Philip Barnes – Blog

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The election result was perhaps a surprise to many, both within and outside the housing sector.  Armed with an overall majority the Government appears to be pursuing a radical agenda primarily aimed at getting the private housing market moving for first time buyers.

Understandably there have been strong criticisms from organisations who were perhaps expecting a different election result and policy focus.  Some of these criticisms have landed at the housebuilders door.  Usually focused on excessive profits, landbanking, failing to build the right type of homes and trying to avoid affordable housing delivery.

On the profit point I can only give a Barratt perspective.  Our shareholders have suffered lean times over the last few years. In the years after 2006 we made losses of £853m and did not pay our shareholders a dividend for 4 years.  Even our great results for FY14/15 only show a 15.3% profit on turnover – hardly excessive compared to some of our peers and other sectors in the FTSE100. And what will we do with that profit? Return it to our long-suffering shareholders or reinvest it in our operations – namely buying land and building homes for our customers.

Which brings us onto landbanking.  Barratt do not land bank.  As soon as we have bought land we go as fast as possible to build and sell homes on it.  We are a return-on-capital business and our business model requires us to do that.  We do not buy land which does not have planning consent.

However we do secure control of unconsented land by means of option agreements – namely the right to purchase a piece of land should we manage to secure consent.  This is our strategic land supply.  Again our objective is to secure planning permission and build homes on it as fast as possible.

We do not sit on any land.  If one of our option sites fails to secure an allocation in a local plan we may then have to sit and wait until the next plan review, as there is usually no chance of a planning permission before then.  That is not landbanking – it is the planning system forcing us (and the landowner) to wait, against our wishes, to secure planning permission. Indeed if we ever were to “sit” or “bank” land we would quickly have lawsuits against us from angry landowners quite rightly expecting us to work faster towards the planning consent which will realise their asset.

In terms of the criticisms that we don’t build the right type of homes, all I can say is that we need to build to the market demand.  Why? Because of the residual land valuation (RLV) model which all housebuilders, landowners and land agents use to value land.  We compete hard for land and we can only secure it when we are able to pay the landowner a competitive price compared to our peers.

The RLV model is simple.  Gross Development Value (aggregared sales prices) minus costs, minus profit = the price we are willing and able to pay for a piece of land.  Therefore unless we put strong market based (but realistic) sales prices into the model we will never be able to buy land as we will never beat our competitors in the bidding competition.

If landowners or land promoters were not solely interested in land value that would be a different proposition.  Barratt would obviously be happy as we would pay less for land.  Our RTPI National Award winning scheme at the HCA owned site at Hanham Hall in Bristol or our multi-award winning scheme on JRF owned land at Derwenthorpe in York (see below) both pay testament to what happens when an enlightened landowner works with us to deliver outstanding quality rather than just squeezing out maximum land price.

So how do you persuade other landowners to do the same?  Well that’s a question for others to answer.  But one thing is certain – landowners will not sell their prized asset unless they are incentivised to do so.

In the meantime perhaps it should be remembered that we increased the number of affordable homes we delivered by 26% last year (2,853 in total) and paid £580m in tax – obviously far more than when we made no profit at all.  Also we supported over 53,000 jobs last year appointing 327 new graduates and apprentices in the year.  We planted 555,000 trees and shrubs and paid £392m in Section 106 payments for local facilities.  Some pretty hefty socio-economic contributions from a private business which operates in rational ways to the planning and market circumstances which are put in front of us.

Comments welcome.

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Autumn Housing Bill – A Once in a Generation Opportunity?

Perhaps a touch hyperbolic but having worked in land, planning and housing for over 20 years this Autumn’s Housing Bill feels like a rare opportunity to deliver some truly radical policies to address the housing crisis. The reason is we now have a fresh second term Government with a real commitment to increase housing delivery.

But wasn’t that the case in 2001?  In my view things are slightly different.

Firstly more housing was not seen as quite the priority it is today.  In fact in some circles it was seen as having contributed to the urban decay and abandonment in some northern cities.  Furthermore the Government was placing its faith in the new European style “plan led system” as the means to force recalcitrant local authorities to prepare plans and release sites for housing.  However with no incentives to comply, many authorities either responded slowly or barely at all, especially in the shires where there were some of the greatest housing and population pressures. A plan led system without plans. It became impossible to secure consent if a proposal was not in a plan.  With precious few plans housing output inevitably dried up.

