Breaking into land banks

james armstrong james36armstrong at hotmail.com
Fri Aug 10 16:06:09 BST 2018


Some food for thought at camp. James




BREAKING INTO UNLAWFUL LANDBANKS  TO RECOVER STOLEN £228bn  
                                                                                                    By James Armstrong 
-   Explaining the macroeconomic causes of the housing crisis.
-  Unlawful monopoly against the public interest on a £billion scale  and unpunished
-  Regulatory failure evidenced by ‘coziness’ (Barker) of  housebuildes to regulators
 - Setting out novel and radical  solutions  to  unlock unlawful landbanks
-  Identifying a new  mass supplier of houses at accessible prices and rents
-  Providing Bank of England with a macro-economic tool to stabilise house prices
     and reduce the continuing risk of  this volatile sector to the wider economy            

The evidence below is widely available to legislators, to financial regulators and anti monopoly regulators.  The failure to act to end the endemic housing crisis in Britain  of inadequate supply and out of reach prices and rents, is evidence of  consistent and persistent  government / corporate policy of  putting corporate  profit-seeking and a defective ethic free economic policy of ’growth’ before promotion of  human and national well being.   This is evidence of both moral failure, political malpractice  and of  a misguided  economical philosophy, one which fails to prioritise universal human wellbeing  favouring instead  corporate success and  increasing prosperity for a select  group of mature and giant corporate builders, banks and private property owners. 
 Adam Smith, professor of Moral Philosophy at Glagow University wrote   ‘Theory of Moral Sentiments’ which sets out his understanding that the drive for national and human wellbeing- an ethical goal, underpins the  economic and political arrangements which he advances in his later, better known work, Wealth of Nations.   
    
Obtaining  building land for new houses is key to implementing the proposed 
National Team Self Build initiative  (J Armstrong) and ‘Group self build’ as recommended by OFT* in 2008   but, as yet, not implemented.  *OFT was wound up in 2014
 
One source of building land  is  the establishment of a national land bank where in the tradition of Owen, Rowntree, Peabody, etc, motivated to promote  the general wellbeing, land owners may  contribute a portion of development land as part of their development plan free or at below market price, to the new NTS-B initiative. 

A second proposed source is to free up the strategic land held as speculation  by housebuilders etc.,  we contend unlawfully as  a monopoly against the  public interest..   Major housebuilders, insurance companies and land developers control a vitally significant area of scarce land for housing (Barker Review,  Guardian , etc.) in excess of  their imminent requirements.
 
Their motive is the increasing value of housing land as an investment.  Ryan Collins, 
 etc “ …housebuildes are primariy rewarded for obtaining valuable land…”  Barker

Using a monopoly (locally of scarce building land) against the public interest,  particularly in prevailing conditions of scarcity, of inadequate house supply and of out-of- reach prices and rents, to keep out competition locally and  with a view to gaining the increased yield envisaged as  future house and land price increases – this is unlawful under the Competition Act, and  punishable by fines and arguably by compulsory purchase orders for the release or confiscation of the land.  Regulators  studiously ignore this and fail to act. (see  Compulsory Purchase Bill of Dec 1946.) 
Promoting  general wellbeing is opposed by the investment banks. Any government regulator who dares to interfere –Monopolies Commission, Competition Commission, Office of Fair Trading  have been  wound up for daring to fine unlawful housebuilder/ monopolists.  Conservative Party relies on contributions from national contractors.   
Below we  cite our  correspondence with  regulators on the subject.,
                                                                       ----------------
 S.P. I. I. V.   LAND   Land carries its own monopoly properties- 
scarcity, permanence, irreplaceability immobility -  and we would add to Ryan-Collins list one  helpful  attribute for tax collectors  – visibility.  

The Barker Review of Housing Supply,  gives data  for ( unlawful )  anti-social land monopoly and see also Guardian report  on  Strategic Land Holdings.    
The Barker Interim Report ,  2003 p 81 lists the  strategic land holdings measured in potential house units , of ten large corporate house builders.-  

Total land as housing units,  held by ten builders is 731,934 units.
 Total UK national housebuild in 2002-3 was 183,825   ONS
Three of the ten  builders held zero landbanks .   
 The largest landbank was held by Persimmon 242,915 units . representing 19.3yrs of their current annual output (  12,352 units. )
Extensive  surplus housing  land was held by Wilson Bowden 33.8yrs supply at 140,891 units
  and Wimpey , 16.7years supply at 225,668 units.
Barratt, Bellway and Berkeley each held zero  units. (Regulators  did not ask how they could survive !)

