UK Government Cracks Down on Land Banking

The UK government has introduced a “use it or lose it” policy for UK housebuilders, meaning that they could face losing their land if they do not develop on it within a specific period. 

The new crackdown will introduce time limits for large developments who have already acquired planning permission from their local authority. Theses restrictions which are currently being discussed by ministers will bring a stop to the practice known as “land banking” 

Critics of land banking suggest that developers hold onto land in the hope that it will accrue in value over time rather than developing immediately. However, housebuilders suggest that they need to keep a supply of land for construction. 

Boris Johnson has set a target of building 300,000 homes a year by 2025 under plans to tackle the UK’s housing crisis.

However, more than 1.1 million homes have been approved for construction in the past ten years but have not been built, according to analysis by the Local Government Association.

Housing secretary Robert Jenrick has stated that the government want to ensure that homes are built on the land sold. 

He told the Home Builders Federation: “We can’t deny that there is a major perception problem and people feel strongly about this. So we want to take action to ensure builders build out at the pace promised.”

Anthony Breach, a senior analyst at the Centre for Cities think tank, told the publisher: “Land banking is caused by the existing planning system.

“In our unusually dysfunctional system, we have the situation where new homes that comply with local plans can still be blocked on a case-by-case basis. In response, builders then hoard a land bank of projects as a safety buffer to manage this risk.”

Additionally the reality is that labour shortages, slow supply of materials and general building conditions can all affect the rate of build out for developers. 

What could the potential changes mean for property investors?

While it’s unlikely that time constraints being introduced will have any immediate impact on local markets, a sudden flood of new build property to a specific location could, of course mean an oversupply which drives down demand. 

However, it’s worth noting that the reason for the potential time limits is the lack of new homes being built. Therefore demand is as high in many areas as ever. 

As always, for anyone looking to invest in property, taking a methodical approach and undertaking significant research into your chosen location will still be key to ensuring the best return on investment when it comes to sourcing the right property for your needs.

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