by Jo Hanslip
In the paper published on the 15th November, A._Local_concentration_and_land_banks_working_paper the Competition and Markets Authority (CMA) has prepared a paper looking at the Housing building market and the local concentration and land banks. Comments are sought until the 6th December 2023.
In the Working Paper (Paper) as it is so titled, “is focused on the widespread practice of holding land in land banks on the part of the largest housebuilders.” In an Update Report (August 2023) the CMA highlighted that they were:
“exploring a number of potential concerns in relation to land banks and their impact on the housebuilding market, including:
(a) Whether the widespread practice of holding land in land banks reduces the availability of developable land, and whether this may act as a barrier to entry, particularly for small and medium sized housebuilders;
(b) Whether there is concentration in certain local markets through the control of a significant proportion of developable land by a small number of housebuilders; and
(c) The extent to which land banks compound the negative impacts of any lack of transparency as to the ownership (and control via options) of land.”
The purpose of the Paper is defined to be:
“(a) Gather views on our methodology for exploring land banks, and whether there are alternative ways of analysing the data we have collected which could shed further light on the issues.
(b) Gather views from stakeholders on the areas identified as potentially concentrated as to how this impacts the market functioning (for example, in terms of the strength of competition between housebuilders, ability for new or small housebuilders to enter and expand, or outcomes such as how much or how quickly housing is produced). We particularly welcome views from smaller housebuilders as to whether they experience any difficulties in securing land in these areas. “
The Paper is structured in the following manner:
“(a) …..background on what land banks, the purpose they serve for housebuilders, and the nature of the concerns in relation to them.
(b) ….the current state of land claims across England, Scotland and Wales, using data on the amount and distribution of land held by 11 of the largest housebuilders.
(c) …. set out … methodologies for examining local area concentration ….
(d) .. set out … findings so far and the further work .. to undertake to explore, and sense check … findings.”
Figure 3.1 of the Paper identifies the number of ‘plot’s, aka land parcels that are controlled on a long or short term basis. It is clear from the Table 3.1 the emphasis of control is within the west Midlands and southern areas of the England.
Source SMA Report 15th November 2023 Table 3.1
Two methods are used to assess potentially concentrated local areas.
- Method 1 is set out in paragraph 4.6 to 4.9 of the Paper (linked above)
- Method 2 is set out in paragraphs 4.10 to 4.14 of the Paper
The Paper sets out a series of questions on which responses are south (by the 6th December):
a) Do you agree with our focus on plots as a measure of land banks? What other measures should we take into account?
a) Do you have any comments or alternative suggestions for identifying local Housing Market Areas?
a) Do you have any comments on Method 1?
b) Do you have any views as to how much weight we should put on Method 1?
a) Do you have any comments on Method 2?
b) Do you have any views as to how much weight we should put on Method 2?
a) Do you have any other comments on our methodology for exploring land banks? What alternative or additional ways of analysing the data we have collected should we consider to shed further light on the issues?
a) In the areas identified as potentially highly concentrated in our analysis, what are your experiences of operating in these areas? How well do you consider the market to be working, and why?
We particularly welcome views from
- Builders active in the area as to whether they consider the market is
concentrated from their perspective, and how this affects their operations.
- Smaller builders as to whether they experience difficulties in finding land in
- LPAs as to whether they experience difficulties in identifying land for
development and having this converted into housing in line with locally identified needs.
b) Are there other areas of England, Scotland or Wales which you consider to be concentrated but which have not been picked up in our analysis? If so, please provide supporting information and evidence.
Several additional factors are identified to be taken into account in the CMA’s further analysis, these include:
“(a)The degree to which internal documents of housebuilders or feedback from stakeholders active in these areas indicate housebuilders face limited competition, and whether and how this impacts local outcomes such as build out rates;
(b) Whether the make-up of the local area makes concentration more likely e.g. small local population and so likely low demand, small or otherwise land constrained area and so less able to support multiple sites; and
(c) Whether housing delivery in the area against targets appears to be challenging (where available).“
The final CMA report is due to be published in February 2024.