The public sector has historically been a strong driver of strategic development projects. Their involvement in delivery has declined in recent years as austerity measures have taken hold and public funding has been curtailed. The public sector’s share of schemes, by number of units, has slipped from 22% in 2010, to 19% in 2011.
This has, however, been offset by an increase in the number of public/private initiatives. An increasing recognition of the need to involve private sector partners at an earlier stage of development has seen the proportion of public/private partnerships grow, albeit marginally, from 11.6% in 2010, to 12% in 2011.
Public land is an under-utilised resource and, recognising this, the government has announced its intention to release sufficient public land to deliver 100,000 homes by 2015.
Government departments with significant land holdings have identified land and property that could be released for new residential development, in the intention to make as much available under the ‘Build Now, Buy Later’ initiative.
Potential mismatch
Our analysis of this proposed public sector land supply points toward a potential demand/supply mismatch. Only 35% of public initiative land over ten acres in size is located in market areas where house prices are above the national average. This is where development is likely to be most viable and where housebuilders tend to concentrate their efforts.
Analysis of deals done in the last four years shows 79% of all land has traded in these higher value markets (see Graph 5). There is therefore a question over the appetite for this public sector land. The commercial terms under which the land is released will be crucial.
The surplus public sector land in the lower value markets (65%), has the potential to meet excess housing demand and construction activity here will contribute to economic growth and sustainable development. However, there is likely to be less land value on these sites, to be shared among planning obligations, Community Infrastructure Levy and land value to the government department.
This is a situation where joined up government is needed to meet the right balance of policy objectives and where new mechanisms to release land value over the longer-term are more likely to be needed.
Maximising value
Outside the public sector, conventional housebuilders control 12% of all sites (by number of units), but their involvement is concentrated at the construction stage, where they control 18% of developments (see Graph 6).
This reflects housebuilders’ expertise in the construction and delivery of the finished product. By contrast, commercial developers and property companies are particularly dominant at the early stages (30%), where they focus on promoting the site and guiding it through the planning process.
Private sector partnerships are among the largest ownership groups at the construction stage (19% by number of units). This is a reflection of landowners who wish to maintain an interest throughout the development process, while utilising the expertise of a specialised development partner.
Land values are currently stagnant for difficult strategic sites, and if landowners are to maximise the value of their assets, long-term commitment is required. Active investment in infrastructure and placemaking is central to unlocking value over the long-term. Development partnerships containing a range of expertise are likely to be the best way to achieve this.
.jpg)
.jpg)
