Immediately after November’s Budget, the price of many housebuilding companies’ shares dropped a little because of an apparent perceived fear by the investment market over potential Government action to end the so-called practice of landbanking.
So what did the Chancellor actually say and what will it really mean for planning?
Whilst speaking about housing supply, Mr Hammond said:
‘….. one thing is very clear: there is a significant gap between the number of planning permissions granted and the number of homes built. In London alone, there are 270,000 residential planning permissions unbuilt. We need to understand why. So I am establishing an urgent Review to look at the gap between planning permissions and housing starts. It will be chaired by my Right Honourable Friend for West Dorset and will deliver an interim report in time for the Spring Statement next year. And if it finds that vitally needed land is being withheld from the market for commercial, rather than technical, reasons. We will intervene to change the incentives to ensure such land is brought forward for development, using direct intervention compulsory purchase powers as necessary.’
There have been previous studies that have looked at the reasons for the delay between the granting of planning permission and the start of development on consented sites. These have found a variety of factors at play: the landowner cannot get the price for the site that they want; a developer cannot secure finance or meet the terms of an option; the development approved is not considered to be financially worthwhile (perhaps due to a change in localised market conditions); pre-commencement conditions take longer than anticipated to discharge; there are supply chain constraints hindering a start; an alternative permission is sought for the scheme after approval, perhaps when a housebuilder seeks to implement a scheme where the first permission was secured by a land promoter, etc. etc.
These studies have also looked at options to incentivise developers to get cracking. One by the House of Lords Select Committee on Economic Affairs in 2016 (Building More New Homes) looked at possible changes to the legal definition of what constitutes a bona fide start on site, the threat of compulsory purchase of sites and the optional use of business rates on undeveloped consented sites after a reasonable period. It preferred the latter option. (No reduction of the current 3 year period for making a start was contemplated nor the greater use of completion notices to force developers to finish their developments within a shorter timescale once started.)
We now see the spectre of Councils or the Homes and Communities Agency (soon to be called Homes England) being encouraged to seize sites from ‘recalcitrant’ developers, probably at some sort of discounted figure (e.g. 50% of market value) and then this land being added to some sort of pot that they can then use to build houses.
As far as we can see the ‘Gap Review’ outlined by Chancellor Hammond in his Budget speech may have implications for land promoters in particular. They will need to ensure that their permissions are as attractive as possible to potential housebuilder purchasers and have ironed out as many issues as possible without the need for umpteen pre-commencement conditions to be satisfied after the ‘main’ permission has been secured. This will be especially important if authorities in the new policy environment are able to decline further major applications on the same site during the lifetime of the main permission that has been secured.
On outline planning projects, Northern Planners are adept at establishing the key parameters for site development that allows future flexibility for the developer. We also have experience of heading off potentially long lists of pre-commencement conditions that can hold up development.