The Demonisation Of Land Banking
Published on:Wednesday January 1, 2020
There are opposing views on traditional land banking. Some misleadingly argue that it dramatically contributes to the housing crisis, claiming that the hoarding of land leads to developers being forced to build on greenfield plots.
Due to environmental considerations, greenfield land takes considerably more time to be approved. It is simply untrue to assume that developers choose to prolong their hold on land in order to work on greenfield plots instead. In reality, the general consensus in the property sector is that the storage of stocks of land secures developments and investment.
Consider the frequency of problems such as local consultations, technical issues and labour shortages. Housebuilders view the land as insurance – a guarantee that there will be work produced throughout the delay caused by industry uncertainty. In this article, we discuss the reality of land banking and explore the actual consequences it bears on the housing crisis.
What is land banking?
Land banking is the process of withholding unused land, usually for the benefit of increasing its value and selling it for a profit. It is often applied a political nature and placed alongside gentrification or associated with the shortage of UK homes. In reality the housing crisis is much more complex and is more rooted in – you guessed it – a lack of housing.
Since the 1970s, the UK government has provided an average of 160,000 new homes a year in England. Yet it has been repeatedly demonstrated that, in order to house our population, there should have been 225,000 to 275,000 homes per year. That isn’t just to keep pace with our population, but also to tackle years of undersupply. In a 2018 study produced by Heriot-Watt University, that figure was predicted at 340,000.
Land banking isn’t the reason behind these inflated expectations however – it is the hesitation in government to support the private sector in property markets. That is why there are current plans to change typical planning processes, elements of tax policy and individual incentives in order to solve the issue of home shortages.
How land banking can benefit the wider community
When viewing the storage of land as insurance through the more difficult stages of development, it is easy to see why the situation occurs. Despite the increase in price for builders, a delay in the project can reward the wider community. The development of an area over time can create an incomplete aesthetic. Residential developments that are postponed until the surrounding environment is fruitful with commercial lots and improved travel connections are not only more valuable for shareholders, but also for the community at large.
The bottom line is that, with the requisite planning permission, this land can increase significantly in value and subsequently support the potential building of more new homes. This is what was promised by the government, and unless there are certain incentives to lure both national and international investors, there will never been a sustainable solution.
At Legend Property Group, we are happy to discuss any property opportunity. If you would like to understand land banking further, then you can either call us on 0161 974 0735 or leave a message on our contact form by clicking the contact button in the footer below. We look forward to hearing from you.