Pioneers, pragmatists and sceptics: speculative housebuilders and brownfield development in the early twenty-first century

Abstract

Despite the significant role that speculative housebuilders have in new housing provision, little attention has been paid to understanding the behavioural practices of speculative housebuilders and, in particular, evaluating their response to state-led policy initiatives seeking to influence their business practices. In addressing this gap, this paper uses the policy switch favouring brownfield development as a mechanism for examining how housebuilders respond to increasing state intervention in their business practices and, in doing so, explores the increasingly contested relationship between the state and the market in housing supply. It then reflects on what impacts this may have on housing delivery within the changing financial and policy context beyond 2010 and warns that public policy seeking to influence the location, type, quantity and quality of new housing needs to be supported by policies that encourage widespread behavioural change in the speculative housebuilding industry.

Exploring the Impact of the Recession on British Volume Housebuilders: A Behavioural Analysis

“…During the land acquisition process, a speculative housebuilder will search for suitable development sites in the best market locations (Adams and Watkins 2002) as determined by its individual strategic business focus and development priorities (Payne 2013). Once identified, the housebuilder will generate a land value with which to make an offer to the landowner.…”

“…Whilst previous research refers to the risk averse nature of the British speculative housebuilding model (see Payne 2013, Payne 2012, Payne 2009), it does so at a cursory glance, providing limited empirical evidence to elucidate the risk averse attitudes, motivations or business behaviours of housebuilding firms. In seeking to fill this gap, this section of the paper presents evidence of how the recession affected the day-to-day decision making of Britain's biggest housebuilders, particularly their land behaviours, indicating the emergence of a more risk averse recessionary business model.…”

“…There remains a key test for academics and policy makers in better understanding the nature and operation of British housebuilders if policies seeking greater levels of output from them are to be realised. A more nuanced understanding of the causes and consequences of behavioural change in the speculative housebuilding industry and a deeper understanding of what limits or stimulates speculative residential development, is arguably necessary (Payne 2013).…”

“…This journey through boom and bust in speculative housebuilding in the early 21 st century, from fervency to collapse, is an exemplar of the inherent nature of risk and speculation underpinning the structure of housing provision in Britain and Taylor Wimpey 1 n/a n/a n/a 360.2 n/a n/a n/a 4,714 n/a n/a n/a 15.2 n/a n/a n/a 14,862 (Payne & Barker 2015). In this sense, risk is contingent on broader shifts in the institutional environment of speculative housebuilding as well as being the result of individual firm decisions (Payne 2013 is most acute for housebuilders when they engage in land and housing markets as they are subject to these dynamic, often volatile market mechanisms which influence the price and value of the key inputs (land) and outputs (homes) of the speculative business model (Barker 2004, Payne & Barker 2015.…”

“…A worked example of this cash flow process is shown in Figure 4. The speculation of capital in this way introduces a series of risks in speculative housing development and helps explain the prevalence of a strategic focus by housebuilders on two key aspects of that development process, namely land acquisition and construction efficiency (Payne 2013). …”