Secondly, urged on by the Urban Task Force and others, the new 2001 Government felt that the housing need could be met on brownfield land alone.  The theory was that there would be a ceaseless supply of back gardens, local pubs and factories available to meet housing needs without the loss of greenfield land.  The National Land Use Database was set up to prove the point.  Unfortunately it couldn’t then find enough available viable brownfield land.  Neither could the local Urban Capacity Studies that became mandatory.  Then even the brownfield apartment blocks in back gardens became outlawed as they proved unpopular with neighbours once built.  Local pubs proved more popular with residents than developers and planners thought. Needle in a haystack.  Brownfield output stayed constant and greenfield output dried up. Housing needs unmet.

Thirdly my sense at the time was that Government perhaps felt it could identify where houses should be built in Regional Spatial Strategies and then development would quickly happen there.  But what about the market?  What about local community views?  What about local politics? Disconnecting with these three factors is never conducive to good policy outcomes and so it proved with housing output remaining stubbornly below need.

So why the optimism that this time radical new measures can hopefully deliver the increase in housing output that the nation needs?
Firstly there seems to be a real commitment to addressing the three key barriers to increased housing delivery.  Namely the complexity and languor of the planning system (not the planners BTW), the absence of plans and the need to plan effectively across local authority boundaries.

Secondly we have a positive pro housing national policy in NPPF.  Like any planning policy document ever written it can of course be read selectively to both support or oppose controversial development as we saw in the run up to the election.  However the underlying intention is clear – to build more homes.  The focus must now be on redesigning the process to deliver the policy objective.

So what can we expect or hope for in the Bill?  Much has been trailed already and sounds positive. Mandatory deadlines for local plans, housing zones where all brownfield applications are deemed acceptable and exception sites to deliver starter homes at a 20% discount.

But what else would be good?

Perhaps some truly radical measures to reduce the complexity of planning applications?  Maybe a return to red line consents for some schemes?  Does any application under the Environmental Statement threshold need to be supported by anything more than a 10 page Design Statement and 10 page Impact Mitigation Statement?  Let’s try and encourage overworked local planning officers to read planning applications rather than weigh them.

Other ideas which might help increase delivery include:

  • clearer recommendations for how Local Authorities must work together to deliver housing needs across boundaries – some great emerging work that can be drawn upon.
  • binding Planning Performance Agreements
  • a 4 week fast track process for simple disputes over planning conditions and the like
  • deemed consent in relation to dilatory statutory consultees, subject of course to safety considerations;
  • removing the need for planning applications on sites in an adopted plan to go to Committee

Finally most importantly is the need to unleash the smaller and custom builders.  Barratt is the first to admit that the loss of many smaller regional building businesses during the recession has had an unwelcome effect on delivery volumes.  Measures to help them by reducing planning costs/uncertainties and increase funding opportunities will hopefully be a focus for the policy makers currently writing the Bill.

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Game Changer

It’s rare that you read something and you immediately realise this is a game changing moment in a long debate.

Absolutely what happened when I read the recent blog post on The London Society (TLS) website in relation to the London Green Belt. Mainly because TLS is not a housing developer or even a commercial organisation. No, they are a body set up in 1912 with the sole intention of trying to ensure London remains both beautiful and a superb place to live, work and visit.

The blog reminded us of what a belt is – namely something linear. The original ideas for a London Green Belt were for a 400 yard wide linear park running around the outer edge of London.  “a healthful zone of pleasure, civic interest and enlightenment….a great communal estate secured for all time for the use and enjoyment of the people of London”  A green accessible girdle available to both existing residents on inside of the belt and to the future residents to be housed yards beyond.

It then recounted the history of Metroland, the politicking and the post war planning to ensure the protection of open land came alongside major plans for new towns further out. The result being that we now don’t have a 600 yard wide accessible linear park, rather 20 – 30 miles of private farmland and golf courses.  New family housing for Londoners therefore gets built over an hour from the City. The Green Belt has served many useful purposes but has also undoubtedly contributed significantly to the chronic housing shortage which Londoners now face.

