Why not build faster?: Explaining the speed at which British house-builders develop new homes for owner-occupation

Abstract

This paper investigates how speculative housebuilders determine the speed at which approved housing sites are developed. It finds that where competition for land is intense, housebuilders must assume the highest possible sale prices to make winning bids for sites. Such bids are viable only because the release of land is restricted by the planning system, while the release of homes is managed on a site-by-site basis by builders to achieve the target sales rates underpinning earlier land bids. These factors have combined to encourage caution about the capacity of local housing markets to 'absorb' new-build supply. Even if the planning system released substantially more land, it may take some time before housebuilders responded by building out faster. While the research predates the recent collapse in speculative housebuilding, it is argued that these findings are likely still to be valid once the development of homes for owner-occupation recovers from the current recession.

Housing supply and urban planning reform: the recent Australian experience, 2003–2012

“…Such decisions include the pace of housing development and the release of homes to the market. For instance, research in the UK has shown that builders will maintain steady output during times of high demand (achieving higher sales prices) rather than build and release houses more quickly (Adams et al, 2009). Similar findings have been demonstrated in the US, even in contexts of low regulation (Guthrie, 2010).…”

“…Gurran and P. Phibbs Further, the planning process is one element in a complex supply chain affected by wider construction industry trends, the cost and availability of labor and materials, the cost and availability of development finance, and the market decisions of developers or house builders (Adams, Leishman, & Moore, 2009;Guthrie, 2010). Such decisions include the pace of housing development and the release of homes to the market.…”

Understanding industrial land supply: how Dutch municipalities make decisions about supplying serviced building land

“…8. Adams et al (2009) then proceed to explain this specific behaviour in relation to the particular institutional structure of housing provision in the UK. House builders limit the number of new houses for sale at any one time, in order to achieve the high revenues necessary to recover the costs for land acquisition.…”

“…Subtracting the total development costs and the desired profits would give the maximum value that a municipality would be willing to pay in order to acquire the land. It is this maximum site value estimate that is regarded in several studies as having the strongest influence on the decision to initiate new development (see Adams et al, 2009;Antwi & Henneberry, 1995;Leishman et al, 2000). The influence on development activity can be described as follows: when expected sales prices of serviced building land are above average, maximum site values will be higher (provided that the development costs remain relatively stable) and municipalities more prone to bid for sites with asking prices that they would normally think not worthwhile purchasing.…”

It’s Housebuilding But Not as We Know It: The Impact of Neighbourhood Planning on Development in England

“…Ten companies produce 44 per cent of all new homes built in England and there has been a long term market concentration in the house-building industry where the largest company has 8 per cent of the market share (Adams, Leishman & Moore 2009). The restricted supply of land in the UK creates incentives for firms to combine both land development and housing construction functions.…”