Following details of the government review into build out of planning permissions for housing, (which we published last week), Jonathan Corris discusses why this could be an unwelcome distraction for the sector and what else is needed to speed up delivery.
As part of its land banking review, the Government has stated that an expert panel will help analyse why housebuilders aren’t building on sites with planning permission. First announced in the Autumn Budget, the review will seek to explain the gap between the number of planning permissions being granted against those built in areas of high demand.
The bigger picture
Housing Secretary Sajid Javid has said that this review is “vital” to understand how more homes can be built quickly. However, over the last 10 years, there have been several independent reviews and investigations of land banking – none have found evidence of the practice.
Whether it exists or not, land banking is just a very small part of a much bigger housing delivery picture. There are other blockers, which are having a more significant impact on supply linked to planning and infrastructure.
Planning woes
Achieving planning permission doesn’t necessarily mean that spades can hit the ground straight away. As highlighted by research carried out by Chamberlain Walker Economics on behalf of Barratt Developments, it can typically take nearly two years to start on site from achieving detailed planning consent.
This can be for a range of reasons, including delays in discharging pre-commencement conditions or some sites may need considerable work to be cleaned from contamination.
With pressure to avoid greenbelts, those delivering housing are often having to fund significant bills to clean up sites that have been subject to misuse and neglect under previous regimes.
Funding gaps
Another major challenge is the funding required to build at scale and deliver infrastructure.
In the absence of government grant, developers and housing associations need to walk the tightrope of boosting housing numbers while remaining commercial. That means that plans for larger developments will have to be approached with caution, so that cash flow isn’t negatively affected.
The infrastructure required for these schemes can be a major hurdle too. Many developers now recognise the benefits of putting infrastructure into a development first rather than pushing it to the end of the construction programme. Building new schools, roads and community facilities before the homes provides a place with an identity which in turn, encourages more people to live there. This not only helps to establish a community for people to be a part of but can also have the benefit of increasing demand and therefore a justification for all to invest more into a development. It is important not to lose sight that the cost of doing so is often huge, requiring more funding from the outset, which can be difficult to achieve within a reasonable timeframe. This can also mean that one scheme may be pushed forward quicker than another due to the pressure on the financial resources of those building.
More collaboration
There isn’t a silver bullet to address these challenges but more collaboration within the development and housing sector could make a significant difference to the speed of delivery.
With the barriers that exist currently, large-scale housebuilding is very unlikely to be delivered quickly by just one party. The reality is that additional resources and support will be required whether that’s on a financial or strategic level. Partnership working between housing providers, developers, local authorities and private equity firms is therefore vital.
Whether through a joint venture or new housing company, a collaborative approach will enable complementary organisations to take advantage of each other’s strengths and skills and potentially create new funding models to accelerate housebuilding.
Fresh thinking
The Chairman of the Review Panel, Sir Oliver Letwin, said that the government is “serious about finding ways to increase the speed of build out as well as tackling the complicated issues surrounding it.” But the land banking review will only scratch the surface of the supply problem.
Trying to shift blame onto those trying to deliver new homes will only serve as an unwelcome distraction to the housing sector. Now is the time for fresh thinking and new approaches that could see parties from both the public and private sector work together more effectively to boost housebuilding and close the gap.
For more information please contact Jonathan Corris, Caroline Mostowfi or Neil Lawlor.
