Comment

Planning for recovery: three recommendations to boost housing supply and delivery

Promoting housing supply and delivery are critical to supporting the national recovery from the Coronavirus pandemic.

Amongst various other factors which have been affected, we have seen completion rates plummet as a result of the lockdown, and anticipate substantial impacts on housing supply and delivery going forward due to recessionary effects such as waning consumer confidence and uncertainty, the scale of which remains to be seen.

Based on three interconnected themes, building resilience through flexibility, the Housing Delivery Test and Five Year Supply, and diversification of supply, we make three recommendations to help bolster supply and delivery.

Building in resilience through flexibility

The first strand of ensuring housing supply and delivery in the COVID-19 recovery should be to seek to build in resilience through flexibility.

Although not quite at a point where Murphy’s Law rules (anything that can go wrong will), things often don’t turn out as anticipated in the planning world. We are operating in a regulatory framework which is increasingly complex, sometimes navigating a political minefield, and can now add an economic recession to the list of factors affecting our well drawn out plans.

Many Local Planning Authorities often use a flexibility allowance in preparing Local Plans, allocating more sites than is strictly specified by the housing requirement. Flexibility is also built in to the monitoring system through the calculation of five year housing land supply (5YHLS), requiring a 5, 10 or 20% buffer.

Our experience suggests there is a systematic trend in misjudging what will actually be delivered in any given LPA, reasons include not paying enough attention to the impacts of market absorption or diversity in supply, misjudging the realistic lead in time from allocation or permission to actual delivery of homes and not scrutinizing the tangible deliverability of individual sites in enough detail. Another key factor is the uncertainty of the business of the development industry; land changes hands, landowners choose not to sell, viability can sometimes be difficult to achieve, finance cannot be raised etc.

There is no doubt the resulting economic shock of Coronavirus will worsen the speed at which homes come out of the ground in the immediate future. To account for unforeseen circumstances, we must, as an industry, consider what constitutes sufficient flexibility in housing supply. In particular, whether a greater degree of flexibility is warranted, such as a 25% or more buffer on homes required, with the objective of releasing windfall sites which are demonstrated to be available and deliverable now.

Coronavirus may well have led to a suppression in the number of planning applications submitted, which as a secondary effect might in turn restrict available supply in the medium-longer term. Certainty on the need position will assist confidence in starting to re-build a bank of implementable consents.

Recommendation one

A nation-wide increased flexibility allowance should be factored into five year supply monitoring mechanisms and Local Plans for a considered amount of time linked to the economic recovery.

Housing Delivery Test and Five Year Supply

Without any sign of proposed changes to the way the Housing Delivery Test (HDT) is calculated or enforced at the time of writing, we will have to assume that the methodology and consequences will remain the same.

Given the HDT is backwards looking, based on actual completions data, the test will be clearly impacted by lower rates of house building in its monitoring period. The HDT is assessed over a rolling period of three years, so a substantial reduction in one or two of these years can represent a significant change in the overall calculation.

Our scenario testing suggests that the HDT results scheduled for publication in November 2021 (which will be the first to include a COVID-19 impact year of delivery) could result in a widespread application of 20% buffers and presumptions in favour.

The HDT is, and will remain, an extremely important measure of delivery performance during recovery years to achieve Government objectives.

When housing delivery falls below 95% of homes required, LPAs are obligated to publish an action plan to assess causes of under delivery and identify actions to increase delivery in future years. Potential future HDT results aside, given there is a clear and present cause of under delivery, we suggest there is obvious logic in the immediate monitoring, data collection and publication of action plans to respond to the Coronavirus.

The impact on HDT results is in contrast to 5YHLS which looks over a longer period, but importantly is forward looking and reliant on professional judgment of what sites, and how many homes, can be considered ‘deliverable’. In addition to this, in a change from previous years, the number of 5YHLS calculations across the country which are required to factor in a measure of previous shortfall or surplus are reducing given the increasing adoption of the local housing need standard methodology.

