“I find myself increasingly irritated by people pointing to the number of sites with permissions (enough for 400,000 homes we are told) as if this somehow proves that the planning system is not part of the longer term problem. First, many of these sites will be in areas that always had low demand. Remember, the UK planning system is incredibly unresponsive to price signals. So no surprise that these sites aren’t being developed now demand has tanked. Second, when those sites are in relatively high demand areas, developers still have strong incentives to hold on to sites, because they know that the long term trajectory of house (and hence land) prices in those areas is upwards. In other words, holding sites becomes more sensible as the gap between current price and future expected price increases. And why do developers expect prices to increase more in the long run? Partly because demand will recover, but partly because the planning system continues to restrict the supply of land in places where demand is highest.”
Sure, developers share some of the ‘blame’ for problems in the housing market. Some of the problem is down to bad practises, bad management etc; some of it down to the planning system itself. But genuine land ‘hoarding’ (getting planning permission for sites you have no intention of developing in the short to medium run) is only a small part of the problem. Ed Milliband will get headlines for attacking it, but that doesn’t bring us any closer to understanding how Labour would try to fix the much bigger problems of housing supply and hence help solve the housing crisis.
SERC: Spatial Economics Research Centre