Breaking into land banks
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 !)
“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
..”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.
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.
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.
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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