No sane person wants to abandon Green Belt Policy and no housing professional wants to see more than 2, 3 or 5% of the Green Belt lost. By stopping the sprawl of London for the last 70 years it has been a fantastic success. But with the lack of housing now causing major social problems for Londoners, perhaps the time is now approaching where and how we need to have the mature discussion on where we can make minor changes in order to set new boundaries which we can endure for another 50 – 70 years?

Is it time to move away from the two notions that (a) all of the Green Belt is beautiful and (b) the loss of one square inch means the rest will be quickly concreted over?

Perhaps the reality is that parts of the Green Belt comprise degraded inaccessible land entirely suitable for development without any adverse effect on amenity? Perhaps, a Royal Commission after May 2015 could look at how we could set new fit-for-purpose Green Belt boundaries which can serve two or three generations to come.

Given the political sensitivity this is clearly the wrong time to be shouting from the roof tops, indeed only in the last few weeks we have seen two separate statements from the Government emphasising the commitment to protecting the Green Belt from new homes. But after the election, perhaps there are signs that a conversation is appropriate? David Lammy is standing for election as London Mayor in 2016 and is promoting the idea of a mature debate about how the Green Belt could alleviate the housing shortage without compromising its purpose. Perhaps this is a time for the housing sector to build up evidence ready to contribute to that debate?

Twas ever thus? In 1532 building was not allowed beyond the London City Walls and this was only repealed in 1666 when the Great Fire created a housing issue which policymakers felt they needed to respond to. Food for thought…..

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Crisis Over

After 6 months worrying, it finally happened last Sunday. Yes with housing consents and starts rapidly rising we heard the first arguments that the housing crisis is now solving itself, therefore no need for any nasty spending increases or unpopular tweaks to planning policy.

It came on BBC Sunday Politics when Andrew Neill quizzed Emma Reynolds (Shadow Housing Minister) in relation to the recently published Lyons Review. If you look at the chart below you can see why.


The Lyons Review has a target of 200k new homes a year, c40K less than the generally accepted need of 240K. If current trends continue we should hit 240K consents a year in 2017. If the trend line for starts continues we should be at 200K new homes a year by 2019; 1 year earlier than The Lyons Review target of 2020.

Luckily for all of us who see the scale of the crisis close up, Emma Reynolds gave a stout and skilful defence of both the need for change and the recommendations in Sir Michael’s report.

As a planner I know that consents data is hugely misleading. To illustrate, in Q2 of 2012 there were c24,000 consents on c800 sites. In Q2 of 2014 there were c62,000 consents, also on c800 sites. The current trend is for bigger sites not more sites. And those of us that actually deliver homes know a site for 50 units does not necessarily sell more homes in a week than a site for 150 units. Housebuilders call a site an outlet, and what the industry needs is more outlets to sell more homes. Extra units but with no increase in outlets can assist security of supply but doesn’t, in itself, guarantee increased new homes output

With affordability worsening, and homelessness increasing in most areas this is absolutely the wrong time to think that the crisis is easing or solving itself. Prioritising housing delivery in both funding and policy terms is needed more than ever. The Lyons Review is a very good way to start that conversation.

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I sense a mismatch between us housebuilders and many others in the housing and policy sphere. It seems that we builders are too often moaning about how the public policy treats us whilst others argue that we have been supported by Government too much, especially as the market and our profitability strengthens.

So where does the truth lie? Clearly that depends on your standpoint and political priorities. Let’s explore.

There is no doubt that with housing output collapsing to less than 30% of need the Government needed to kick start private sector housebuilding activity. The credit crunch and subsequent price falls meant it was almost impossible, in many parts of the country to build and sell a house profitably. Costs were static but there were virtually no purchasers able to secure a mortgage. Firstbuy and Kickstart blew air on the embers and arguably prevented a wholesale collapse of the housebuilding sector north of Watford. From there Help to Buy came and stimulated both demand and supply of new homes. Its continuation until 2020 provides confidence to continue investment in the process of land purchase, planning promotion, construction and sales. Starts are up and planning consents are their highest since 2007.

Alongside the financial assistance a wide range of other policy levers have been pulled relating to inter alia, planning, public sector land and small builders.

So no housebuilder could reasonably claim that we haven’t been targeted for help or that this hasn’t positively affected our balance sheets. Why? – because we provide a public good for which there is a calculated and recognised need related to household growth.

