Land traders get a bad name in the property industry. There’s no way of getting away from it. Many perceive them to be speculators trading off a scarce resource.
Last year, well known architect Roger Zogolovitch denounced them as a “disease”. Others perceive their trading mentality as a barrier to house building and one of the sources of the housing crisis. A licensing scheme has been called to weed out those promoters who are not there to build the homes.
There are a number of reasons why this is a bad idea particularly if we want to encourage smaller developers to build homes. Most developers do not have what I would term a full-service capability i.e. the ability to take a raw site, steer it through planning, building and sales. It’s not how the world works.
Many small developers carve out and focus on the bits of the process that they are good at. Some are good at bringing sites to the market – this can take an awful lot of time depending on the nature of the landowner involved.
Other developers are good at building but know little of the planning process. It’s different strokes for different folks. Land trading is a product of complexity and rarely will you find small developers who can confidently say they are a full life cycle builder of new homes.
Despite perceptions to the contrary, most small developers also do not have deep pockets. Many borrow third party equity and debt to finance their schemes. This means they need to move quickly and often the capital is tied to a certain part of the development process requiring a swift exit.
The idea when taken to the extreme that developers will not be able to exit schemes until they are physically delivered, no matter what, will imperil the already precarious nature of real estate funding market. It will most likely make it more expensive as investors simply shy away from residential as an asset class.
Finally, the planning system is not immutable. Developers often need to change planning permissions to reflect market changes. Sometimes there is a confusion between land trading or planning speculation and genuine amendments to reflect a changed market.
All that being said, there are of course bad apples and those seeking to get away with threadbare planning permissions. This is the job of the Planning Authority to weed out through design scrutiny those that don’t come up to the standards required.
More generally, if we had a simpler, more SME friendly planning system then its likely smaller developers would have the confidence to take a whole life approach to the development sector. Rather than adding new regulations onto developers, find a way of making the planning system more navigable for smaller schemes whilst keeping high standards of design quality.
