News Item

Posted: 18th August
By: rlf


Tesco to build 4,000 new homes on undeveloped land

As Britain continues to be caught in the grip of the worst housing crisis in recent times, Tesco has announced plans to develop thousands of new homes on sites that were originally earmarked for new stores.

The announcement followed revelations that the company owns a vast bank of land in the UK, (some 1,100 acres) for which there are no development plans.

This led to fierce criticism of the retailer for ‘hoarding’ land, which could be used to build up to 15,000 new homes.

The retail giant, which already has a property portfolio worth £20 billion, is yet to decide if it will sell the land or build the new homes itself (via its in-house developer, Spenhill), in a project that is worth an estimated £1 billion.

According to Property Week, the majority of the houses will be built in the south east of England, with 700 properties planned in Welwyn Garden City (close to Tesco’s operational headquarters) and 80 houses due for development on the former Evershed printing works site in St Albans. Developments are also planned in Liverpool and the west of England.

The initiative will help in part to ease the chronic housing shortage in the UK, but there is a pressing need to find a longer term solution.

Large companies like Tesco have long been accused of ‘land banking’ around major towns and cities, to prevent competition from other suppliers. In simple terms, ‘land banking’ is the practice of land owners purchasing and holding onto an asset interminably, or until such a time as they can sell it at an inflated price. This is also evident in the housing sector, with the likes of Persimmons and Barratt Developments holding land banks for upwards of four years.

By exploiting the property market in this way, such land owners are making money out of a crisis that they could be helping to solve.

What is the solution?

One of the proposed ways to tackle the issue of land banking is the introduction of a Land Value Tax (LVT), which is a levy on the unimproved value of land, excluding any structures or improvements.

LVT has been widely debated amongst politicians, with proponents claiming that it will address at least one source of the underlying housing crisis, by making it more expensive for builders to hold onto undeveloped land, while kick starting the development of vacant and underused sites.

Sceptics argue that the levy will result in higher prices on land that has been taxed, while awaiting development, or builders will simply delay their planning applications.

The silver lining to the dark cloud is that 4,500 new homes are expected to be built by major supermarkets between 2013 and 2018.

Tesco to build 4,000 new homes on undeveloped land

The announcement by Tesco seems to have started a trend, as Sainsbury’s has also announced that it will be teaming up with Barratt on a major housing development, which will include 700 new homes and a tube station in Battersea, South London.