Councils are granting enough planning permissions – so why aren't we building housing?

The good old days. Image: Hulton Archive/Getty.

One of the central housing objectives of David Cameron’s government was to liberalise the planning system and increase the amount of land that was permissioned for residential development.

To be fair, in that respect, it didn’t do too bad a job. The number of units given planning permission in England increased from 176,209 in 2011 to 261,644 in 2015. The planning system is now yielding enough permissions to meet the roughly 250,000 new homes many housing economists think we need to keep up with household growth.

This doesn’t mean they are all in precisely the right places – although London’s permissions are running at around 50,000 a year, according to the latest figures from the Department for Communities & Local Government (DCLG), more or less in line with what the capital is thought to need. Nor does it mean that they are all necessarily in a position to be built out the very next day.

But, still, the number of plots approved for residential development in a given year has increased dramatically, by 48 per cent between 2011 and 2015.

Here’s the thing, though: this has not been matched by anything like a corresponding increase in building activity. Starts have risen over the same period by just 26 per cent, from 110,820 in 2011 to only 139,680 in 2015. If we’re ever to increase housing supply to the required levels, this growing shortfall between permissions and starts will need to be addressed and overcome.

Now, the Home Builders Federation (HBF) dismisses the starts figures as unreliable. And it is true that they probably underestimate activity somewhat  usually by a few thousand units, sometimes possibly by up to 20,000 units.

But even 20,000 (and I’m being really generous there) is nothing compared with the gap that has emerged between new planning permissions and building starts – a gap which was 65,389 in 2011 and, by 2015, have grown to a massive 121,964.

Sure, there is a little bit of give in the figures, but the trend is clear: homes simply aren’t being built as quickly as they are being approved by planners.

Another way of measuring this is to look at the completions numbers from the government’s other housebuilding data series, the more reliable “Net supply of housing”; this is published each November and is the HBF’s preferred source of figures.

Of course, completions take rather longer than start’s, so we have to allow for a degree of timelag: builders reckon homes take two to threee years to proceed from planning permission to being ready for occupation.

But even allowing for that, the same discrepancy occurs. There were 195,300 homes approved in 2012, for example; three years later there were still only 155,080 completions. Whichever we cut this, whether we look at starts or completions, it is clear that building activity has not responded proportionately to the rapid increase in land ripe for development.

The gap between permissions and building activity that has emerged since 2011 can be appreciated at a glance from the following graph. Note too that, pre-crash, while there was a gap back then, it was much tighter.

So what’s behind this? To be fair to developers, many of these planning permissions may not be in their possession. There has long been an issue of non-building landowners (speculators, historic landowners, public sector agencies, and so on) sitting tight while their holdings rise in value. This has been well documented in London by the consultants Molior.

However, Molior has charted a decline not an increase in the number of unbuilt planning permissions being held by non-builders over recent years, from 45 per cent in 2012 to 32 per cent in 2014.

So that still leaves two-thirds of unimplemented permissions in the capital in the hands of developers. So why are they not throwing up houses? Is there not a shortage of homes in this country?

Unfortunately the private housebuilding industry does not cater to housing need: it caters to effective demand. The building activity depicted in the graph above (minus 20,000 or so housing association starts each year) reflects not how many houses could be built, but how many willing buyers there are ready to purchase a new-build property at current market prices.

Developers do not build out sites as quickly as they physically can. They build them out as quickly as people are prepared to buy them – at the current market price or higher. As Philip Barnes, group land and planning director at Barratt Developments, recently observed:

The reality is that housebuilders, as return-on-capital businesses are not able to build our products at a pace faster than our customers will purchase them, at the market value.

“We could in theory cut prices to speed up sales – but we have based our land purchase price on the estimated market values so we don’t have this option in practice.”

Does this amount to landbanking? Developers say it doesn’t.

But, whatever we might call this process, the effect is that they are not releasing land with houses on it back into the market until it has reached the price they need to achieve to turn a profit. They are acting perfectly rationally in the present market – if I were a housebuilder I would do the same – but this is not an arrangement which is compatible with dramatically increasing the number of homes to plug a housing shortage.

Addressing this dynamic is something that Theresa May’s government must prioritise if it is to make any real headway on housing. There are various policies that have been uggested for tackling it. Opening up the market to SME builders by increasing the number of smaller development sites would be a good start, although it is unlikely this would make quite the difference that is needed.


A bolder route would be for the government or councils to directly commission builders (including, again, many SMEs) to put up the houses we need, and so bypass the private sector; but this will involve spending a good chunk of money.

