Why does The Guardian hire the economically ignorant to write about economics?

Dotted across the country is industrial land with nothing on it. Derelict or simply vacant, there is an empty space where once machines hummed.

Making use of land that has potential for housebuilding or a return to its former industrial purpose should be a priority for any government.

Yet at the moment landowners can sit happily on their inert patch of ground without any penalty.

It\’s the reason why all the big house builders can boast three or more years of land with planning permission and allow it to sit idly on their books.

Just ignorant, ignorant tosspottery.

Being a big housebuilder is a continual process. You\’ve a workforce, machinery, management, designers and all. You do not develop one site then sit around for a year until the next one is ready to develop. Rather, you\’ve got you planners planning the next but one, the designers designing the next and the builders building the current one at any one time. And when the current one finishes then the builders move on to the next, the designers onto the next but one and the planners and acquisition agents onto the next but next but one.

You are continually putting land to be developed in at one end of the process and pumping out houses at the other end.

Such a continual process will, obviously, have a certain amount of land in it lying around waiting to be developed. The question is, how much of that is optimal for any one firm to hold?

The biggest influence on that (the cost of finance will be important etc, but this will be the biggie) is how long does it take to get planning on a piece of land? No, not the basic \”Yup, you can build houses there\” sort, but the \”Yes, we the local council approve your plans for this development\”?

I\’m told that it takes two to three years for a development of any size. So, how many years of work will the land bank be? Two to three years, obviously, so as to ensure that there is always something fort the workforce to go work on.

And that\’s why those land banks. It\’s not because the builders are cackling with glee as they cough up interest payments on land they\’re not using. It\’s because the bureaucracy takes so fucking long to allow them to use it.

Tosspot.

It gets worse:

An LVT would be an annual tax on land based on its market price. This doesn\’t move very much and with a tax in place would move even less. There is no speculation in land in the same way there is in property.

Idiot tosspottery. The whole property speculation game is actually piss all to do with property. Or even land: it\’s speculation in the right to build on a piece of land. It\’s the planning permission that rises and falls in price. There\’s a very simple method of proving this too. Look at the insured value against destruction (fire, say) of a three bedroom house in Bradford and one in Westminster. The amount the insurer will give you if the place does burn down will be roughly the same (same sized house etc, obviously). And it won\’t have changed much over the past couple of decades, normal inflation aside.

Obviously, the value of the whole package, land, house and planning permission has changed over those years and between the two places. But it\’s the value of the planning permission that changes, not the bricks and mortar.

17 comments on “Why does The Guardian hire the economically ignorant to write about economics?

  1. When a house builder converts an industrial wasteland into a housing estate, they will be evil for poisoning the children. There will also be wringing of hands about replacing factories (holy places to the left, though no Guardian correspondent has actually worked in one) with houses.

  2. …..Why does The Guardian hire the economically ignorant to write about economics?……

    Because the economically literate can get a better paid job elsewhere.

  3. In 1993 houses even in parts of Inner London cost less than building cost. Now you might be insuring for £300K what is worth £1M.
    What’s changed? Why, the land price has gone from negative to hugely positive.
    So land is very volatile in price.
    But land, to coin a phrase, is an illiquid speculative instrument.
    Big builders have lots of land, and they are quoted stocks. So if you want to speculate in land you can do it through shares of big builders.
    We would thus expect to see that volatility (beta) in house builders is greater than the market as a whole.
    And that’s exactly what we do see, Worstall, you idiot tosspot!

  4. Its an interesting and amusing thought experiment to imagine the articles that would be written if big builders suddenly said: “OK then*” and built on every plot for which they have planning permission and then promptly laid off all their staff.

    My guess is their would be howls of indignant outrage about capitalist bastards, but that’s probably just my cynicism.

    *That presupposes that the building industry has the capacity, but hey it is only a thought experiment.

  5. bloke in france

    You seem to have miss understood something. Nowhere does Tim say that the price of land is not volatile, whereas the article he is quoting does.

