Organisations including RICS and the Campaign to Protect Rural England are accusing housebuilders of hoarding land, causing a rise in house prices. The CPRE suggests that the top construction companies' land banks have gone up by 18% in the past five years and that housebuilders now have enough land to build 280,000 homes.
Housebuilders have been keen to refute these accusations in their submissions to the review chaired by Kate Barker, a member of the Bank of England's Monetary Policy Committee. The House Buiders Federation says research shows that landbanks represent only two years' supply of land and that there has been a 32% drop in land held by the top housebuilders between 1999 and 2001.
To prove they aren't squirreling away land, housebuilders have released details of their landbanks to the Barker research team. In its submission the HBF claims that housebuilders would not be able to hang onto land even if it wanted to because it would reduce the company's return on capital and hurt the share price.
Housebuilders largely blame the housing shortage on an outmoded planning system. They claim that it is inefficient and say that planning applications don't get processed quickly enough. The section 106 planning agreement also sticks in many housebuilders' craw. This forces housebuilders to build affordable housing or infrastructure in return for planning approval. Retirement home specialist McCarthy & Stone claims that Section 106 can delay planning by over a year and that it allows councils to ask for unreasonable contributions from housebuilders.
There are signs that the Treasury is listening to housebuilders concerns and a Whitehall inside revealed in Building this week that Barker is considering simplifying section 106 by replacing it with a development tax, which would take much less time to negotiate. This development tax would be collected by the government and then handed out to local councils for social housing and infrastructure.
Housebuilders have mixed views about such a tax. Alan Cherry, chairman of Countryside Properties said that previous such taxes have always cost more than they've been worth and he fears that the government may be tempted to introduce the tax in addition to a scaled back section 106. On the other hand Redrow chief executive Paul Pedley said that his company would be willing to pay for a standardised replacement to section 106.
Barker will release an interim report in the autumn and in spring a final report will be published with recommendations that will coincide with Gordon Brown's budget.