And it is this “calculation” or regulation of need which is usually the cause of housebuilder concerns.
Our product is considered by many to cause harm. Especially by those who do not wish the area of the UK covered by homes to rise above the current 2-3% of our land mass. The state (nationally) created the planning system to provide nationalised state control of our output – operated both locally and nationally. The problem is that the calculated needs are rarely met as the state (locally) focusses on the overriding electoral pressure to prevent the perceived local harm rather than meeting the wider need.

There is no sanction for not having a plan let alone failing to meet need. Many applications are a battle – for Barratt it takes an average of 70 weeks from the first pre application meeting to being able to start construction. Longer than the whole construction and sales process for our smaller sites. The crux of the housebuilders constant lament is not the existence of the planning system but the need to turn the dial slightly more towards meeting the housing need rather than simply avoiding the perceived harm. NPPF has helped enormously but the uniquely English obsession with the urban containment (aka stranglehold) around most of our key cities is simply not a sustainable approach to assist future generations.

Time and time again I hear people who don’t actually build houses say the planning system is not the key issue. They are wrong. In a recovering market we can and will build more houses if we have confidence that land will be released where it will meet need and address demand. At present the planning approach to the edges of our major cities of London, Manchester, Birmingham, Oxford, Bristol and others gives no confidence in this regard. I would urge those cities to look at the examples provided by York and Newcastle recently.

So back to the question – do we housebuilders moan too much? Unquestionably yes but perhaps slightly understandable as we get lambasted for not building enough, for making too much profit, for not providing enough affordable units and receiving too much Government support. Yet the way we see it is that we could and would build more if, as Cameron Robb of Shelter said recently, the system could provide more land more quickly and more cheaply into the hands of those who actually build houses.

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The plan led system has long been a source of intrigue. Along with Green Belt it is one of those immoveable aspects of British planning that seems beyond criticism.

First source of intrigue is because it must be the biggest misnomer in British social policy. 24 years after the plan led system came in we still don’t have many plans. Only 57% of local authorities have an adopted local plan and only 15% have a post – NPPF plan, namely one that can be described as up to date. I recently heard someone from York City Council confirming that within two years they should be able to adopt the first plan for the City since 1956. Newcastle, as a major regional capital currently has the 1998 UDP as its adopted policy document.

Planning must be the only area of policymaking where national policy is more fleet footed than local policy. As a housing specialist we seem to get brand new national policy every few years. Since 1992 we have had 3 versions of PPG3, plus PPS3 and now NPPF. In contrast the pace of local plan production seems to sit somewhere between glacial and snail.

The second thing which causes intrigue is its purpose. It’s clearly not to speed up housing delivery as average annual output in the last 25 years has been roughly half the level of the preceding 25 years.

I guess its attractiveness lies in the innate desire of us planners and policymakers to prepare plans. Perhaps giving us an attractive sense of control over the rapacious developers. It also seems so similar to our North European cousins with their high quality urban extensions and so divorced from the sprawl and unplanned development in the Southern Europe, Ireland or the US.

A comprehensive district-wide local plan offers us the chance to control the future of a whole district or town or even City. It allows us to draw a map where some areas are shaded brown for housing and other areas are shaded green for countryside or purple for employment etc. Then, once the plan is finished you simply say yes to a housing application if it is shaded brown. The brown areas are carefully sized to accommodate all the homes we need for the next 15 years. Not too small and not too big.

Job done. Housing applications on brown = Yes. Housing applications on another colour = No.

But it hasn’t quite worked out as planned – pardon the pun. Firstly, unlike our North European cousins sometimes we see the preparation of the plan as the end of the job – other than to sit back and monitor what others to to make it happen. Completely different in Holland or Germany where the plan is simply the catalyst for local and central government to roll up their sleeves to work with the private sector to make the plan happen. The 1991 VINEX programme in Holland planned 455,000 new homes in new suburbs. By 2008 they were built.

Secondly, the plans, when written, simply didn’t get implemented. In response the Government then asked LAs to prepare strange “plans lite” documents like urban capacity studies or SHLAAs. These were aimed at defining the off-plan sites which could nevertheless be deemed suitable for housing in order to drive up housing output – in particular on brownfield sites.

Unfortunately, over ambitious Employment Land Reviews, the recession and the abolition of “garden grabbing” largely put an end to these “plan-lite” “windfalls” as a significant source of supply.

