A draft analysis was released by Sir Oliver Letwin MP at the end of June entitled an Independent Review of Build Out Rates. The review attempted to tackle the complex issue of land-banking and followed on from his interim report in Spring.
Letwin was specifically asked 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 first report, he indicated that it was the absorption rate into the market that limits house building, i.e. the rate at which new homes can be sold “without materially disturbing the market”. Key to this was the conclusion that a greater range of designs, types and tenures would help speed up this rate.
However, his latest analysis found no evidence of developers slowing the market through land-banking. “Their business models depend on generating profits out of sales of housing, rather than out of the increasing value of land holdings; and it is the profitability of the sale of housing that they are trying to protect by building only at the ‘market absorption rate’ for their products,” he said.