– Housing supply in England has fallen every decade since the 1960s.
– Past efforts to fix this have focused on increasing the number of planning permissions granted, but this has failed to feed into enough homes being built.
– Currently planning permissions are a one-way gift which boosts the value of the land with no obligation to build, creating a bottleneck that concentrates land supply in the hands of large house builders.
– The six biggest house builders alone currently have roughly 1 million plots in their strategic land banks, nearly the equivalent of the target land supply across England over the next five years.
– New CPS report argues that SMEs need to play a much greater role in the sector, including getting priority when public sector land is sold for housing.
– The report also proposes turning planning permissions into delivery contracts, binding developers to build within mutually agreed timeframe.
– It also argues for putting a Housing Delivery Test at the core of the system so councils have to ensure delivery of sufficient homes not focusing on land available.
Since the 1960s, housing supply has fallen steadily each decade, and that attempts to fix this have mostly focused on increasing the number of planning permissions flowing through the system. However, while the 2010 planning reforms led to permissions rising to over 350,000, the number of new homes actually built was just over 200,000.
A new report by the Centre for Policy Studies, praised by Housing Minister Chris Pincher, therefore calls for changes to the planning system to open up the market and allow better access for small and medium sized companies and to diversify the housing supply.
As highlighted in ‘The Housing Guarantee’ out today, the top 10 house builders currently build 40% of all new homes, with the top six controlling around 33% of the market. Facing challenges to obtain land, smaller builders face being squeezed out of the system – falling from building around 40% of homes in the 1980s to around 10% now.
The six biggest house builders alone currently have roughly 1 million plots in their strategic land banks, nearly the equivalent of the target supply across England over the next five years.
The report sets out three key reforms that the think tank argues must be made to address the systemic failures in the current system and support delivery of more homes:
– Changing permissions to delivery contracts based on an agreed timeline. Where house builders cannot deliver this, they would have to pass the land on at an agreed price to local SMEs. This would mean as land came forward for development, it was actually translated into new homes.
– A renewed emphasis on the Housing Delivery Test, ensuring councils are assessed on the basis of numbers of homes built, not on planning permissions granted – and are penalised if they are not delivering for their community. This would increase not just the number of homes built, but their speed, diversity and quality.
– Introducing panels of local house builder SMEs that public sector land is sold to, with challenging delivery targets to ensure the quality and diversity of local housing supply, and support competition within the sector.
Over time, these reforms would modernise the new build housing market, making it more transparent, and ensure the flow of land actually turns into new homes via a clear and obvious build-out trajectory. It would mean a higher delivery of housing and a greater role for SMEs as well as higher overall supply.
Minister of State for Housing, the Rt Hon Chris Pincher MP, said:
‘This CPS report is a very welcome contribution to the debate around both house building and planning reform. I am particularly pleased that the report has highlighted the important role that SMEs can and should play in delivering more homes and helping the United Kingdom’s economy build back better.
‘A successful SME sector is crucial in our shared objectives of planning reform and increased house building.’
Report author and CPS Head of Policy, Alex Morton, said:
‘The Government’s planning reforms are very welcome. But we need to focus on delivery and learn from previous attempts to fix England’s housing supply problems.
‘The reforms we are proposing would help create a new, better planning system that focuses on ensuring delivery, working alongside the other proposals Government is bringing forward.
‘We have a once-in-a-generation opportunity to fix these issues, and with a Planning Bill under way, now is the time for action.’
Jonathan Seal, Chief Executive Officer at Regal London, commented:
‘We welcome today’s report from the CPS and supportive comments from the Minister. Both make clear the important role that SMEs have to play in shaping the debate about housebuilding and planning reform.
‘As one of London’s leading residential-led, mixed-use developers, we are proud to have been a part of the city’s transformation but are confident there is more to be done in improving supply to London. We are committed to delivering more high-quality homes as part of the important contribution SMEs are making.
‘This report is much-needed recognition of the need to reassess how we achieve that and for SMEs to have an important seat at the table.’