Short of that, private developers will have to be incentivised to build more quickly. This will probably mean giving – and requiring – local authorities the power to impose contractual obligations about the pace of development when granting planning permission in the first place. It will mean creating a framework within which developers do not bid each other up for every plot of land to such a price that they cannot afford to build it out at speed.

If it is clear and explicit enough, the local authority’s requirements for all developments could be used by developers to signal to landowners that they cannot pay above a certain price for the land. Land prices, the repositary for most of the inflated value in housing, would be anchored.

Don’t get me wrong: we are still going to need lots more land, in perpetuity, to keep the housing pipeline going. This is not a Nimbys’ charter. It will still be a big task to ensure enough new homes are approved by planners – and in the right places – to meet the rapidly growing need for housing.

But the principal challenge right now is not increasing the numbers of new planning permissions. It’s getting those that are granted built out much more quickly.

Daniel Bentley is editorial director at the think tank Civitas and tweets @danielbentley. His briefing paper “Planning approvals vs housebuilding activity, 2006-2015” was published this week. 

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Pembrokeshire's innovative new eco-hamlet is great. But it should be the size of a city

The eco hamlet. Image: Western Solar.

The opening in January 2017 of an “eco-hamlet” for council house tenants in West Wales is great news. I have nothing but praise for a development which builds houses with a low carbon footprint, using locally grown wood, to make homes which are well insulated and powered by solar energy. It was also quick to build, with large sections being made in a factory and then assembled on site. And it was relatively cheap – at around £70,000 to £100,000 per building, it is certainly comparable to the costs of more conventional builds.

These houses are an inspiration to the construction industry and an aspiration for the home owner. After all, who wouldn’t like to live in a house that had yearly utility bills of £200, rather than the national average of £1,500?

So the problem is not the six wonderful solar houses at Glanrhyd, Pembrokeshire, or the lucky people who will get to live in them (and enjoy shared use of an electric car). The problem is that we’ve seen all of this before – but nothing changes. What we really need is far, far more of them.

Pentre Solar in Pembrokeshire. Image: Western Solar.

I’ve been involved in sustainable construction for nearly 25 years and seen many inspirational developments like Glanrhyd. There’s Julian Marsh’s home in Nottingham, Susan Roaf’s Oxford Ecohouse and the Hockerton Housing Project, to name but a few. The list is long.


Yet while many individuals continue to build these innovative and inspirational structures, we have a construction industry which still responds to these buildings with disdain. One executive from a large well-known house building company told me recently: “This is a new, expensive and untested technology. We just can’t risk building something so new with all the risks to the consumer and at a higher cost.”

But the situation is even worse than the disdain from the mainstream construction industry. Rather than being welcomed, the latest versions of these sustainable buildings are challenged at every turn. The initial response to the Welsh eco-hamlet plans were concerns about the materials, the technology and the design. The houses at Glanrhyd then had more than 20 planning conditions placed upon them. The CEO of Western Solar, the company behing the hamlet, freely admits that nearly half of their research budget went on solving problems they encountered along the way.

Thinking and building big

So it seems this kind of development just isn’t celebrated enough. There is a general atmosphere of mistrust from construction professionals. It is seen as too complex, too expensive, too risky. Yet there are positive reactions, too. Welsh politician Lesley Griffiths had this to say about the new houses in Glanrhyd:

This scheme ticks so many boxes. We need more houses, we need more energy efficiency, we want to help people with fuel poverty. It’s been really good to hear how they have sourced local products. It’s great they’re using local people to build the houses.

Surely we need to take the eco-technology we have and start rolling it out on a much larger scale. To do so would be a massive step in meeting the significant housing shortage (an estimated 125,000 extra new houses are needed every year). It would also address the disrepair of our current housing stock, and help refit the millions of houses in good repair but requiring improved performance in order to achieve the government’s 2050 carbon reduction target.

We must not forget that the 2050 Climate Change target is not some arbitrary political policy, but one based on the environmental challenge facing all of us. We need to play our part in slowing down the speed of climate change and adapting to the changing natural, social and economic environment.

The solar houses in Pembrokeshire are wonderful. But until we start building huge numbers of buildings with similar credentials, we are just celebrating a cottage industry rather than restructuring our urban environment for an uncertain future.The Conversation

John Grant is senior lecturer in natural and built environment at Sheffield Hallam University.

This article was originally published on The Conversation. Read the original article.