Housebuilders’ landbanks: Inventory, asset or hoard?

Abstract

In the context of longstanding allegations of land hoarding and/or speculation, this paper examines the land holdings of major housebuilders. The paper discusses the concept of landbanking and potential motives for and consequences of holding land inventories. Through a descriptive analysis of quantitative, temporal data of the landbanks of leading, listed housebuilders, the paper analyses the land holdings of residential developers in both the US and UK. The analysis encompasses various aspects including the relative scale of their land holdings, the extent of land ownership compared to control (typically through options) and the evolution of these patterns over time. It is found that the main motives for holding significant land inventories could be operational, investment or anti-competitive but that holding land also comes with opportunity costs and risks. Despite operating in a highly imperfect land market and restrictive planning regime, the large UK housebuilders have been able to maintain significant and relatively stable landbanks. In comparison, the US has seen a major shift towards land-light strategies. US housebuilders increasingly rely upon relatively short-term options, rather than outright land ownership, to secure their pipeline of development plots. The shift primarily aims to hedge risks associated with holding land. Although the comparative evidence is limited and imperfect, it generally indicates that UK housebuilders tend to maintain smaller land inventories compared to their counterparts in the US, Australia, and Ireland.