Does land development in the UK boil down to green belt versus brownfields?
The national housing crisis in the UK is blamed by many on restrictions to green belt development. The solutions, however, may be worked out through localism.
There is much debate in the United Kingdom over different solutions for the housing shortage. One part of the argument has to do with the dearth of financing available to both builder-developers and potential homebuyers (although the government is dealing with this latter point through schemes such as Help-To-Buy). Another part has to do with government directives on where to build: in green belt areas or on brownfield land.
The UK green belt policies reach back to the 1930s, when political leaders adopted a policy to prevent suburban sprawl. These policies effectively kept a ring of forests, agriculture and undeveloped land around many of the towns of England, Wales, Scotland and Northern Ireland.
But the total population of the country has changed dramatically in the eight decades since, as have a host of economic factors. Not only has industry and population expansion created evermore-dense towns, but a housing crisis has developed due to an unfortunate confluence of factors in the past decade: immigration, a higher birth rate, seniors living longer, and the recession.
Total population growth in England and Wales has been at about 7 percent the past decade, adding more than 3.7 million people since the turn of the century. But the financial crisis of 2008 and the resultant recession have been consequential as well. Banks are reluctant to loan money to developers, just as they have not been lending to homebuyers. New home building is at the lowest rate, as a portion of population, in 100 years. Meanwhile, multiple generations of families are sharing housing while they wait for conditions to change – specifically, for more homes to be built.
So the question in broad brush drills down to this: when the economy recovers, where will home building happen?
Directives to build brown – and the problems that presents
PDLs, (Previously Developed Land) in the towns, offer an alternative to green belt building. Also called “brownfield” sites, this is where land is vacant or occupied by vacant and decrepit buildings, or perhaps zoned for commercial and industrial purposes but sitting empty – seemingly providing opportunities to build. This is land that is contained within the green belt rings, closer to town centres and on the grid of existing utilities. These conditions make it easy to develop property, and would provide a vital, urban lifestyle to residents – and consistency with the green belt ideals of the 20th century, right?
Around the year 2000 a government commission led by acclaimed architect, Lord Richard Rogers strongly encouraged building new housing on brownfield lands, in part as a strategy to avoid green belt development. The commission acknowledged that 3.8 million new homes would be needed by 2012.
Builder & Engineer magazine weighed in on the topic more recently and they aren’t in complete agreement with that approach. The publication cites how building over the past decade has been at 160,000 to 200,000 new homes per year (and less in 2012, with a reported 21,540 new starts in the second quarter, which would annualise at about 86,000 units). Why so slow? They cite the observations of Richard Simmons, who is managing director of the Construction Centre and also a property developer.
“I think it is because brownfield is pretty slow to come to market by the time you’ve done all the testing,” says Simmons. “You have to spend a lot of money first assessing the site. Firstly you have the desktop study where they look for what contaminants are in the ground and their assessment reveals whether remediation is needed or not, which can be expensive. As a developer you are always thinking that there might be the cost of evaluating a site that might go wrong, so it’s not as easy as building on a farmer’s field.”
Not all brownfield land is contaminated, counters the British Property Foundation. A spokesman for the organisation explained that the broader definition of brownfield is PDL, which simply means it was built upon in the past. “Green building isn’t necessarily plush green land,” the spokesperson told Builder & Engineer. “It can often be nasty and derelict.”
The green belt solution?
The Daily Telegraph published an opinion piece in August 2012 largely in support of green belt preservation. It cites Housing Minister Grant Shapps’ stated support for development outside of green belt lands. Still, the newspaper acknowledges the importance of housing and the mixed picture created by the Localism Act of 2011:
“Protecting the green belt is not easy: it is in the nature of economically vibrant towns to sprawl into the countryside, and only the green belt stands in the way. Moreover, the Government’s support for the green belt can clash with its commitment to localism, as many local authorities want to build on it or causally redraw its boundaries.”
