With the government’s “radical” planning reforms imminent, the phony war hypothesising about zonal planning is coming to an end and the real debate is about to begin.
Defenders of the status quo have already been making the case that the housing crisis is little or nothing to do with the planning system and we can expect to see those efforts re-doubled – however, their arguments don’t make the point they think they do.
The planning system can’t be the problem, we’re told, because more than 90% of planning applications are approved – but that doesn’t tell the whole story. It takes no account of the applications that are never submitted. A typical planning application for new homes can take many months and cost six-figure sums to prepare – all of which is lost in the event of a refusal. Applications are only submitted when developers are very confident that they will succeed.
The discretionary nature of our planning system means the outcome of any planning application is uncertain – in cases where policies are opaque, a potential application would need to deal with novel issues, or there is a genuine difference of opinion with the council over how a policy should be interpreted, it should be no surprise that developers opt to drop sites before an application is ever made. That doesn’t mean the site isn’t suitable for development, or that it wouldn’t – eventually – get permission. It just means that the risks of finding out are too high.
The second of those arguments is a simple numerical one.
Even if some suitable sites aren’t coming forward, it doesn’t matter – each year, permission is granted for more homes than are actually built. In 2017/18, more than 380,000 homes were approved – far in excess of the government’s target of 300,000 new homes a year.
While the simplicity of the numbers may seem beguiling, the world is messier and more complicated than that.
Dealing with pre-commencement conditions and putting development finance in place means it takes time to turn a planning permission into a start on site – an average of 18 months for sites of up to 500 homes, according to Lichfields. Once started, developers only build at the rate they can sell – the “absorption rate” in the language of the Letwin Review. That approach helps both manage their cash flow and minimise their exposure to a sudden change in market conditions – it is an entirely logical response.
Whilst permission for all the homes on a site might be granted in one go, it can take several years before the homes are complete. That is all compounded by the knowledge that 10% to 20% of applications expire before they are ever started.
Some have made efforts to model these real-world effects. Shelter, for instance, compared permissions and completions between 2013 and 2018 and found more than 280,000 “phantom homes” – ones with permission that were never built. That figure assumes a two-year lag between permission being granted and the last home on a site being built. That seems optimistic given Lichfields’ average 18-month lead-in time. Shelter acknowledge that assuming a three-year lag causes the number of “missing” homes to fall by almost half, to just under 150,000.
That’s still a lot of homes – about six months of the government’s annual target – but even that figure should be treated with caution.
Data about housing supply in England is notoriously bad, one of the consequences of which is that it is difficult to know when permissions have been superseded. If a developer wants to change a house type on a site or re-design a future phase, it requires a new consent. That’s part of the reason why 15% to 20% of permissions are recycled into fresh applications.
Glenigan, who provide the data for this research, try to adjust for that by not counting duplicate applications on the same site within a 12 month period – but many of these revised applications will be more than 12 months apart. With no national GIS database of applications, different site descriptions could mean the double-counting of duplicate applications submitted close together.
If there are two permissions for the same site, clearly both can’t get built – which means some of those “missing” homes have never really existed in the first place.
Advocates of the current system often proclaim that “you can’t live in a planning permission” – a truism that no one would attempt to argue with.
It isn’t the slam dunk argument they think it is though.
Over the last decade and more, we have tried to address the housing crisis by matching the number of permissions with the number of homes required as closely as possible. That’s a nice idea in theory, but one which has singularly failed, crumbling on contact with reality. To work it requires land owners and developers to act against their own best interests – something very few are likely to do, however much local authorities command them to do so.
Another way of ensuring enough new homes are delivered is to recognise the way the housing market operates and work with it. If 20% of planning permissions lapse, plan to deliver 20% more homes than you need. If sites take a long time to build out, allocate more sites to diversify the sources of supply – there are plenty of suitable ones out there.
Simply counting permissions and comparing them to delivery rates isn’t an argument against planning reform – it’s actually an argument for it.
Paul Smith, Managing Director, The Strategic Land Group