BARKER commented 
“Land is a scarce good” p 115   (Consider…land’s innate monopoly features  (see above) and particularly building land,  is vastly more scarce ….JA)
“In some localities a single housebuilder may have significant market power.”
And elsewhere ---“Market power will enable housebuilders to push up prices.”
“ Housebuilders are primarily rewarded for obtaining valuable land rather than responding to consumer need”
Table 5.4 lists localities of high housebuilder concentration -
Of the 19 areas listed where a single firm had over 50% of supply six  accounted for  100% of supply
                                                   and…
..”the possibility… that individual  developers of certain types of home in certain areas do have market power…. “   p 95 
Market power will enable  firms to push up prices. p 89
“given that land is a scarce resource….”    P 89 

THE £228BN ELEPHANT IN THE ROOM  - THE WINDFALL THAT BARKER AND OFT FAIL TO MENTION 

Building out land at some 16 houses to the acre, and each acre with planning permission  valued at £2m, (more in London and the South East)  gives a potential value to the landbanks of the ten builders listed by Barker p81, of  £91bn.  The other 5,000 house builders, (giant retail groups like Tesco hold landbanks too) plus insurance giants and land speeulators e.g. Land Securities,  might  hold a similar amount of land.
Here is a £182bn obstacle to each single would-be self builder motivated to  save money and looking for a single (local) low cost site on which to make a family home,
Failing to put a value on (we would say unlawful) landbanks,  shows clearly that  government and their chosen analysts and regulators are overwhelmingly motivated by the profit driven (broken) ‘market’ and not by peoples’ wellbeing and necessary desire for access to housing. 

THE ENORMOUS SCALE OF UNLAWFUL LANDBANKS 
It is generally calculated by contractors that the site represents some half of the value  of  a new house.  At a present estimated  value of £182bn, the grossly inflated value of  these (unlawful) landbanks listed in Barker, for 732,000 unbuilt houses,  is greater than the total cost (then) of both the land and the construction of  the entire UK existing stock of some 25m houses perhaps costing £2,000 each or £50bn in total.   These were mostly built before the 1980’s when land skyrocketed above £1,000 per unit for the site. A terraced house in Hampstead, built in the 1920’s  for £250, including the site cost,  was recently advertised for sale at over £800,000.
A church (God’s house)  still in use at Escomb, near Bishop Aukland was built around the year 1790
The estimated value of the (unlawful) landbanks listed by Barker, for unbuilt houses at £182bn,  represents  some 9% of U.K.’s G.D.P.  The proportion might be doubled if other corporations’ landbanks are taken into account. 
 
 Is there still any wonder what causes the housing crisis?
Is there any doubt about  the government’s motive for  failing to end the crisis?

There is certainly doubt about the ability and willingness  of  successive governments to act in face of the power  and maturity and wealth of  corporate house-builders, of bankswho invest ever growing mortgage securities,  and of the City who co-ordinates and promotes corporate interests. 

In face of this unprecedented power we advocate action on a war-time scale  of legal action particularly regulatory action, focus on the housing crisis, allocation of resources and  re-casting the shape of  the national economic model.

Housing supply has for years languished like a derailed train engine.  The missing rail comprises the wellbeing of people – Adam Smith’s Invisible hand suggests  a  caring  divinity.  The political implications require people’s wellbeing to be the centre  of housing policy in order to put the national train back on track for future generations.                


BARKER”S description of her task.  
“The change to competitive dynamics may not be enough ….”   p103 so Kate Barker, then Chief Economist of Bank o.f England.  
JA Comment -  Barker after the  most extensive review of housing supply,  sees a need to change to “competitive dynamics” This presumes a presently uncompetitive ‘market.
 
BARKER  on regulatory ‘cosiness’
“..competition tends to be focused on land acquisition rather than on consumers.” 

