housing destroyers

[james armstrong]

To ,Director General, OFT

Copy Mr V Cable, MP, HM Business Secretary                            27th June 2011  

Dept of Business innovation and Skills , 1 Victoria St
 , London SW1H 0ET

Copy Oliver Letwin, M.P. 

 

 

 

Dear Sirs,                                                                                   27 June 2011


 

 

Your Ref   E E L 85681
of 23 June received to-day in reply to my letter of 6 April.

 

 

Thankyou for your 
June reply to my April letter  

 

BACKGROUND TO THE 
CORRESPONDENCE

The systemic and 
years’ long  failure of supply of
new houses  in UK
 both occasioned the Barker Review, and
the OFT Homebuilding  (sic) Survey.    This failure occasions   hardship among a million families (the
backlog of those in housing need)  , has
got worse since  2003 and during the
period of the  OFT Survey, and to-day is
at a crisis level..

Along the way, abuse of the housing market  has caused 
the largest financial crisis characterized by commentators as the worst
since 1929.  

Inadequate new house supply has been a major factor in
grossly inflating the price of houses. This house price inflation is central to
the  present financial crisis.   A market where there is a huge unmet demand
and yet supply is consistently falling is clearly broken, and I would maintain,
deliberately destroyed by corporate 
house-builders. 

The occasion of my correspondence and the OFT Survey,  and  I
suggest to the OFT reply to my letters,  is finding the 
cause of the crisis, punishing the 
wrongdoers and  remaking a fair
and  effective  market 
especially  now facilitating more
effective new house supply.

 

Against this background OFT have ‘discovered (2008)  that self build is the biggest supplier of
new houses , a fact which Barker did nor discover in an extensive review of
house supply.   Not only that, but the
self build sector is not mentioned once in either the 2003 nor 2004 Barker
reports.  So the biggest single supplier
of new houses was not identified by the HMG , D P M commissioned survey. And
the existence of 16,000 separate individual house-builders was overlooked.  Nor has this failing been acknowledged. 

 

 

 

 

You write

 Housebuilders are responsible for 90 per cent….and self builders only ten
per  cent.

Ten per cent of new houses is of the order of 16,000 new
houses per annum  ( the 16,000 overlooked
by Barker )

Each of these houses is a life saver to a house-needy family,
a self built home. No single house , and not 16,000, is ‘only’ .    Each one of the 16,000 self builders is a self
motivated house -constructor overlooked by Barker    In a democracy, people, not house builders,
are the  legitimate first concern of  government agencies.     ‘OFT  questioned 7,000 UK homebuilders(sic)’  you write. 
How many homeless and house-needy people did you interview?    

       Each of the
16,000 self builders has achieved this against a background where  732,000  units of the very scarce and very costly  potential sites are out of reach  in the landbanks of    the seven housebuilders listed in Table 5.1
of Barker Interim Review.    

Another  tranche of
very scarce sites will be held by the  (hundred/)
 thousand builders not listed by
Barker.  (cf total UK
output at 160,000 units)   A Planning
system prevents building outside designated sites.  

House-builders like Wimpey have had 50 years to study  each local plan and gather the resources buy
up potential building land.  A young newly
married couple  motivated to solve their
own  need 
have to cope with the  difficulty  of finding a suitable site (see OFT
findings)  at an artificially
inflated  site cost caused by the landbanks
and by market destruction and specifically by the restricted output  of national housebuilders. Where typically
the self builder is houseneedy and  has
limited resources .  (compare the  resources of one individual with the
resources of Taylor Wimpey )

 

Each of the self builders 
typically requires  a land bank of
zero units.  This  alone suggests 

a)      that  the potential of self build is huge, 

b)      that  if national housebuilders require   landbanks of 
12 years’  supply (Persimmon in
2003  Barker  table 5.1,) 
then HMG, Barker, OFT and  the OFT
letter writer should  acknowledge that
self build is the way forward, since self builders require zero landbanks.  Of course the recent statements by the
Housing Minister in support of s-b 
belatedly acknowledge this.

