james36armstrong at hotmail.com
Mon Jun 27 19:32:45 BST 2011
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
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
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
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.
Housebuilders are responsible for 90 per cent….and self builders only ten
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
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
you are looking for a solution to a problem, the ten per cent component can be
, as s-b is here, the answer.
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 .
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
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
now addressing the points I raised in
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.
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.
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