             (in the chapter heading ‘Competition’…” housebuilders are  protected from
              desirable competitive pressure by a regulatory system that may contribute to
              a shortage of housing..p 94  competitive pressures are low …this cosiness 
              between housebuilders and the regulatory regime…”  
             “Housebuilders are in a relatively comfortable position as regards to 
               regulation and the low outputs that result.” P94 
Yet   OFT in  a letter to me says  30 Jan 2003 …
             “ Legislation (covers) the supply of goods and services. It does not cover the
                ownership of land.”
Yet     Barker says, p115,  “Land is a scarce good” 
                Barker did not find land banks held to be excessive
      Yet    three national  builders held zero reserves of land but another  one 16 years’,
                 one 19 years’ , and one  33years’ supply.  Is this not ‘excessive’?  
 
Barker had overlooked self build and so the effect on individuals of corporations  chasing a £224bn jackpot by landbanking  OFT followed Barkers defective vision.
BARKER listed constraints on supply - 
Industry constraints including the competitiveness of house builders - 
“..a reluctance to build out large sites quickly.” 

A VITAL  OMISSION by barker 
“Self build  represents the largest supplier of new houses in UK “ (OFT 2008)
Barker’s Review of 2003/4 entirely omitted the self-build / custom-build genre.
In response to a letter from  the writer pointing out the omission,  Barker wrote,(Oct 2004,  “ (self-build) This is a very pertinent point and probably should have received some attention. It is unduly difficult for individuals to obtain land to undertake self-build”
The omission invalidates Barker’s judgment on the scale of  Housebuilders’ 
anti-social and therefore unlawful monopoly landbanking. OFT slavishly follows Barker. 

ARGUMENT  
 In relation to self builder’s  ( mostly each an individual working  to build his/her own low cost home, not a corporation working for profit.) their inability to  find sites for building  because of  landbanking  by corporate builders should be investigated.  Self builders are the largest suppliers of new houses.(OFT)  They typically require  a site for a single house. These are not easily available since the structure of the trade in building land is in sites for multiple units. Self builders are rarely aware, nor professionally guided nor in a position to negotiate for land in competition with national builder-corporations.  Existing single unit sites are the means by which, against  enormous pressure, individuals  satisfying their own housing need,  together  form the largest single supplier of new houses. It is in relation to individuals, a genre not considered in Barker, that the anti-social  land holdings of giant  corporate builders should be judged.  OFT also ignores the baleful effect of landbanking on individual potential self builders.  OFT  is concerned with ‘ the market’ meaning apparently the corporate house builders whose monopoly activity OFT apparently  seek to justify but only their conduct in reference to other corporate housebuilders, ignoring their unlawful effect on individual self builders , mostly individuals and all  non corporate.         

REGULATORS’ CORRESPONDENCE 
Competition Commission 27 Jan 2003 “The CC does not have  authority  to initiate its own investigations.”  OFT  write  9 Sep 2004  “ The Review did not find evidence of deliberate anti-competitive intention.”   OFT omitted the effect on the house-needy of trickling out supply and the effect on self builders of national builders  monopolizing ultra scarce ultra expensive and unavailable building land (especially in single plot units). 

RECOMMENDATION  With a view to releasing land for self build, OFT were asked to  prosecute house builders for unlawful land banking against the public interest.  

LANDBANKING IS UNLAWFUL MONOPOLY ACTION.   MONOPOLISTS ACTING AGAINST THE PUBLIC INTEREST, RAISING HOUSE PRICES, RESTRICTING SUPPLY,  SHOULD BE FINED  - IN LAND NOT IN CASH . 
The proposal is to  take (legal) action  to require FSA or CMA  or appropriate regulator to act against the  monopolists.  With a view to releasing the land for building, when land-bankers are fined not in cash but land for purchase by self builders or as a grant.  

Note : Regulators are being sidelined as a restraint on housebuilders etc and for acting against the current liberalization of financial services. A policy of rising house prices is currently central to government macro economic model of  financialisation of houses and land.    See history of  correspondence  by JA with regulators Competition Commission and OFT  on this subject below. 
Jan 2003  letter from OFT  “legislation only allows references to be made in respect of “goods and services”     JA replied quoting Barker p115  “land is a scarce good” 
OFT Sept 2004   “ the (Barker) Review did not find landbanks held to be excessive”
 (Barker) “ Did not find evidence of deliberate anti-competitive intentions  or actions” 
 JA  response :”  It was not Barker’s remit to  determine whether landbanks were excessive.  In light of Barker’s findings ( eg 33yrs supply for one builder zero  landbank for another)   and Barker’s comments of ‘coziness’ of builders with regulators. This should be legally pursued. 

