Last week Sarah Payne posted a really interesting blog about housing, house building and planning. It can be seen at drpetermatthews.blogspot.co.uk. It has rightly been applauded in the Twittersphere for bringing a new perspective on the issue. Whilst Sarah is an academic she brings experience of working in housebuilding which provides a really useful underpinning to the academic perspective.
With the aim of pushing the discussion further I have posted below 6 of my own perspectives on Sarah’s piece. All bar one are, I think, fully supportive.
1. Sarah is right to highlight how polemic the Telegraph vs. PX debate has come. I would say as planners we shouldn’t worry about it!! In my view it’s actually healthy and twas ever thus. (used to be CPRE vs. HBF) The issues at play are massive and hugely political – the protection of “rural England” vs. the denial to a generation of easy access to the housing market. We as planners are the arbiters, balancers and decision makers in this huge and rightly contentious process. A fantastic responsibility for us and perhaps we should embrace challenge and comment from all sides!!
2. Fully agree with Sarah’s comments around land banks. Firstly having a bank of consents (400k) equivalent to less than 2 years need is too low rather than too high in my view. Second the problem is that many consented sites are locked up because much of the land is contracted (not purchased) at pre recession bubble prices. Those deals now need to be renegotiated or expire (potentially taking years yet) before those sites can deliver.
3. Really pleased to see Sarah speak up for the role and value of the planning system and pointing out the massive benefits it has delivered. I do, however, think we planners have to accept it has, will, and SHOULD hold up rates of development. That is one of its primary purposes. My first job was in development control – clue in the title! The question, as always in planning, is one of balance. Given the state of the housing crisis I think the Government is saying the control element should be lifted slightly in relation to some greenfield urban edge land in order get more houses built – thus tilting the balance slightly to try and address the housing crisis. Our role as planners to hold up development in the wrong places will and must remain a crucially important one. We only have to look across the Irish Sea to see the effects of unregulated planning.
4. Sarah’s question, quite rightly, is whether the Government’s recent shift in balance (with the aim of releasing more sites) will actually work in delivering more houses? I am optimistic. Why – for 3 reasons:-
Firstly my experience tells me that when there are more sites active in a market more houses will get built and sold. A range and choice of sites will attract more players and they will compete harder for sales. In Newcastle we have only one greenfield site in the City and we have seen woeful housing output. The Council is now bravely attacking the issue and if we can get 7 or 8 different builders all active on good sites build rates will surely increase. The demand is demonstrably there. The recent success of some new sites in neighbouring North Tyneside proves the point.
Secondly if the planning system encourages more NEW sites to come forward we will see new land contracted at new viable, deliverable post bubble prices. Such land can and does work financially. Already we are seeing how such new sites have helped most of the volume builders post healthy results for 2011/12. Those results (dramatically contrasting with 2009-11 results) will both help them secure cheaper lending for even more land purchases and, hopefully, at long last encourage them to be less risk averse and less short termist.
Thirdly many builders simply won’t promote new sites where there is strong community opposition. Too risky under localism. If it is clear the government agenda is now a more “muscular localism??!!” then this could change. Especially on the back of better results driving down risk aversion.
5. I note Sarah’s caution about Green Belt development. I worry here we could repeat the mistakes of the mid 80s/early 90s when housing output increased but Green Belts around cities were generally protected. Hence many market towns and villages which “happened” not to have green belt suffered from some shocking new estates. This time I personally would prefer to see a greater focus on well planned and well designed garden suburbs around our core cities. I accept that the issues around the London Green Belt are far more complex and mine is more a northern/midlands focus. Fully agree with Sarah that planning is but one piece of a complicated housing delivery jigsaw sitting alongside credit, public sector austerity and nimbyism. It’s a very important piece though and worthy of focus as the housing crisis gets worse and worse, month by month. Not to mention the economic opportunity cost from the incessant slow down in construction activity.
6. My final and only point of disagreement relates to Sarah’s £860k/£250k land value vs. £6.5m development cost example. I don’t necessarily agree with the picture of pain for the housebuilder. In most cases the land will be contracted (rather than purchased) until the development is consented and ready to start. In my experience the builder will not be likely to incur lending costs on the £860K because he/she won’t actually pay the £860K until they are certain the £6.5m cost can be funded and recouped. If the land value has actually dropped from £860K to £250K (due to falling sales values driving down the GDV and residual land value) the builder doesn’t lose much as he/she simply doesn’t do the contracted deal. Unless the landowner renegotiates (perhaps unlikely at this stage of the economic cycle) the site is just locked up and the only losers are the young families who don’t get to see the site built. Yes the builder will write off the land option and planning promotion costs which in your example might be around £300k – a small fraction of the £6.5m total cost. Better that write off than incur a major loss on a £6.5m investment!
Thanks again to Sarah and it would be great to hear views.