The media watchdog group FullFact.org took its own look at the scenario in September 2012 and finds a more mixed view. The group critically examined claims by the Campaign to Protect Rural England, CPRE, which are that brownfield land in England was sufficient for the construction of 1.5 million new residences.
But a closer look at the available land found something much less, says FullFact.org. Overall, there are 61,920 hectares of brownfield land in the UK, as compared to 1.6 million hectares of green belt property. A little more than half – 54 percent – of the brownfield sites are vacant or hold derelict buildings. Only the remaining 46 percent, approximately 30,000 hectares, of brownfields are truly available for repurposing and building without displacing a current occupant. This does not distinguish the portion of those brownfields that are truly appropriate and feasible for housing: many are contaminated with industrial waste, while others are situated in industrial corridors, where it would be difficult to attract residents to live.
For all of us, including those involved in UK land investment as well as those looking at investing in real assets, it may ultimately prove to be an argument that offers no national solution, as housing needs and philosophies about green belt vs. brownfield land may differ from town to town. Which in the end may be the ultimate benefit of the Localism Act.
Basically, this portfolio is constructed with a mix of 60% stocks, 40% bonds. The theory (or selling feature) is that this is a pension-style approach. You are presented with upside growth opportunity with stocks, safety and income with bonds.
• Significant volatility – During the 2008 liquidity crisis, many “balanced” funds ended the year down 20%, 30%, or more.
• In a low interest rate environment, bonds may not provide adequate income, and may lose value if rates start to rise.
• Little to no inflation protection.
The “100% Equities for Everyone” Portfolio
This idea, espoused by some advisors, is that the only way to true investing wealth and security is to go “all in” to the stock market. The highest returns over you investing lifetime will be made in the equity markets, they advise.
• Investing Near the Top – You are most likely to be attracted to this idea when recent stock market returns have been good. Therefore, the tendency is to buy high, potentially hurting returns.
• Long Bear Markets – There have been time periods of 18-20 years in which the market has failed to gain, start to finish. If you are 50 today, are you willing to wait until age 70 before your equities start gaining?
• The “Pillow Effect”- Most investors cannot psychologically take the stress of seeing all of their hard-earned money fluctuate up and down so much on a daily basis. Giving up sound sleep is no way to invest.
100% Private Exempt Market Products
Some exempt market sales representatives will tout all of the high income and growth potential in their products, and see no problem with you placing your entire portfolio into their selection. Why make 3% in GICs when you can make 8% in our products, they ask? The temptation of high returns can be difficult to resist.
• Risk – While risk may vary amongst offerings, regulators view the entire category as high risk. These products should never be compared to GICs. It’s like comparing a hammer to a saw, different tools for a different job.
• High Expectations That are Not Sustainable – A few years ago, many lending strategies such as Mortgage Investment Corps (MICs), offered high yields of, say, 8% per annum, paid monthly. Recently, we have witnessed a great deal of competition amongst lenders, causing rates to lower. So an 8% rate could change to 5% overnight.
• The “Blow-Up” Factor – Selecting exempt market products could be appropriately compared to navigating your way through a minefield. By yourself, with no equipment to detect the mines, the chances of stepping on one, and causing significant injury, are fairly high. When selecting exempt market products, the same is true. Without an experienced team of professionals to guide you, there is a reasonable chance that your product will not turn out as expected, and perhaps even go to zero.
Markets Made You Afraid? Just Put Everything HERE
After a significant drop in the markets, many investors are naturally afraid of continuing losses which could wipe out everything. So their insurance-license advisor recommends they place their entire portfolio into a Guaranteed Retirement Product (some of them end with a “plus” for example). The sales pitch is that you are guaranteed income for life, and you will never lose your principle.
• Extremely High Fees – The annual fee can be 3 or 3.5%, which is huge, and lowers your return.
• The Guarantee May Not be Worth It – A product that guarantees you against any losses over 10 years is normally not necessary, as it is less likely the product will be below your original amount invested over that time.