c)       Self build , prospering against  enormous difficulties, shows the dynamism of
the sector-  so for you to write ‘only
ten per cent’  is inappropriate and shows
lack of understanding and reason. The heart and the brain account for ‘only’
some ten per cent of body weight but are the vital ten per cent.  A  
tumour   weighing  less than ten per cent of b-w can be fatal

d)      When
you are looking for a solution to a problem, the ten per cent component can be
, as s-b  is here, the answer.

e)      Barker
missing out the  dynamic s-b sector,  OFT relying on Barker’s flawed findings on
landbanking ( when self builders own no landbanks ) is a serious and
potentially fatal flaw in the OFT writer’s reasoning .

f)       
‘Hoarding land
with  implementable  planning 
permission ’ and ‘on which they have not started construction’  is a small sub sector of landbanks .   Presumably all the land in landbanks is held
with potential for  planning permission
for which the housebuilders can apply in future as their accountant thinks fit.
. That’s why they buy it  or option it in
the first place.     The reason for holding landbanks is  because of the  rise in value of that land. There is a
huge  inter company trade in  such land.(It is not held solely with  intention to build on it. )  Landbanks are advertised in balance sheets
,as boosting the  value of the  company.  
See the astonishing  statement
unchallenged by Barker , that  ‘house-builders
make their money from land’ 

g)      Finally  it is 
inadmissible  for OFT and Barker
to validate the reasons why House-builders hold landbanks as reducing risk, -
when self builders could and would build immediately on the  land, at lower cost, more quickly and of
better quality and presumably better meet the needs of the house-needy
(themselves) rather than that of the 
property investors.         

MONOPOLY  ‘given that our market study found  little evidence of competition problems  in relation to the supply of new houses….’  you write. 


Barker, in complete contradiction of this  lists 
Table 5.4, twentytwo boroughs  
where one house-builder supplied over fifty per cent of new houses – and
in six boroughs one supplier had 100% monopoly of supply.   My experience is that universally it is the
case that one builder exerts considerable local monopoly.  Secondly, since s-b is a significant sector
and since  in a democracy  each person is significant ,  how fair does the Office of Fair Trading
describe the competition between one self builder and Taylor Woodrow for one
site in your market study? We note you did not claim to consult 7,000
house-needy people.  ‘No one builder was found to be dominant’ suggests OFT were looking
the other way. Unlawful  cartels are an
example of market destruction without  a
single dominant  supplier       OFT wrote that there was no evidence
of  detrimental landbanking  when they had not investigated the evidence I
supplied for Poundbury.. Because they choose not to investigate it  landbanking at Poundbury has not gone away.  And it is invalid to say there is no
evidence.  

        Thankyou for
now addressing the points I raised  in
April. 

I think you have not understood the need to  find a solution to the broken market, that
landbanks are part of the cause of the broken market and that Barker was
seriously flawed in overlooking the most dynamic sector of house-building  and sixteen thousand suppliers perhaps and to
date , no one has acknowledged that  HMG
got it wrong. 

Why this is important is that it allows apologists from
government and government agencies to fail to finger the  housing -market wreckers and therefore ensure
that they don’t continue their anti-social behaviour on a national scale.     

          The number
of giant national and international corporations which have been fined
substantial amounts  in criminal courts,
and by regulatory  agencies is
enormous.  Individual fines of well known
City firms top £1billion.   

           Governments are infiltrated  and fiercely lobbied and political parties
funded by the same predatory companies who fall foul of regulators. 

The people are vulnerable to exploitation by giant corporations
and rely on Regulatory  agencies, to
uphold ethical standards. This predation by corporations on individuals suggests
that regulators should approach  market
failures bearing this in mind.

       Please circulate your reply to those
copied on my letter.  Democracy requires
we  fulfil our democratic role by looking
at market infractions from  a people  viewpoint. 
  

Yours faithfully,  
            James Armstrong   		 	   		  
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