... fail, fail again.
Bob E has put together a list of some of the DoublePlusGood headlines on the DCLG's website:
November 2010: Shapps: We're lifting burdens from the backs of builders
March 2011: Grant Shapps offers "Build Now, Pay Later" deal to developers
April 2011: Growth plan to transform empty offices into new homes
June 2011: Government plans release of public land to build 100,000 homes
July 2011: Government announces new Affordable Homes Programme set to exceed expectations
December 2011: Grant Shapps launches £420m fund to get Britain building again in 2012
June 2012: Grant Shapps: Builders back the NewBuy Guarantee
The sum total effect of all this lifting, paying later, transforming, releasing, exceeding, launching and guaranteeing has of course been precisely zilch. New housing completions are hovering around the 100,000 level, just as the Tory voters were promised before the last general election.
But never mind, there's always time for another wizard "they own land, give them money" wheeze:
Ministers are to help developers build 200,000 homes which have been placed on hold, in an attempt to stimulate the economy...
Official figures show that local authorities have granted planning permission for more than 480,000 building plots in recent years. But work is only progressing on 136,700 of them. Development has been shelved at more than 81,000 sites and suspended or delayed at 226,000.
Many of the developments were given permission only on condition that they provide amenities for the community. But such deals are no longer viable because house prices have fallen, Mr Pickles believes. The brokers he is sending will renegotiate them to take account of the deteriorating economic climate.
There are various things which could result from this:
- the developers do indeed complete projects and bank larger gains, having being absolved of market risk;
- the developers play poker and mothball all developments on the assumption that they'll be able to get even better discounts on their s106 agreements;
- the developers continue to play for time; the reason the developments were mothballed is because they are waiting for an upturn in land prices.
- the developers assume that the Tories meant it seriously about not granting any planning permission in future, in which case they have every interest in using up their stock of 480,000 build permits as slowly as possible.
- there is a theory that new construction has stalled because banks are now unwilling to lend. If this is true, then again, nothing will come of this. I personally doubt that it is true; if a developer already owns the sites and has planning he's already earned the bulk of his profits (or paid the bulk of his cost of sales). They only need to borrow a bit of extra money to get their developments finished and sold, and that money can be repaid within a year or so out of the sales proceeds. This is not particularly risky from the banks' point of view.
When science is irrelevant
49 minutes ago
17 comments:
"- there is a theory that new construction has stalled because banks are now unwilling to lend."
but not to developers, but to aspiring buyers, I thought. So the developers aren't building because there's no longer an army of misguided idiots waiting to snap up their overpriced rabbit hutches for silly money. Once the banks turn the money tap on again it will be business as usual.
Your last paragraph is incorrect. From my experience and I have some banks are not going to lend to developers in this market. As for the bulk of the costs already been made that is nonsense, dependent of course on the size of the project.
B, banks a bit wary about buyers, hence and why the government has this NewBuy scheme so that the taxpayer bears the risk.
A, maybe banks won't lend to developers - in which case this fancy new scheme won't achieve anything, which was the point of the post.
To explain my last para:
1. Developer owns site, worth £100,000 (quite possible bank financed)
2. He can build house on it for £70,000 and sell the whole thing for £200,000.
If banks refuse to lend, then they can whistle for their £100,000 loan to buy the land/get planning.
If the banks lend him £70,000, then they can have their money back within a year or two, assuming builder can sell the building. Even if the builder only sells it for £150,000 then at least the bank gets £150,000 back. If the builder can't even build the building, the bank gets nothing back.
What continues to stagger me, and has done so for a very long time indeed - is the endemic stupidity in the corridors of power. You'd think that the Great and The Good would have cottoned on by now.
Wouldn't you?
L, they know exactly what they are doing: giving money to landowners and restricting new development. That is the plan.
This is actually an advance in Tory thinking.When you said before that there were thousands of unused planning permission, they and their shambolic lying minions all bellowed "OH No there is n't! We need more land off the green belts or whatever.The blockages are caused by the restrictive planning system.Its like 1984 ,The knock on the door at three o'clock ! We are,in fact, busting to build new houses and bring down the price of new build and hence the whole market"
This is the first time they 've edged towards the truth.