• Terrible Timing – The time your advisor should have recommended this product was before the correction, when the markets were high, not after. You are essentially locking-in losses, and lowering your upside when markets recover, the worst possible combination. As it turns out, since the great 2008 correction, markets have recovered significantly. Anyone who purchased these products close to the bottom missed out.
• Commissions – Perhaps you were so afraid of losing your money that you failed to realize that your advisor just “double-dipped”! He/She was paid handsomely when you implemented the first portfolio, and then paid a big fat commission cheque again when you bought the “Plus-type” product. Great for the firm, great for the advisor, not so great for you, the investor. If there ever was an instance of financial malpractice, this would be it.
Now that you know what to look for, ask yourself: “Do any of the above categories apply to me?”
One huge potential problem is that your banker is paid to sell GICs and mutuals, your broker stocks and bonds, your insurance advisor insurance products, and your exempt market representative private products (to be accurate, I am being simplistic, there is some overlap). Since many financial service professionals represent and are paid for selling their branded products, they either do not have familiarity with other categories, or have no interest in seeing your money go elsewhere.
It would be a tremendous benefit to you, the investor, if you received guidance from someone who is familiar with many product types, and can recognize when an outside party is required. Many times, the suggestion to keep everything “in-house” can cost you financially.
A Reasonable Solution
Now that we have seen a number of all-to-common ways that an investor can misallocate their investment assets, let’s discuss a strategy that can help you accomplish the following:
i. Reduce stock market volatility, reducing stress
ii. Create safety and guarantees, allowing you to sleep well at night knowing your money is safe
iii. Provide for market growth, which you want to participate in
iv. Protecting your portfolio against inflation, so you can keep spending and avoid lowering your standard of living
v. Make the process simple and easy to understand
One of the first discussions I always have with a client focuses on safety. You want to make sure an appropriate amount of dollars are allocated towards guaranteed investments, such as GICs, government bonds, annuities, and other, similar instruments. This assures you that, no matter what happens, you are able to sleep well knowing that money is there. That feeling of security is powerful.
Next, having a suitable mix of public stocks and bonds can provide for growth as well as safety, income, and diversification. These are important ingredients in a properly designed portfolio.
Lastly, an appropriate allocation to select private exempt market opportunities, containing real asset investments, can serve to stabilize your portfolio, protect you from the eroding effects of inflation, and can possibly be the “saviour” of your portfolio in times of financial crisis. I recently watched a video where famous billionaire investor Michael Lee-Chin (founder of AIC mutual funds) explains that, during the 2008 crisis, the part of his portfolio that saved him were his private investments.
How Can an Investor Distinguish Between Legitimate and Fraudulent Land Schemes?
The growth of the population in the UK naturally creates a need for new housing and commercial structures. But investors need to distinguish fraud from opportunity.
Between 2006 and 2012, The Insolvency Service closed down 82 land investment companies on the basis of fraud that took £60 million of would-be investors’ money with nary a sixpence in returns. But that may be just the tip of the iceberg of losses, as some authorities believe land investment fraud may cumulatively total as much as £1 billion.
How so much and how does this happen? It is hardly a new phenomenon, as investments in worthless land stretches back into history. Land fraud was present enough in the ancient times that it receives several mentions in the Old Testament, specifically Deuteronomy, Leviticus and Psalms. The very first mention addresses the fraudulent movement of a landmark that defines a boundary (Deuteronomy 22:17).
Modern land fraud takes advantage of individuals who are typically contacted by telephone. The pitch plays to a get-rich-quick scheme, hinging on the well-established growth of population, both at home in the UK and abroad, where world trade is opening up land in remote regions for agriculture and resource extraction. Some pitches are for contracts and property that are altogether invalid; in others, an actual tract of land might be sold to the hapless victim, however that land is usually inaccessible or forbidden from development due to proximity to historical or environmentally sensitive property.
