britain building.

“It is no coincidence that Britain’s most productive housebuilding period also saw the highest numbers of SME developers in operation. This 80% slump has been to the detriment of both the industry and the nation at large.”

The government failed to hit its target for new homes last year, prompting the Communities and Local Government Committee to launch an inquiry into the housebuilding industry in July.

It said it wanted to find out whether the industry has the capacity to build enough houses or, if not, what constraints it was facing and how they could be overcome.

LendInvest said the government should work with SME developers “at all levels” to make it easy to plan and develop property.

It said SMEs could develop land swiftly once they had access to it either through forced sell-offs or preferential deals on public land.

However, to be successful the industry also needed the government to place increased scrutiny on the land market, such as requiring the publication of data on land pricing, option agreements and ownership.

What’s more, the government should explore state-backed funding schemes to provide lenders with more capital to lend to SMEs, LendInvest said.

It should also commit to provide funding for SME development projects and support alternative finance as a route for SME growth.

Finally, LendInvest pointed to a lack of skills in the housebuilding industry and called on the government to support initiatives around training up developers.

It said the government’s Industrial Strategy should go further to incentivise development to “position property development as an attractive entrepreneurial opportunity”.