Critics have warned that plans to overhaul the English planning system could lead to a deterioration in build quality and offer little genuine incentive to increase housing construction.
The government has launched a consultation aimed at reforming the post-war planning system, which the prime minister described as “a relic” constraining the construction of homes and compounding affordability issues.
Part of the problem with the current system is that planning decisions are “discretionary rather than rules-based”, said housing secretary Robert Jenrick in the consultation, with nearly all decisions to grant consent undertaken on a case-by-case basis, rather than clear rules. That increases the cost of capital for developers, he said.
The government hopes that the reforms will help tackle the acute housing shortage in the UK. Adopted Local Plans that are in place provide for 187,000 homes per year across England, significantly below the government’s target for 300,000 new homes to be built annually, but also lower than the number of homes delivered last year.
However, the proposed reforms have been criticised as removing local authorities and residents’ voices, compromising building quality and providing no guarantee that any more affordable housing will be built.
Ripping up the current planning system at a time of huge economic uncertainty was a “gamble” said Dr Hugh Ellis, policy director at the Town and Country Planning Association, while the “confused” white paper provided almost no evidence to justify the changes proposed. “I have never seen anything like it,” said Dr Ellis.
Central to accelerating the planning process are proposals to place land into three categories - ‘growth’, ‘renewal’ and ‘protected’. Construction of new homes and infrastructure that meet certain design criteria would be granted automatic planning permission on land designated for growth by local authorities.
Renewal areas, which would cover existing built areas where smaller scale development might be appropriate, would be granted “permission in principle” and protected areas would not.
The government estimates that this could halve the time it takes to secure planning permission on larger sites identified in plans.
However, granting automatic permission to land in ‘growth’ zones does not necessarily mean that housebuilders will have invested less capital in land at any one time, said Knight Frank head of residential development land, Justin Gaze. “They are still going to have to take land through the planning process and tie-up land in promotion and option agreements,” he said.
Concerns have also been voiced that accelerating planning permission could result in more poorly-built developments.
“If you take away regulation you get a rush to the bottom,” said Dr Ellis. “Ninety percent of their planning applications are being approved, what more do you want out of this?”
In recent years, housebuilders including Persimmon (PSN) and the former Bovis Homes, now Vistry (VTY), have incurred hefty costs in order to remedy build quality issues and improve customer service, which has eroded operating margins.
However, the volume of homes constructed is ultimately determined by whether housebuilders can sell them and at what price, rather than ease of supply.
“The point is this is all about demand, and that almost is the thing that needs to be increased,” said Mr Gaze.
Ministers also proposed a consolidated infrastructure levy, which would be charged to developers to help fund affordable housing and infrastructure and replace current section 106 payments and the community infrastructure levy.
Developer contributions currently deliver around half of all affordable housing and are made in exchange for permission for a building project. The new charge would be set nationally - either at a single or area-specific rate - based upon the final value of the development above a certain threshold and levied at the point homes are occupied. Local authorities may have the ability to ring-fence a proportion of the levy for affordable housing.
Yet the proposals contain no evidence of how housebuilders will be genuinely incentivised to increase affordable home construction, said Dr Ellis, and also fail to address issues such as regional disparity between the number of these types of homes being built. “I can see no single mechanism in the white paper that will result in more affordable housing,” he said.
A growing number of housebuilders including Vistry and Crest Nicholson (CRST) have increased their exposure to the affordable housing sector, attracted by the lower level of capital required to build these homes due to local authority support.
The negative impact would be if the infrastructure levy was set at too high a level, said Mr Gaze, which could result in a reduction in the value of land held by housebuilders. “You have still got to incentivise landowners to spend money on land and bring land through the planning process,” he said.