In this situation, there is therefore limitation to the immediate effectiveness of the five year supply mechanism for triggering a policy response to the supply shock. In some cases, where a five year supply position is marginal, the immediate impacts of COVID-19 in the current and next monitoring years could tip the position quite far below the five years required by policy, but it simply might not be exposed in the calculation.

One remedy to address this limitation is to tighten up the definition of ‘deliverable’.

Despite previous changes increasing the burden of evidence required to demonstrate that a site is deliverable, there are still critical flaws in the definition’s ability to show realistically what will come forward in the next five years. The PPG was last updated on this matter in July 2019, and states that ‘clear evidence’ to demonstrate deliverability may include:

• current planning status – for example, on larger scale sites with outline or hybrid permission how much progress has been made towards approving reserved matters, or whether these link to a planning performance agreement that sets out the timescale for approval of reserved matters applications and discharge of conditions;
• firm progress being made towards the submission of an application – for example, a written agreement between the local planning authority and the site developer(s) which confirms the developers’ delivery intentions and anticipated start and build-out rates;
• firm progress with site assessment work; or
• clear relevant information about site viability, ownership constraints or infrastructure provision, such as successful participation in bids for large-scale infrastructure funding or other similar projects.

There is significant variance in the quality of these pieces of evidence in providing certainty of deliverability. For example a written agreement from a developer confirming anticipated start dates is extremely weak compared to evidence that significant sums of money have been invested in comprehensive site assessment work to discharge conditions. In the wake of COVID-19, recent, quality evidence will be vital to proving deliverability in the five year period.

Recommendation two

The definition of deliverable should be tightened in an attempt to better understand the realistic level of supply in LPAs. For developers and promoters, deliverability statements should be submitted with planning applications. These statements should set out factors such as track record, viability, land ownership, strategy for implementation and other measures where possible, such as reduced time limits for implementation.

Diversification of supply

We contend that lack of diversity in supply significantly impacts on achieving high build out rates in an area, and is a critical factor in maintaining housing supply.

In the latest iteration, paragraph 68 of the NPPF included a requirement for Local Plans to provide a 10% allowance for sites no larger than one hectare. Accompanying this is paragraph 72 which states that the supply of large numbers of homes can often be best achieved through planning for larger scale development such as new settlements.

Large sites and the ‘Garden Village’ concept will be likely have an important to role to play in other key themes emerging in the recovery from COVID-19 such as Building Better Building Beautiful, preferences for homeworking and access to private and public open space.

Whilst also considered vehicles for delivery of these themes, large sites will clearly always have an important role to play in housing supply, however the amount of homes they can be expected to deliver, certainly throughout the recovery, is expected to decrease. There are a large number of adopted and emerging Local Plans which have many eggs in this basket who may suffer severe impacts on total house building rates as a result.

We contend that a requirement of 10% for small sites, and no further controls which can affect the soundness of a Plan, goes nowhere near far enough to reach a satisfactory level of diversification in housing supply. There are multiple other factors to consider such as:

• split between urban and rural sites;
• relationship to HMAs;
• variation in type of housing product;
• nature of development, scale and likely resulting speed to market; and
• housing for specialist groups such as later living.

Local authorities are also increasingly looking to apply district wide SHMA housing mix requirements to individual sites. These requirements are contributing to concern, delay in delivery, undermining negotiations and arguably miss the point. SHMAs represent a point in time across a wide area, and not what a well-informed developer might see as a deliverable, commercially viable proposition.

Recommendation three

We need practical policy responses to ensure diversification of supply. Positive weight must be given to the nuances of a site’s individual contribution to an overall basket of sites. For plan making, guidance should promote a more diverse supply of sites, and indicate that diversity of supply (or lack thereof) is an issue of soundness.

An extraordinary crisis warrants an extraordinary response

Given the way COVID-19 crisis has impacted the industry, the role that housebuilding can play in the national economic recovery, and reports of a more radical ideological direction upon which the planning system might be led - there is clearly potential for an unprecedented response in refocussing and re-equipping the planning system for recovery. At the heart of this should be measures towards ensuring housing supply and delivery.

For more information on housing delivery and supply please contact Jonathan Dodd.

8 July 2020