In this week's blog, it would be remiss not to take a closer look at the Planning and Infrastructure Bill, designed to "unlock our country's economic growth" after Wednesday's King's Speech. As the new Parliament comes together, it becomes quickly apparent how much of the legwork has already been done in terms of formulating housing policy, but as an industry, we wait with bated breath for the first instances of implementation.
In this analysis, we will try to drill down on specific elements that will unlock our market's ability to deliver housing projects more efficiently and in greater quantity. At first glance through the headlines, what we don't see is any sort of tax subsidy or financial incentives to bring more developers to the table; the weight of the task seems to be still sitting on the shoulders of the big 6 in terms of delivery; however, this isn't a surprise, given the fiscal situation inherited, it was reasonably apparent that the first wave of deliverables would be altering the mechanics of the market to free up more opportunities. It's essentially the low-hanging fruit that doesn't involve raising taxes elsewhere to balance the books, creating a more efficient system through political will rather than expenditure; time will tell how successful those changes will be, but those changes have begun, nonetheless.
The core principle of these changes has actually moved in a different direction than what was initially anticipated; rather than a big state approach potentially inflaming the nimbyism issue into some sort of rural resistance movement, the focus has been completely shifted to what's being called "enhanced democratic engagement" essentially turning the powers to council planning committees to override pockets of local resistance, so decisions can be made sensibly and with nuance when it comes serving all interests. There is also funding for 300 more planners to work through these local problems, so rather than forced construction by Westminster diktat, as many feared, this is more about problem-solving and getting more experts, both literally and figuratively, into the field to resolve these bottlenecks.
One of the issues that directly impacts our client base and their ability to engage with a project is the timescales for planning decisions, and these issues rarely come along in a template fashion; every situation is different. Everyone reading this who's been in the industry for any length of time will have come across a project where a dispute over a strip of land, or a gate, or an access point essentially stalls a project for six months or more, in some instances mothballing the whole venture creating catastrophic cost overruns. The government concluded that the timescales for both initial decisions and planning inspectorate appeals are unacceptable, with 91% of all local authority decision-making missing their target of clearing 70% of applications & decisions within eight weeks. The fix being implemented here isn't as bold as what may come with time; many speculated that we could see a new system entirely based on zoning and the removal of the ability to lodge individual objections; however, what we will see immediately is more money and resources for local authorities to restaff & resize these operations to pre-pandemic levels with a view on cutting down these times through increased capacity.
The final piece of legislation that will have an impact on circumnavigating entrenched local bureaucracy is the new powers proposed to allow local authorities and public bodies to acquire development sites using compulsory purchase orders or CPOs that remove the hope value from the transaction and do not require ministerial approval. Hope value is a critical lending metric in development finance, although long since rebranded to the much more confident-sounding "gross development value"- it's the cornerstone in managing the weight of risk versus the realities of the market expectation. However, it's also a tool that, in certain instances, can be used to create value at the taxpayer's expense to essentially bank land, engage the planning, and offload the land back to the council.
This sort of practice represents the unchecked behaviours of the past, and further changes will phase it out completely. As with all the above modifications, reforming the rules for compulsory purchase compensation will have to be "fair but not excessive" when it comes to supporting our client base and supporting landowners; all needs must be balanced if our sector is to deliver affordable housing and essential infrastructure the country needs.
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