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Bland Unsight

Cameron: "is It Not Time To Cut Out The Middleman?"

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This will improve accountability, raise effectiveness and deliver savings for taxpayers – that’s what efficiency can do. Indeed, across the piece, we should be bold. We should be smarter with what we do have.

At the moment, we sell off unused government land to developers. But the whole process takes a lot of time. Is it not time to cut out the middleman? Should government not just contract out development on this land and get building on it straight away?

Source

(h/t northshore)

If you were a volume builder how would you respond to somebody floating this as a possible initiative? How does it impact the value you place on your land bank? How confident should you be that the price the government will sell the houses at reflects the value at which you are carrying the land at on your balance sheet?

More nudge politics from the Conservatives?

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Combine it with compulsory purchase of industrial farmland and secure the planning gain for the public purse and you're talking. Affordable homes for all.

That's how we successfully ran Hong Kong.

they, not we.

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Source

(h/t northshore)

If you were a volume builder how would you respond to somebody floating this as a possible initiative? How does it impact the value you place on your land bank? How confident should you be that the price the government will sell the houses at reflects the value at which you are carrying the land at on your balance sheet?

More nudge politics from the Conservatives?

So it's exchanging one inefficient market for another one. Not necessarily in pure financial terms a net loss....

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It depends what he means by middleman and contract-out. I suspect he means planning and sell off for builds leaving existing land banks untouched respectively. He says 'contract out development' which is a bit wooly.

But if he means private owner effective control and leasing that would maintain long-term ownership and change gains incentives. As HAM says the latter is the Singapore/HK model.

Basically comes down to whether the immediate and running uplift accrues to Government, as HAM also implied - i.e. the issue is building not planning, so for the Government to really start undercutting landowner/homebuilder excess profit models they'd also need to influence output elsewhere and ensure that agglomeration effects on prices keep cycling within the taxpayer net somehow? Fingers crossed.

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So they would create leasehold houses on government owned land? using private building contractors?

It sounds a bit like that situation in the North East (recent HPC thread - Cramlington) where the owners were complaining they couldn't sell their house because buyers wanted the lease extended and that was pricey. The quoted asking price of that leasehold house didn't seem to be significantly or at all lower than for a similar freehold house.

If the idea helps more houses to be built quicker it might help things a bit but if credit levels stay high then it's still barely scratching the surface.

It does seem to undercut the builders hoarding their land banks a bit and they might start to get concerned about running out of buyers and start to build more themselves. There must be a more direct way of dealing with the land bank hoarding - such as compulsory purchase if not built on within a specific time frame, say on the grounds of national security and the security of the economy etc which they've all been going on about today about Corbyn.

Edited by billybong

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So they would create leasehold houses on government owned land? using private building contractors?

It sounds a bit like that situation in the North East (recent HPC thread - Cramlington) where the owners were complaining they couldn't sell their house because buyers wanted the lease extended and that was pricey. The quoted asking price of that leasehold house didn't seem to be significantly or at all lower than for a similar freehold house.

If the idea helps more houses to be built quicker it might help things a bit but if credit levels stay high then it's still barely scratching the surface.

It does seem to undercut the builders hoarding their land banks a bit and they might start to get concerned about running out of buyers and start to build more themselves. There must be a more direct way of dealing with the land bank hoarding - such as compulsory purchase if not built on within a specific time frame, say on the grounds of national security and the security of the economy etc which they've all been going on today about Corbyn.

That's the thing. For it to really mean 'cut out the middleman' it has to involve social land/housing of some tenure. Which would be fine by me and for affordability, but to date has been the antithesis of this Government. Unless you consider HTB et al to be a skewed means of psuedo nationalising housing and risk, which it is.

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One guess is that once the houses are built the government sells off the freehold of the land to say an estate manager/developer - maybe even an offshore one.

The new houses will have also added value to the land.

Edited by billybong

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It depends what he means by middleman and contract-out. I suspect he means planning and sell off for builds leaving existing land banks untouched respectively. He says 'contract out development' which is a bit wooly.

But if he means private owner effective control and leasing that would maintain long-term ownership and change gains incentives. As HAM says the latter is the Singapore/HK model.

Basically comes down to whether the immediate and running uplift accrues to Government, as HAM also implied - i.e. the issue is building not planning, so for the Government to really start undercutting landowner/homebuilder excess profit models they'd also need to influence output elsewhere and ensure that agglomeration effects on prices keep cycling within the taxpayer net somehow? Fingers crossed.

Is this not what the government did when it built council houses post war ? (put the contract for X number of houses to be built out to tender) but instead of renting them out they would sell them

This way they would make money from the uplift in value of the land once the houses were built instead of the developers ?

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Is this not what the government did when it built council houses post war ? (put the contract for X number of houses to be built out to tender) but instead of renting them out they would sell them

This way they would make money from the uplift in value of the land once the houses were built instead of the developers ?

Post war - probably something like that but the scale was immense. I'm struggling to believe this Government are considering selling land with permission, at post-permission prices or with that embedded gain excluded. I'm struggling even more with the idea that they're considering leasing it, but that's what they should do to also capture future rents.

Whatever happens - and I wouldn't be surprised if this is just where 'discounted' FTB homes come from - it will only add to supply if they undercut by promising a large steady future stream of such land and offer it to anyone and/or includes a means to prevent developers just switching projected builds from existing plans.

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From the speech in the OP's link there seems to be three main references mentioning/implying new home building.

Under Principles of a smarter state


More than that, efficient government can actually help with our progressive goals. Opening up contracts to small businesses spreads entrepreneurship and drives innovation. Closing down government offices and releasing government land can help build more homes and spread home ownership.

Under Devolution.


