MP for West Dorset Oliver Letwin has published his first update on the government’s land banking review and has hinted at a mixed tenure solution being key to driving faster build out.
“The fundamental driver of build out rates once detailed planning permission is granted for large sites appears to be the absorption rate,” Letwin wrote in a letter to chancellor Phillip Hammond.
Letwin said he has concluded that this in turn is determined by the type of home being built and that “it is also clear from our investigation of large sites that differences of tenure are critical”.
Letwin was tasked in the Autumn Budget to “explain the significant gap between housing completions and the amount of land allocated or permissioned in areas of high housing demand, and make recommendations for closing it”.
In his initial report he narrowed his focus “by considering exclusively the question why, once major house-builders have obtained outline planning permission to build large numbers of homes on large sites, they take as long as they do to build those homes”.
He said that, while he has received a litany of reason for slow build out once planning is granted – labour and material shortages, no capital, constrained logistics, land remediation and infrastructure – he does not believe these affect build out.
He wrote: “I am not persuaded that these limitations are in fact the primary determinants of the speed of build out on large permitted sites at present. They are components of the velocity of build out; but they are not the fundamental rate-setting feature.”
He said that social and affordable housing was considered as additional to regular absorption, but was still limited by being linked to cross subsidy from private sale:
“And we have heard, also, that the demand for private rented accommodation at full open market rents would be largely additional to, rather than a substitute for, demand for homes purchased outright on the open market.”
As his review continues, with initial results expected in June, he says the questions are whether or not build out would be increased by packaging large sites to include different types of product and tenure and if the reliance on large sites was reduced.
He also questioned what the implications would be for builders if the developed value of sites starting to deviate from assumptions made when buying the land.
After the result in June, a full report and recommendations are expected by the time of the Autumn Budget.
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