DBC, as far as I can see this is yet another "They own land, give them money" strategy.
Clearly, it will not lead to those sites being completed - maybe Anti is right and banks won't lend anyway, for example. All it means is that the implied value of planning permission is to be enhanced, leading to higher land banker profits in future.
And given that the Tories have announced that new planning permission are a thing of the past and yer sensible developer likes to keep a year or two's supply in hand to even things out, they're in no hurry to use up what they've got.
You are doubtless right on the larger issue: I was just surprised that they had wised up to the fact that there were loads of unused planning permssions out there which we would lvt onto the market but which they have, as per usual decided to address with reductions in the section what-have-you agreements.
DBC, yes, they let that one slip out, but don't underestimate the Daily Mailexpressgraph.
Their point will now be "We don't need to grant any more planning, we'e granted enough planning to keep them going for four years. Oh, and by the way, 448,000 units means that approx. 50,000 acres of Hallowed Green Belt will be concreted over and denied to future generations.
"In any event, 448,000 homes is enough to house the population of Birmingham. I blame the immigrants. We didn't fight World War Two just to have foreigners swallow our cherished heritage. Will the last Englishman to leave please turn out the lights etc .".
There's nothing which they can't DoubleSpeak.
What's the problem with not building any more houses? Firstly, building more houses will not bring prices down in any way, look at Ireland - prices remained high until the bust, despite huge numbers being built. Secondly, very few people are actually homeless. Sure lots of people who want to own a house are currently renting, but if they all move into new houses, then there will be a lot of rented houses empty, which isn't exactly progress.
B, yes of course, in terms of average physical housing per inhabitant, we have enough housing and new construction for private ownership is not really a solution to anything. The problem is the totally inefficient allocation, which Land Value Tax would sort all this out within months.
I hate NIMBYs for their motives and all round duplicity, not because they actually make things much worse than they already are.
But the Tories are treading a fine line here - they have to keep the NIMBYs happy by restricting new development and at the same time keep their major donors in construction happy by giving them money under the pretext of encouraging new construction.
@B
Mark is on the money with his reply: nobody wants any more houses built because that would devalue the Nimby's dulce domum and a flood of new houses would pull down prices across the board which the developers don't want either.
It will be interesting to see if these proposals go through and developers are relieved of any Section 106? responsibilities , what Fatty Pickles will say when extant planning permissions are not used even under these bribe- the-developers-to-do-their-job conditions .( I expect they will nationalise the unused sites and build council housing for rent using direct labour.Not.)
DBC: " I expect they will nationalise the unused sites and build council housing for rent using direct labour"
Probably they will. Did you not hear about the speech which Cameron gave recently explaining how "unregulated" markets had miserably failed to provide affordable housing and slagging off New Labour's 'right to buy' policies? I think he proposed something like 'a million new council houses' as well.
"and a flood of new houses would pull down prices across the board which the developers don't want either"
You would think so, wouldn't you, supply and demand and all that, but the experience of Ireland shows that, so long as the money tap remains turned on, a "flood of new houses" has very little effect on their price. Also the '60s boom, where prices spiralled despite record levels of housebuilding.
B, yes and no. The money taps are now firmly turned off, and the countries with the most new construction (Ireland, Spain) are seeing the biggest price falls.
The best control experiment is the USA over the credit bubble period. By and large, and as a generalisation, states with strict planning laws had much bigger price bubbles (and subsequent crashes) than states with liberal planning laws.
@B
But Irish prices did fall with a right bump eventually.There was a long Wily Coyote moment when they went off the cliff and appeared suspended in mid air until falling all of a sudden.(There's nothing holding UK prices up now actually)
DBC, B, be that as it may, I'm agnostic on new build for private (which only the LVT kick up the arse will sort out), ergo the next best thing we can do is build a million or three units of council houses, like Dave Cameron promised. Not.
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