Planning and land needed to satisfy demand

House builders in Britain have called for policy makers to increase resources for local authority planning departments alongside giving further training for the construction sector and quickening the delivery of public sector land, in order to increase supply of new homes.

The House Builder Survey from international real estate firm Knight Frank is built around the views of builders and developers across the country. The most recent report indicates that two-thirds believe the maximum number of new homes that can be built is year is 180,000. Worryingly, just 9% believe that the Government’s target of 200,000 is achievable.

Demands

Activity in the house building sector has increased over the previous twelve months, but the supply of new homes is still falling well short of satisfying demand.

60% of respondents to the survey believe that house completions will rise in the coming year, with 18% saying this could be anywhere between a 10-25% increase.[1]

A large majority of 90% said that construction costs will rise in next year, with another two-thirds expecting development land prices to also increase.

What’s more, the report found that labour and building costs are thought to pose the largest risk to the sector during the next twelve months. Respondents to the survey believe that the greatest policy change would be to recruit more people to Local Authority planning departments.

Imbalance

‘The imbalance between the demand for new homes and the number of units being built is well-recognised, by the industry and political parties alike,’ commented Grainne Gilmore, head of UK residential research at Knight Frank. ‘In the 12 months to April 2014, some 141,000 homes were built in the UK, up by 4% on the previous year,’ she continued.[1]

Gilmore went on to say that, ‘official household growth projections suggest an additional 230,000 potential households a year in the UK. Below these headline figures, there is a recognition that the right type of homes must be built in areas where there is the most housing need, typically adjacent to existing urban areas.’[1]

‘This has led to tensions about the greenbelt, with a lack of consensus on how to expand accommodation in some of the UK’s most thriving towns and cities. Nearly one half of the respondents to the housebuilder survey said that rules around developing on greenbelt land should be loosened,’ Gilmore added.[1]

Political support

Data from the report shows that policy markers across all the major political parties are keen to promote further development on brownfield land. The Royal Institution for Chartered Surveyors has published research that suggests there is adequate brownfield land available in England to build 226,000 homes by 2019.

‘Brownfield development is more costly than that on greenfield and there must be some recognition of this,’ said Gilmore. ‘In addition, there must also be some recognition that brownfield sites are not always ideally situated to provide the right type of units where they are needed. In terms of housing delivery, nearly 60% of respondents to our survey expect to increase their housing completions in the next 12 months, with a fifth expecting to increase by up to 10% compared to the previous 12 months,’ she added.[1]

Gilmore acknowledges that, ‘while any uplift in development volumes will be welcome,’ she feels, ‘it will be a worry for policymakers that, when asked the maximum level of housing supply that could be delivered to the market under current conditions, more than two-thirds said it was 180,000 units or less.’[1]

Planning and land needed to satisfy demand

Deadlines

Additionally, the report shows that since the deadline for the changes to the use of Section 106 payments to fund infrastructure passed on the 6^th April, less than a third of local councils have adopted a new Community Infrastructure Levy structure instead. This means that development could be stalled as these different structures are organised.

Community Infrastructure Levy was found to be the biggest risk to the sector, with three-quarters of respondents highlighting it as a threat. 56% said it was acting as a drag on development as a whole.

‘In terms of planning, the verdict on the National Planning Policy Framework three years on from its introduction is mixed, but overall house builders say it has contributed to a rise in development values,’ noted Gilmore. ‘While there may be some issues with the NPPF, only 26% said that moving back to a more regional approach to planning was a key priority for policy makers as shown.’[1]

‘While many in the industry believe there are issues that need to be ironed out with the NPPF, there is little appetite for policymakers to launch a new form of planning legislation. However, it is notable that only a quarter of respondents said that under the NPPF the speed of securing planning permissions had fallen. This may underpin the feeling that more resources should be allocation to local planning departments,’ she also stated.[1]

Additional resources

Making more resources available to local authority planning departments was highlighted as the feature for boosting development volumes by respondents. Gilmore observed that, ‘many planning departments have been affected by public sector cuts and a result are now overstretched.’ She continued by saying, ‘while it may on the surface seem counter intuitive, house builders and developers are in favour of robust local planning departments, it follows that developers not only want speedier decision times, but also more robust discussions around planning decisions, resulting in fewer appeals and planning permissions granted subject to long lists on conditions.’[1]

Improvements and encouraging more skills training for the construction industry was found to be the second most important measure for respondents to the investigation. ‘The need for more skilled labour is underlined further in our survey, with 94% of respondents saying that the current cost and availability of labour was a risk to the industry. Some 40% of respondents said the risk was significant, while 42% said the risk was moderate. A further 12% said the risk was modest. Those working in the industry also report that lack of available labour is hampering activity,’ Gilmore noted.[1]

‘The effective release of public sector land continues to be a key concern of the industry. Last year, the government announced that from this year, the HCA would become the default disposer of centrally held government land. In last year’s Autumn Statement, it was pledged that land with the capacity for up to 150,000 homes would be released between 2015 and 2020,’ she added.[1]

Capital gains

Gilmore believes that, ‘there is a need for local councils to also get involved in disposing of land or using it as part of joint venture developments.’ She notes that, ‘in London, the pressing need to deliver more homes has been addressed by setting up a London Land Commission to help speed up the process. It is estimated that 100,000 homes could be built in the capital if all surplus land held by the GLA alone was used for development.’[1]

‘The need for more homes built where they are needed most is pressing. Ultimately it is a step change in supply which will help ameliorate affordability issues faced by some buyers, creating a sustainable long term housing market,’ Gilmore concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-building-developers-planning-2015092211008.html