  6. Am I misunderstanding this LVT thingy?

    They want to levy the LVT tax on land the builder doesn’t want to be standing idle? Land that is costing the builder/developer a fortune in loan repayments or opportunity loss from other things the tied-up money could be doing.

    They want to add another reason not to build? As opposed to speeding up planning?

    Is that right?

  7. I suspect they would want the LVT to be based on the value of the land _with_ planning permission, even if the planning permission has not yet been granted. Quite a lot of brownfield sites, I suspect, actually have an economically negative value, in that the clean-up costs exceed the value (with just the existing permission for industrial use) of the land.

    Certainly, the fields that our new High School was built on weren’t economic for housing development because they used to be a refractory works. The most polluted bit is now car park and there was a long and irritating campaign to prevent the school being built even on the okay bit (as well as various gas funnelling measures being built in to the architecture.)

  8. You could tell Mr. Inman that there *is* a penalty for just holding onto land and doing nothing with it. Its called “Property Tax” and “Interest Payments On The Loan You Took Out To Buy The Land In The First Place”.

    Both of those tend to *incentivise* developers to keep as little real estate tucked away and unused as possible since as soon as they develop it they can start earning income from it.

  9. Spectator 19th October
    “Exclusive : No 10 advised to punish land hoarders
    Jake Berry who has worked as PPS for Grant Shapps since November 201o has written a paper for Number 10…it argues that developers who land bank sites should be penalised for doing so.”
    As for developers striving might and main to flood the country with houses so diminishing their profit per unit and bringing on the House Price Crash denizens of that website pray for:
    House completion rate 2011/12= 120,000 ; completion rate 2007 (boom time )=180,000
    Completion total for 1933-1939 =3 million or half a million a year.
    Tim’s use of figures for sites with extant planning permissions does not add up.

  10. What was the delay in getting permission 1933 – 39?
    What was the cost to the developer in holding the land to get permission back then?
    Was land easier for developers to buy back then than now?

  11. There was a school near me that shut down in 2005. In 2006 the building was knocked down and site cleared for development.
    Builder planned to build about 80 new homes on the site – a bunch of the locals in the nearby housing estate complained. Hearing, enquiry etc. In 2012 the company started building on the site – 6 years of an empty site that presumably someone was paying for.

  12. Mr Reed
    You got the slightest idea how houses were built pre-war? 4 walls, stick a roof on, lick of paint & done. Used to take about a week. Minimal wiring, minimal plumbing, single glazing, no insulation whatsoever.Ever seen pre -war building regs? A pleasant read over breakfast.
    2012? There’s a reg for everything. Bloody great books full of them. Electrical regs, gas regs, water regs. Insulation requirements & U values. Energy efficiency. Safety glass requirements. Ventilation requirements. All that has to be agreed before a start. Then there’s all the health & safety requirements for site work. Qualifications for trades.

    Comparing with a pre-war house is like comparing a Prius with an Austin 7 Ruby.

  13. The irony however is that in many ways 1930s houses are the golden era of Britsh house building. They are usually pleasant, semi detached, durable properties of a comfortable size for a typical family.

    New builds now tend to be soulless tacky pokey places built to unpleasantly high population densities. Anyone would think this is because the state controls what can be built, and gives us what it thinks is good for us…

  14. Idiot tosspottery. The whole property speculation game is actually piss all to do with property. Or even land: it’s speculation in the right to build on a piece of land. It’s the planning permission that rises and falls in price. There’s a very simple method of proving this too. Look at the insured value against destruction (fire, say) of a three bedroom house in Bradford and one in Westminster. The amount the insurer will give you if the place does burn down will be roughly the same (same sized house etc, obviously). And it won’t have changed much over the past couple of decades, normal inflation aside.

    Well, this is also bullshit. It’s not the planning permissions themselves that bestow the value; even where there are basically no restrictions in place, site values rise and fall. The permissions are just one factor.

Leave a Reply

Name and email are required. Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>