In the first of two articles Ralph Kellas examines the factors behind slow' build out rates and analyses proposed ways to tackle the issue.
Between 2011/12 and 2017/18, on average, 258,192 homes were consented each year but only 153,560 homes were completed each year. This gap is a challenge given high housing demand and the slow ratchet of the Housing Delivery Test.
The issue has focused attention on the build out rate: how quickly new dwellings are completed once they are fully consented. The search for solutions to ‘slow’ build out has focused on the planning system (which restricts and permits development, but does not demand its completion). So what can the planning system do to increase the build out rate?
This blog is in two parts. Part 1 looks at the reasons for build out and some of the measures proposed to address it. Part 2 considers the implications of ‘slow’ build out for local authorities and the planning tools available to them to encourage faster build out.
Build out rate – market forces
On the face of it, large-scale housing development is an obvious way to deliver more homes quickly, especially given NPPF support and government funding for urban extensions / new settlements. However, the Letwin Review found that very large sites in high-demand areas are likely to complete only a small proportion of their units each year.
Lichfields’ research (first reported in 2016 and updated in 2018) found that sites of all sizes experience the same constraints. Sites of 500-999 units struggle to complete more than 100 homes a year. Although sites of 2000+ units can see higher build-out rates – i.e. over 300 completions a year – those higher rates tend to be short-lived within the overall build out period.
Why? For Letwin, it was too much of the same. The market can only absorb so many of a limited range of products (i.e. 1- and 2-bed private sale flats) within a given period, unless prices come down.
It is important to stand back when looking at the raw statistics and think about when the clock really starts to run for ‘consented’ schemes. Achieving post-consent approval of details (including reserved matters) can take significant time, which means the gap is not necessarily what it seems nor simply a function of supply-demand economics.
Several players have proposed reforms:
- Tenure diversity: Letwin recommended introducing new planning rules for large sites, requiring more diversity of home types and tenures in line with demand. These changes would include new legislation requiring ‘housing diversification’ to be a reserved matter in all outline planning permissions for large sites in high demand areas and a prod for authorities to “insist on levels of diversity that will tend to cap residual land values for these large sites at around ten times their existing use value”.
The Government’s response was lukewarm: supporting the principle of funding increased housing diversification through reductions in residual land values but moving on to the process elements of Accelerated Planning.
- Letwin also suggested that improved coordination between utilities, highways authorities and other agencies could help bring forward the start of build out. This is an area where real delays to build out occur and where Government should assist, including through the Infrastructure and Projects Authority.
- The British Property Federation has launched its own Accelerated Planning Manifesto focussing on how plan-making and development management can drive delivery. Noting the “contradiction” between deep cuts to the English planning system while increasing housing targets by 50%, the first proposal is for Government to “invest heavily in local authority planning departments to address … funding cuts combined with more investment from the private sector.”
- The Queen’s Speech on 19 December indicated that the forthcoming planning White Paper (to be published soon) will contain measures to help with local authority resourcing. We will otherwise have to wait for the publication of the White Paper to see what appetite the new Government has for the above proposals.
- A further change would be to recognise the limits of process engineering and regulatory interventions on supply economics and simply allocate more land. The current ‘Do Minimum Plus 20%’ approach would seem to create too small a pool of land.