For example – one area has proposed a new Land Commission led by a new mayor, which would have powers to accelerate house building and reclaim major sites from dereliction. While here in Yorkshire we’ve seen exciting proposals that will see more power given to the local area on transport, skills and housing.

Under Efficiency


At the moment, we sell off unused government land to developers. But the whole process takes a lot of time. Is it not time to cut out the middleman? Should government not just contract out development on this land and get building on it straight away?

Just to say that the paragraph under Efficiency doesn't specifically mention housing so development and building (cutting out the middleman) could also mean other sorts of development as well as housing e.g. schools and hospitals and maybe even office/industrial development etc. The speech also has no details, no numbers and no time frame for the new homes they're proposing to help to build - and in the absence of any other information in the speech one has to assume the funding of any house purchases will be more or less the same as before.

Edited by billybong

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Post war - probably something like that but the scale was immense. I'm struggling to believe this Government are considering selling land with permission, at post-permission prices or with that embedded gain excluded. I'm struggling even more with the idea that they're considering leasing it, but that's what they should do to also capture future rents.

Whatever happens - and I wouldn't be surprised if this is just where 'discounted' FTB homes come from - it will only add to supply if they undercut by promising a large steady future stream of such land and offer it to anyone and/or includes a means to prevent developers just switching projected builds from existing plans.

I was not thinking they would be selling the land (apart from selling it to the buyer of the house that was built on it )

I was thinking more like the government contracts out the actual building ,ground work/ brickies /,chippies the government would now be cutting out the middleman ...Barat,and they like ,the land would be developed when they wanted it to be done opposed to selling to a developer that just banks the land

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Presumably after the war there was no point in any builder hoarding land as it was relatively cheap and not increasing so much in value. They had to build to make money - and there wasn't such a monopoly.

If they were building on ex government land presumably the government would set a completion date for house building and there would be penalties for non compliance. I suppose these days with their teams of lawyers a completion date with penalties can be pretty meaningless there are so many loop holes (as well as VIs and brown envelopes) so it's best if the government holds onto the land until completion - and the taxpayer might then even make a profit.

Edited by billybong

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I was not thinking they would be selling the land (apart from selling it to the buyer of the house that was built on it )

I was thinking more like the government contracts out the actual building ,ground work/ brickies /,chippies the government would now be cutting out the middleman ...Barat,and they like ,the land would be developed when they wanted it to be done opposed to selling to a developer that just banks the land

Developers are money making enterprises that also happen to build houses. They do that by optimising output for profits, because they can. The limiter isn't planning, it's actual building. Even if Government effectively sells direct via contracting the work, something else has to happen to make an end product cheaper, given permissioned land prices and subsidised price demand. Most house price is embedded in land value, so unless it introduces undercutting or competition (e.g. self build) developers will choose to build on the new permissioned land over existing plans and banks. To do otherwise would knock the value of broader portfolios.

That's why I wondered about selling vs leasing; because absent a LVT Cameron's (vague) comments don't yet add up to more building or lower prices. Government might capture the uplift rather than private hoarders, but so far that's just a win for Treasury. Which isn't a win; unless it's channelled back into society and housing.

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Developers are money making enterprises that also happen to build houses. They do that by optimising output for profits, because they can. The limiter isn't planning, it's actual building. Even if Government effectively sells direct via contracting the work, something else has to happen to make an end product cheaper, given permissioned land prices and subsidised price demand. Most house price is embedded in land value, so unless it introduces undercutting or competition (e.g. self build) developers will choose to build on the new permissioned land over existing plans and banks. To do otherwise would knock the value of broader portfolios.

That's why I wondered about selling vs leasing; because absent a LVT Cameron's (vague) comments don't yet add up to more building or lower prices. Government might capture the uplift rather than private hoarders, but so far that's just a win for Treasury. Which isn't a win; unless it's channelled back into society and housing.

Developers ? the government would be the developer all it would take would be a government employed project management team to hire in the trades, the developers as in Barat and the like would be out of the equation as would their land banking stranglehold ( government land will no longer be coming there way?)

That would be my take on cutting out the middleman ..but that's nothing more than a guess ,as you stated it`s all a bit wooly

Government might capture the uplift rather than private hoarders, but so far that's just a win for Treasury. Which isn't a win; unless it's channelled back into society and housing.

Well yes that could be the outcome whether it`s all about making money for the government or making housing affordable is what matters as if it`s the former it's going to have little effect, as you say there would have to be some sort of undercutting to nudge the developers practices

Would the threat of no more government land be enough to change the developers practices ? is this just a veiled threat ?

Edited by long time lurking

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Developers ? the government would be the developer all it would take would be a government employed project management team to hire in the trades, the developers as in Barat and the like would be out of the equation as would their land banking stranglehold ( government land will no longer be coming there way?)

That would be my take on cutting out the middleman ..but that's nothing more than a guess ,as you stated it`s all a bit wooly

That's all it would take if you or I were in charge. A Government that really wants more affordable housing could probably achieve it pretty quickly through regulatory/tax changes without laying another brick.

Well yes that could be the outcome whether it`s all about making money for the government or making housing affordable is what matters as if it`s the former it's going to have little effect, as you say there would have to be some sort of undercutting to nudge the developers practices

Would the threat of no more government land be enough to change the developers practices ? is this just a veiled threat ?

Or just promising expiring/no more private uplift permission ticks to hurry things along. But a threat only works if the opponent believes it would be followed through. So far at least the political interpretation of a housing 'crisis' centres on platitudes to [purposefully directed] quantity rather than [purposefully directed] price. Which means they're currently still full of shit because they know full well how it works. But I'd love to see a turnaround through application of economic sensibilities.

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I dont see Cameroon making it to the next election as leader of the tories. I'm personally not sure he expected to win this time around anyway.

He's already said that he'll be standing down before then.

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