Tackling slow build-out rates, ‘Delayed Homes Penalties’ and the protection of nature
In this blog, Alexa Culver gives her perspective on the Government’s Planning Reform Working Paper. Thoughts expressed are her own.
Government has today (Sunday 25 May) launched a ‘Working Paper‘ which invites views on further action the government should take to speed up the delivery of new homes.
It is a good thing to see Government now looking to address the real barriers to housing delivery, although less good to see this happening after rushing the Planning and Infrastructure Bill, and its wholesale reform of nature protections, through the so called “urgent measures” parliamentary process.
After the Planning Bill landed, with its promise to speed up development, developers understandably got worried. This is all well and good, but this isn’t actually going to speed up housing delivery. If you want us to build quickly, say the developers, we need a return of ‘help to buy‘ and we still need to be building big expensive houses too.
Now, today’s Working Paper is addressing the root issues: so called absorption rates – how quickly people will buy the houses that are built.
The Working Paper says:
“The Competition and Markets Authority (CMA) and others have concluded that most homes in England are not built as fast as they can be constructed, once permission is granted, but only as fast as the developer expects to sell them at local second-hand market prices. This leads to a build out rate for large sites which can take decades to complete. While it is commercially rational for developers to operate in this way, the systemic impact is a lower level of housebuilding than we need. The government is therefore committed to taking firm action to ensure housebuilding rates increase to a level that makes housing more affordable for working people.”
Government then goes on to introduce the idea of a ‘Delayed Homes Penalty’ which Local Planning Authorities could charge to developers who do not deliver homes at the rate promised at the time planning permission was granted.
“A Delayed Homes Penalty would effectively be a last resort measure, which we hope not to have to implement, but may be needed if industry does not sufficiently adapt and fulfil their commitment to deliver homes more quickly.”
While many might support this idea, I am actually oddly against it. I think if Government is relying on the private sector to deliver 1.5 million homes then Government has to accept the market forces that drive private home delivery.
Delayed Homes Penalties (rather like the own goal in Part III of the Planning Bill) are going to either be ineffective because they will never be triggered – exemptions for these penalties would be drafted too widely to matter, or, will make things worse, because the financial risk of these penalties landing will simply choke the supply of available land for housing delivery. Landowners and developers would either need to sell the homes at an undervalue to avoid the penalty (not an overly appealing prospect), or pay the penalty (again, not overly appealing). It would be economically rational for landowners and developers to wait a few years for more favourable policy conditions.
I keep coming back to the excellent 50 Shades of Planning podcast interview with Michael Gove last week, where Gove was open about the unintended consequences of poorly thought through reform. He admitted that the reforms under his watch made an already troubled planning system worse than it had been before.
I think we are watching Labour fall into this very same trap, of making things much worse than the status quo. This is particularly true of Part III of the Planning Bill, which is almost certain to delay development rather than speed it up. The delay penalties, rather like a big pot of cash for nature, sound superficially good, but both interfere with a subtle ecosystem of legal, financial and ideological interests – that will tip into collapse when change is bulldozed through, without evidence, and without a wholistic understanding of the consequences.
Instead of ripping up our nature protection laws as a wrong-headed gift to developers (don’t forget, most developers didn’t ask for our nature laws to be ripped up) and then following that ‘gift’ up with the threat of punishment if they don’t behave, I think Government should either build homes themselves, or step out of the way. Let our strong consistent laws, and time-honoured principles of sustainable development dictate how we progress. Sensible housing targets, rightly reintroduced after Gove’s admitted mistake of, in effect, scrapping them, should increase land supply for development and nature. Properly funded planning authorities will be able to perform their crucial role in this complex ecosystem.
If Delayed Homes Penalties are introduced, Government will need to decide whether on-site protests against the killing of wildlife (killings sanctioned under Part III of the Planning Bill) would count as a legitimate delaying factor for new homes delivery. Developers rightly wouldn’t want to be faced with on-site unrest and Delayed Homes Penalties. This ‘Working Paper’ shows that economics, and mortgage affordability is the true barrier to new home delivery. Not newts. Like Part III of the Planning Bill, I think Delayed Homes Penalties should be thrown in the bin.
Government could build houses rapidly to address the housing crisis if they wanted to. If we are instead relying on private sector developers to do this, then we should let strong consistent laws and well-funded planning authorities channel high quality sustainable development at the absorption rates and tenure mixes our economy can sustain. For those of us who understandably struggle to afford new homes, Government should find ways to support them. The purchase price for houses should, or must, comfortably cover the real costs of delivery, reasonable profit margins for market-led schemes, and critically the true costs of ensuring high environmental and social integrity.