 JA response      As MPC member and B of E chief economist , Barker might be expected to favour  rising house prices as B of E and HMT (and City) current  macro economic policy to “Grow the economy’  see Ryan-Collins etc.    OFT was wrong to rely on Barker who was biased and who overlooked self build. Yet Barker talked of  regulatory ‘coziness’ (unexplained) .   Barker also ignored the role of self build and the anti-social effect of land banking is  greatest against self builders- who it was  found by OFT in Home-building Study 2008.  “The greatest barrier to self build was finding land to build”.  … OFT Appx R1 
B of E, itself a central part of the regulatory system, was  found to be ‘cozy to builders”  The regulatory system has been undermined.  The Monopoly Commission, Competition Commission and  Office of Fair Trading have been closed or replaced.  

Were OFT  punished for daring to fine  103 construction firms £129million for  rigging bids for public contracts?  One of the House builders, Balfour Beatty  was fined £38m, a record, in 2009.  The result was that Office of fair Trading was wound up in 2014
 The criminal Balfour Beatty went on to win contracts for building retirement houses in Cooper’s  Hill Surrey in 2017 worth £38million. 
Now, welcome to the Competition and Markets Authority. (CMA.)  Whose name fails to register let alone recognize the widespread practice of land monopoly,  and misuse of market power which alone justifies it existence.     

It turns out that OFT were dealing with criminals,   the monopoly of landbanks was the  physical cause of the  endemic shortage of supply of new houses , the OFT whitewash Study absolved them of  anti-competitive activity by ignoring their effect on the largest supplier- individual self builders.  The OFT Study looks at the  effect of  monopoly – elided as ‘competition’ - on ‘the trade’ and on  ‘the market’ and on customers’ satisfaction levels,  ignoring the actuality on  individual self builders of the effect of corporate land monopoly on  actual and would-be  self builders,  and so discounting the potential of  group self build- which OFT elsewhere (1.23)  advocate- on stabilizing prices,  and increasing supply and reducing volatility in the ‘broken’,  therefore  not- freely-functioning market’.
   
  It is quite appropriate that OFT were wound up in 2009 and  Balfour Beatty  and other convicted fraudsters are rewarded in 2017 with a £38m building contract.    
We note  construction firms’ contributions to the Conservative Party , and the  relentless lobbying of  the Chancellor by the City and the parliamentary Remembrancer Department on behalf of investment bankers on whose £1.3tr income from investing ever rowing mortgage assets  B of E and H M  Treasury rely and which drives the ever increasing prices of  the entire UK housing stock by restricting  the supply of new houses.                                       

CONCLUSION
The housing crisis causes  widespread stress and misery among millions of  house- needy people in Britain.   Major countries – Germany-   provide housing  at lower  cost and stable prices and rents. Failure  to act in Britain, if necessary on a war –time scale, to end this crisis is a failure of executive government and a democratic lapse. 
 
If this analysis and the proposed changes set out here are thought  to be  inadequate or too radical, it is suggested that critics are morally bound to come up with alternative  proposals,  promptly  to bring the crisis to an end.                         
                                                                      James Armstrong            July  2018
                                                                       james36armstrong at hotmail.com
                                     22, Harveys Terrace, Dorchester, Dorset DT1 1LE
 contributed - to the Barker Review 2003. 2004   also  to the OFT Home-building Study , 2008
                       self builder of two houses in London
                       see also ‘National Team Self Build’.. JA
 


 








 
  
Ellen Scrimgeour    Kate Barker   Macfarlane    Bureau of investigative Journalists
Prof  Muellbauer              David Cowan                           Magna Housing Assiation
Prof  Dorling                    Mark Davys                             National Housing Federation 
Shelter                     Martin Wolf   FT                           Self Build magazine
Rowntree  (JRF)               Ryan Collins                            Build It  magazine 
Financial Conduct Authority                                   Planning magazine
Lloyd                       Competition and Markets Authority    RTPI 
Private Eye              Fabian Society                   Graham Duncan, Consultant Planner  
New Statesman        Local Government Association  Minister of Housing    
Andy  Haldane         Mark Carney B of E                Treasury Select Committee 
….  T.U.C.               Labour Party,  Green Party, Conservative Party, Lib Dem Party                                  
Fabian Society         Lord Alfred Dubbs                   Oliver Letwin, M.P.
                                                                        2,899words   6 pages 
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