The issue of government housing targets again hit the headlines last week, with Rishi Sunak facing a rebellion of 47 MPs demanding an end to blanket housebuilding targets and the subsequent installation of a micro approach focused on local knowledge making local decisions. There are solid arguments for both sides, and in this week's blog, we take a measured look at both views and how the potential outcomes could affect our industry.
First, we look at the case for change. As it stands, we rely on an algorithmic system where, under blanket targets, certain planning decisions are influenced to maintain an overall balance. So, for example, the net additional dwellings figures for 2021 came in at just over 200,000, so straight away, miles under the target. The idea is that levelling up works by levelling the playing field, and certain areas can have the scales tipped in their favour at any one time regarding decisions.
This process is excellent, but algorithms have little nuance and struggle to make preferential judgement calls with any accuracy. Anyone who has unpacked their shopping order and found Kale Fritters rather than their usual chocolate biscuits will testify to that. So in this instance, the algorithm has yet to be able to distinguish between different pressures in different regions, limiting decisions in areas that may very well require more housing stock, but just less urgently than down the road.
The second issue under the old or current system is there is a flawed process in place to incentivise developers to move quickly; millions of planning applications were granted and seemingly land-banked, meaning the algorithm believes that by granting those permissions, those areas are now underway when homes aren't really being built.
One of the other areas for improvement in the system is that it needs to differentiate better between urban and rural areas outside of mandatory belt protections. On a practical level, rural regions have space and fewer houses, so the system tips the balance towards disproportionate levels of development in these areas. Again, this has an environmental and infrastructure impact; it's often not practical to build massive housing estates in regions that can't support that level of development.
The above makes a strong argument for change; however, the other side of the debate, the case for leaving the targets in place, also has some vocal supporters. For example, Robert Colvile, Director of the CPS and Sunday Times Columnist, believes that removing the targets would drastically reduce the number of properties being built, stating that it would "enshrine nimbyism as the governing principle of British society". This is a fascinating point; the levels of local bureaucracy and potential squabbling over planning decisions would create substantial delays. Furthermore, we already have an appeals-based system; essentially, the reform could produce that other most British of tropes, the pointless queue.
Another predominant voice against the reforming of the housing targets is the former levelling-up Secretary Simon Clarke MP, who reportedly took to Twitter to distance himself from Liz Truss's former policies and ideas, with "fundamental inter-generational unfairness we will be worsening and perpetuating if we wreck what are already too low levels of housebuilding in this country." The idea is that change will cost us momentum at a crucial moment, and we must press ahead with what we have.
In conclusion, looking at both arguments, it's evident that we need to see the best of both worlds; there must be reform, but it can't be a situation that slows down growth. Part of what we do at Invest & Fund involves working with developers with local knowledge; it's something that we put a considerable amount of importance on, and we would love to see a situation where local people in authority positions make local decisions quickly to benefit our clients. However, we also believe there must be some structure to that, some overriding system that can accelerate growth and doesn't create a mire of local squabbling, as the last thing we need is nimbyism in our backyard.
Invest & Fund has returned over £120 million of capital and interest to lenders with zero losses, showing the rigour that governs our business.
To take maximum advantage of this robust and exciting asset class, please visit www.investandfund.com or contact Shaheel at shaheel@investandfund.com.
Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong. Take 2mins to learn more.