To be clear, there are wholly legitimate opportunities to profit from land asset growth. But these are investments that require a significant minimal purchase — £10,000 or more – and which are managed by professional land investment managers. It is extremely unlikely that such programs would use telemarketing to find their joint venture participants.
That is not to say that individuals pulled into fraudulent schemes are rural rubes. The Serious Organised Crime Agency (SOCA) did a survey in 2005 to identify how scams operate and proliferate. It found the following:
• “Suckers lists” are developed based on past responses to questionable offers; The Financial Services Authority uncovered one such list that contained contact information for 38,000 people.
• A much larger group of people, about 3.2 million adults in the UK, together lose about £3.5 billion in scams of all types each year.
• The profile of the victim may not be what you think. Often, some knowledge of the subject of the scam offer may make the scam victim over-confident in their decisions to participate in the investment. Many have had successful business or professional careers, even if they allow emotion to override good sense in an investment decision. And, their decisions are rarely off-the-cuff; instead, they spend time considering the decision.
• Oddly, these scammed investors often do not discuss the investment with family or friends. They seem to know they will be challenged but are determined to proceed anyway, without validation from others.
Legitimate land investment offerings should be made with a thorough prospectus that accompanies ample information on the professionals managing the investment and the strategies they are following. The population increase in the UK provides many opportunities for land asset growth, as housing is in very tight supply and needs to be replenished with new building. One type of land investment looks at the areas in the most critical need of building, where the investors can work with local planning authorities to seek a land use designation change. Under the right conditions, asset growth can be considerable – but a period of two to five years is typically required to go through planning and infrastructure development.
Are you willing to invest in a more long-term and reliable organic traffic source for your website? Then let’s look at a search engine that can assist you in increasing your traffic.
Interview an Influencer or Get Interviewed by a High-traffic Website
Have you heard of Tim Ferriss, the author of the Four-Hour Work Week?
His podcast is nowadays a staple content type that he provides to his viewers. Tim’s show has world-class performers who share their insights on a variety of topics, and he is well-liked on social media. Do Tim’s fans enjoy the show? So far, the show has received over 50 million downloads. On most days, it’s the most popular business podcast on iTunes.
Interviews, whether on video or audio, are inherently conversational, lively, and engaging. The great aspect is that it’s a win-win situation for both sides. The interviewer is exposed to a new audience, while the interviewee is able to provide his website visitors with new fascinating and authoritative information. You can ask an industry influencer to share your interview with their followers on social media if you interview them. Consider the organic traffic you’ll get from their social media followers, which number in the hundreds of thousands. Consider the level of interest generated by a prior Derek Sivers interview on the Tim Ferriss Show. Derek shared the show’s URL with his 283K followers on Twitter. It won’t hurt if you establish a relationship with the influencer as a result of the interview.
Similarly, being interviewed by a high-ranking website can result in a significant increase in search engine traffic. Harsh Agrawal’s blog, Shoutmeloud, received 35,000+ views in a single day after he was profiled by YourStory. That was the blog’s most popular search engine traffic source (with 600,000+ monthly visitors). Because interviews provide consolidated value, they can be used as a long-term lead generating source for your company. Consider how many bloggers you’ve learned about through interviews on YouTube and other high-authority websites.
You may also conduct a Reddit AMA if you have a very compelling storey to tell. Mateen’s AMA got about generating $85,000 in profit by selling TeeSpring shirts/hoodies received 2000 page views. He also boosted the number of visitors to his website on a daily basis.
By registering as a source with HARO, you can also answer queries from journalists. On HARO, Christopher from Snappa came across this question from Inc Magazine about the future of content marketing. He swiftly responded with a thorough response. He was mentioned in Inc a few weeks later as a result of this. HARO is an excellent strategy to have your brand mentioned on authoritative news sites such as Entrepreneur and Inc. Those backlinks will enhance your search engine traffic and increase your marketing strategy by improving your reputation in Google’s eyes. Contact an SEO agency to find out how you can do this and how they can manage it for you while you work on the bottom line of your business.