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Land Supply

When you look at the housing market in the UK, specifically planning policies, you can see why the subject is so complicated. Today, the demand for land versus housing development is definitely unbalanced. One study performed recently focused specifically on land availability and housing developing in Hertfordshire and Cambridgeshire, with results that were quite interesting.

For instance, this particular study showed that housing output in these parts of the UK was either less than or equal to structure plan requirements in two districts where the release of land was far more constrained. Additionally, land released for housing pictured by the structure plan did not match the market demand specific to timing or normal pattern. Then, the study also showed the most developers typically did not challenge existing planning policies simply because the cost of appeal and negotiation was too high.

Other interesting facts associated with this study included areas of constrained land supply having fluctuation in building of homes being less than the price of housing and land for housing. For areas were constrains were somewhat low, land prices increased the most during housing booms. In fact, during the following slump, prices in these particular areas stayed high, more so than they were ten years prior. Additionally, the study showed that the pricing change for houses seemed to follow a set pattern in all areas and more interestingly, for all types of housing structures.

The bottom line is that the amount of land and the distribution of that land to be used for building homes are determined by the planning system in the UK, which includes a number of things such as formal policy statements to include local and structural plans, negotiations, developmental interests, and so on. To help balance out constraint on land release in the UK, many times planning documents are used. With this, land is released in one area by allocating more land that would be used for development but somewhere else.

The assumption here is that the demand for housing land located in a constrained area would go to other areas where land is actually available. However, if the transfer does not happen, the constraint on the land release would change a number of things such as the distribution of the home building activity, the type of development, the timing of the home development, and the price of home development in all areas. Therefore, this type of project is geared toward assessing planning constraint and nature, along with the various levels of constraint on development but at the local level.

When looking at the structure plans for both Hertfordshire and Cambridgeshire, a couple of things were discovered. First, for Cambridgeshire, a jobs-related growth policy coupled with dispersal of activity taken away from Cambridge City and the county's south regions was adopted. Second, for Hertfordshire, land release was limited in physical infrastructure to what they call "spare capacity". However, in both cases, the primary focus was on development of existing and larger type settlements.

Something else discovered was that structure plan policies were being interpreted quite differently at the district level. For instance, in Fenland, when looking at requirements for dwellings, projections went beyond the structure plan and large sites released in small villages. It was also found that planning permission for stock sites grew extremely fast with the number of structures exceeding the provisions set forth in the structure plan.

If you look at the interpretation of the structure plan policies on land release for South Cambridgeshire, you would see they adopted an even stricter version. In this case, they only made exceptions in cases where other considerations took priority. On the same hand, North Hertfordshire adopted much the same structure plan policies, ending up completing just slightly more than what the structure plans had targeted. For Fenland, a noticeable increase occurred in South Cambridgeshire with completions in North Hertfordshire staying consistent over the past ten years.

Another aspect of this particular study focused on price. Keep in mind that during the late 1980s, the UK, specifically in these mentioned areas, saw huge increases in demand for land. By the start of the 1990s, housing land in Fenland was double that of agricultural land, which meant a relatively low constraint on supply. However, if you were to look at prices for both South Cambridgeshire and North Hertfordshire, you would see prices of housing land skyrocketing to twenty times that of agricultural land.

Through the study, it suggested that during this book, the increase in demand was focused on the constrained areas. Just keep in mind that when at the highest, the price of housing land in South Cambridgeshire reached 150 times more than agricultural land with North Hertfordshire going for more than 200 times more. By that time, even Fenland had shot up to 60 times greater than agricultural land. The interesting thing is that even after the boom ended, land prices throughout all of the districts fell hard but even so, they stayed higher then they were in the early 1980s.

What we see today is an on-going challenge between land supply and housing development in the UK. The problem is that land is hard to find and land that is found is expensive. Because so many commercial developers are snatching land up, it makes it difficult for private homebuilders to buy land and self-build. Then when you consider the planning permission and its challenges, it is easy to understand why the trend of supply and demand remains imbalanced.

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