Now the “in my day” bit.

I can remember, just, what it was like to work in a local authority before the plan-led system. The local plan team prepared local plans for areas of major change or areas where particular control was needed. In my authority about 5 local plans covered about 20% of the area. The development control team was then trusted to say “yes” or “no” to housing applications based on whether the site and design complied with general national and local policy objectives or criteria-based policies. Namely whether or not it was a good development. It all seemed to work quite well. Certainly I found development control was an exciting place to work constantly making tough judgement calls on interesting applications. There were no housing caps – simply a loose application of the 5 year supply based on supply estimates compared to past build rates.

So what happens now? Nothing – as the plan led system appears sacrosanct and we all need to work within it. But that doesn’t stop old timers like me hankering for a planning system which either:

a. enables local government to quickly prepare district wide plans and then get involved in making delivery with pace happen, or,
b. focuses local planning effort on areas of change and then considers other applications on their sustainable development merits rather than the colour it is shaded on a big map.

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Sometimes it takes an overseas perspective to make you realise something fairly obvious. And so it was for me when reading the Planetizen interview with Ben Ross about how the Maryland Purple Line mass transit project had tackled the issue of Nimbyism when developing the

As well as the usual important stuff about feedback,transparency and mobilising supporters Ross brought home to me that the reason Nimbys are so powerful is that, unlike nearly any other political cause, Nimbyism is a coalition of both the political right and the political left.

It’s the same in the UK when trying to address the housing crisis. When it comes to delivering the homes we need, most people recognise that (for good or ill) this is dependent on private sector housebuilders. This requires the release of large numbers of brownfield and greenfield sites.

That requirement for greenfield site releases to be built by private housebuilders creates problems for both the left and the right. And because it so much easier to oppose something than to create something the inevitable result has been a huge undersupply of housing.

For the right the problem is obvious. Population growth and housing aspiration is focused most heavily in the South East where tory constituencies dominate and there is little brownfield land outside London. Greenfield housing is unpopular and MPs and local councillors queue up to denounce the evils of concreting over the countryside. As they articulate the need to halt the rapacious developers, little mention is made of a housing crisis described by Nick Boles as immoral.

For the left the problem often seems to be profit. From what I hear in cross-sector “round table discussions”, I sometimes get the sense that some on the left regret the fact that volume housebuilders need to play a key role in addressing the housing crisis. It sometimes feels as though the message is that if housebuilders must be allowed to build, then they should be rigidly controlled and restricted to brownfield urban sites!

The tone is often the same. An evidenced case relating to the quite obvious capacity (as a nation) to release small amounts of land to house the nation is met with hyperbole about urban sprawl and housebuilders wanting to tear up the planning system. Quickly followed by descriptions of fabulous urban regeneration schemes across the UK and Europe. Without any realisation that we housebuilders equally regard them as fabulous (indeed delivered many of them) but are simply pointing out that regeneration is only one of the levers we need to pull in order to address the housing crisis. Others are required.

More plans, more control, more research, more organisations, more regulation, more studies, more planning often seems to be the safe approach without any hard evidence that more state-side control actually leads to more delivery.

With the left and right up against us – no wonder we housebuilders have under delivered!! But, instead of moaning – what can be done about it?

Firstly I need to immediately exempt Ministers and Shadow Ministers from the broad generalisations above. From what I see and hear Nick Boles, Emma Reynolds and Kris Hopkin understand the issues clearly and work tirelessly working out solutions to try and deliver more homes. Despite the obvious political difficulties.

Secondly we housebuilders, at times, need to focus more clearly on solutions and ideas rather than just describing the dysfunctional outputs arising from a fairly dysfunctional system.

Nobody in housebuilding is arguing for a liberalised Spanish/Irish – planning system or an unregulated land market. But perhaps we need to work ever harder on identifying what we do stand for. Would Martin Luther King really have had as much impact if he titled his 1963 speech as, “I Have a Nightmare?”

Thirdly we all need to remember the importance of robust hard evidence. At present in the housing debate there is too much articulation, and insufficient demonstration, of the points being made. Whether you agree or disagree with the content the recent Shleter/KPMG report – it’s a robust evidenced contribution and a good first salvo in the run up to May 2015.


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