Londoners struggling to pay their rent or find affordable housing can largely thank land banking for their woes, that and capitalism
Land banking: the practice of aggregating parcels of land for future sale or development.
A property manager once asked me, after agreeing on the fixed rent price that was advertised, ‘Would you like to pay any more rent?’ Although this question is mind-blowingly stupid, it represents today’s housing situation in the UK. (The same real estate agent also told me that fees in the realm of thousands of pounds for paperwork were necessary because ‘We have to make money’ — and I actually respected his outright honesty on this ludicrous practice.)
Rent is determined by a number of things. The desirability of the location, rates of other properties in the area, length of the contract, how good the schools are, proximity to city centres/stations, the greediness of the landlord and the amount of properties being bought/sold/let out in the area. You only have to type ‘land banking’ into YouTube to find a video produced by a US company called Green Deed to see how beautifully capitalist the act of land banking (LB) is. Green Deed say this process of buying-up land is ‘to find another avenue for building wealth’, and celebrate that we should own ‘a piece of the earth and charge others to access it! Works every time!’
LB is, in the words of Green Deed, a ‘proven wealth-building strategy’ and is something that is now supplying profit for supermarkets, as well as bulking up pension funds. It occurs mostly in green-belt zones, and at the expense of rural areas/habitats. With severe housing shortages in the UK, and London in particular, this process of buying up land and selling-off sections to various property developers and the like pushes up the price, which in turn makes mortgages and rent more expensive.
The following is taken from an article published in the Daily Mail (This Is Money, 2015): ‘The big four supermarkets have 46.61million square feet of space that they had bought with the intention of building new stores. But just 2.8million square feet is being built on — 20 per cent down on last year, according to property agent CBRE. The empty land could be enough to build in the region of 13,500 family homes’. If then you multiply 13,500 (the forecasted amount of family homes that could be built) by 2.4 (the reported average amount of people per household in the UK), this equates to housing for approximately 32,400 people, and more housing means cheaper housing.
The article continues: ‘Britain needs around 230,000 new homes to be built every year to make up the current shortfall, although some estimates put the number considerably higher. But to sell off the land bought for retail purposes for residential use could cost retailers billions of pounds … If a business has bought five acres of land to build a supermarket, which was expected to produce a turnover of £50 – £60 million a year and then sold it for residential use, it would get nothing like the returns it was expecting … There is a scarcity of suitable retail sites with planning permission so they are more valuable and typically more expensive than residential land’.
The reality is that supermarkets, seen to be central to so many communities, are pushing our rent up. I love a cheeky Tesco Meal Deal, but as much as I love expensive rent? Don’t know about that.
A BBC Radio 4 documentary which aired in 2006 titled You and Yours revealed how LB scams happen. The process involves a piece of land, one that has a low chance of receiving planning permission, being sold to unwitting individual investors for high profit margins. The following extract is taken from a study titled ‘Land Banking Companies: Why the majority of them are (legal) scams’, which was published on LearnMoney.com:
‘The sad truth is the plots of land sold by Land Banking firms have about a 1% chance of receiving planning permission over the next 20+ years. Although of course the land banking firm will give the impression that planning permission will soon be granted.
Land banking companies started appearing around the year 2000 and most if not all of these firms follow a similar business plan which is:
- Agricultural land is presently priced around £3,000 an acre
- The land banking company will approach a farmer or landowner and offer to buy 5-20 acres at well over market rate which normally means they strike a deal
- The company will then split the land up into smaller parcels and try to sell them for around £7,500 – £25,000 per plot (one plot is usually 0.1 of an acre) …
For most investors, dealing with a land banking firm will result in them losing the majority if not all their money’. (The report also tells how the Asian community is supposedly targeted more than white communities.)
If you actually wanted to buy land in the UK, it is advisable to speak to councils or the press, not to vulture companies like Green Deed. Land banking is pushing up your rent, taking money from smaller individuals and funneling it up to the wealthy. This selling-off of our beloved motherland is trickle-up economics at its absolute filthiest.
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