Land banking

A good example of the perverse incentives of the market system is land banking and the utter failure of the housing market (not enough people talk about how utterly the housing market is failing us).

“The three largest housebuilders (by number of houses built) regularly produce about 25% of all new homes, while the top ten typically produce about 40-50%. This means the government relies on a small number of private businesses to deliver most new housing. But their collective supply consistently falls short of targets. For example, the total number of additional new homes from all sources in England was around 233,000 in 2021-22 against the government’s target of 300,000.” Anyone ever play Monopoly?

“As a result, housebuilders have been able to secure government mortgage market support schemes – such as Help to Buy, introduced in 2013 – that were aimed at releasing pent-up demand for new homes. Research shows these schemes have inflated new build sales prices in some circumstances.” i.e. they are taking the subsidy, and have to be bribed to even build a house.

“When market power in local land markets was combined with structural power over the state, we believe volume housebuilders were able to increase their profit margins rather than ramp up delivery to help the government meet its target of 300,000 new homes per year in England.” They would rather not build homes, the article argues, because ramping up supply depresses house prices while at the same time pushing up land values (this would squeeze their margins, they want cheap land and expensive houses).