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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The ATM is 50. Here’s how a hole in the wall changed the world

The olden days. Image Lloyds Banking Group Archives & Museum.

Next time you withdraw money from a hole in the wall, consider singing a rendition of happy birthday. For today, the Automated Teller Machine (or ATM) celebrates its half century.

Fifty years ago, the first cash machine was put to work at the Enfield branch of Barclays Bank in London. Two days later, a Swedish device known as the Bankomat was in operation in Uppsala. And a couple of weeks after that, another one built by Chubb and Smith Industries was inaugurated in London by Westminster Bank (today part of RBS Group).

These events fired the starting gun for today’s self-service banking culture – long before the widespread acceptance of debit and credit cards. The success of the cash machine enabled people to make impromptu purchases, spend more money on weekend and evening leisure, and demand banking services when and where they wanted them. The infrastructure, systems and knowledge they spawned also enabled bankers to offer their customers point of sale terminals, and telephone and internet banking.

There was substantial media attention when these “robot cashiers” were launched. Banks promised their customers that the cash machine would liberate them from the shackles of business hours and banking at a single branch. But customers had to learn how to use – and remember – a PIN, perform a self-service transaction and trust a machine with their money.

People take these things for granted today, but when cash machines first appeared many had never before been in contact with advanced electronics.

And the system was far from perfect. Despite widespread demand, only bank customers considered to have “better credit” were offered the service. The early machines were also clunky, heavy (and dangerous) to move, insecure, unreliable, and seldom conveniently located.

Indeed, unlike today’s machines, the first ATMs could do only one thing: dispense a fixed amount of cash when activated by a paper token or bespoke plastic card issued to customers at retail branches during business hours. Once used, tokens would be stored by the machine so that branch staff could retrieve them and debit the appropriate accounts. The plastic cards, meanwhile, would have to be sent back to the customer by post. Needless to say, it took banks and technology companies years to agree common standards and finally deliver on their promise of 24/7 access to cash.

The globalisation effect

Estimates by RBR London concur with my research, suggesting that by 1970, there were still fewer than 1,500 of the machines around the world, concentrated in Europe, North America and Japan. But there were 40,000 by 1980 and a million by 2000.

A number of factors made this ATM explosion possible. First, sharing locations created more transaction volume at individual ATMs. This gave incentives for small and medium-sized financial institutions to invest in this technology. At one point, for instance, there were some 200 shared ATM networks in the US and 80 shared networks in Japan.

They also became more popular once banks digitised their records, allowing the machines to perform a host of other tasks, such as bank transfers, balance requests and bill payments. Over the last five decades, a huge number of people have made the shift away from the cash economy and into the banking system. Consequently, ATMs became a key way of avoiding congestion at branches.

ATM design began to accommodate people with visual and mobility disabilities, too. And in recent decades, many countries have allowed non-bank companies, known as Independent ATM Deployers (IAD) to operate machines. The IAD were key to populating non-bank locations such as corner shops, petrol stations and casinos.

Indeed, while a large bank in the UK might own 4,000 devices and one in the US as many as 12,000, Cardtronics, the largest IAD, manages a fleet of 230,000 ATMs in 11 countries.


Bank to the future

The ATM has remained a relevant and convenient self-service channel for the last half century – and its history is one of invention and re-invention, evolution rather than revolution.

Self-service banking and ATMs continue to evolve. Instead of PIN authentication, some ATMS now use “tap and go” contactless payment technology using bank cards and mobile phones. Meanwhile, ATMs in Poland and Japan have used biometric recognition, which can identify a customer’s iris, fingerprint or voice, for some time, while banks in other countries are considering them.

So it’s a good time to consider what the history of cash dispensers can teach us. The ATM was not the result of a eureka moment of a single middle-aged man in a bath or garage, but from active collaboration between various groups of bankers and engineers to solve the significant challenges of a changing world. It took two decades for the ATM to mature and gain widespread, worldwide acceptance, but today there are 3.5m ATMs with another 500,000 expected by 2020.

Research I am currently undertaking suggests that ATMs may have reached saturation point in some Western countries. However, research by the ATM Industry Association suggests there is strong demand for them in China, India and the Middle East. In fact, while in the West people tend to use them for three self-service functions (cash withdrawal, balance enquiries, and purchasing mobile phone airtime), Chinese customers consumers regularly use them for as many as 100 different tasks.

Taken for granted?

Interestingly, people in most urban areas around the world tend to interact with the same five ATMs. But they shouldn’t be taken for granted. In many countries in Africa, Asia and South America, they offer services to millions of people otherwise excluded from the banking sector.

In most developed counties, meanwhile, the retail branch and the ATM are the only two channels over which financial institutions have 100 per cent control. This is important when you need to verify the authenticity of your customer. Banks do not control the make and model of their customers’ smart phones, tablets or personal computers, which are vulnerable to hacking and fraud. While ATMs are targeted by thieves, mass cybernetic attacks on them have yet to materialise.

The ConversationI am often asked whether the advent of a cashless, digital economy heralds the end of the ATM. My response is that while the world might do away with cash and call ATMs something else, the revolution of automated self-service banking that began 50 years ago is here to stay.

Bernardo Batiz-Lazo is professor of business history and bank management at Bangor University.

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