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How will planning reforms affect housing development?

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What do the recently announced planning reforms mean for the housing and residential development sector? Our Managing Director of Development Finance, Robert Orr, shares his thoughts.

Following the Chancellor’s decision to increase the nil rate band of Stamp Duty Land Tax (SDLT) in England and NI, from £125,000 to £500,000, last week saw more potentially positive news for the residential development market with the launch of the ‘Planning for the Future’ consultation.

Whilst the changes to SDLT are expected to act as a short-term demand side catalyst for the housing market, these proposed changes to the planning process are being seen as the most material supply side reform for several generations. The aim being to give developers more certainty and thereby encourage greater delivery in line with the Government’s aspiration to create 300,000 new homes per annum.

At present, each planning application is treated as bespoke, leaving the developer open to uncertainty around local objections and planning committee variances. Often locally elected officials can be put under pressure to decline schemes even when recommended by the professional planning officers after months of negotiations. Whilst around 90% of planning applications are eventually agreed, the process currently takes too much time and cost, particularly if a Planning Appeal needs to be progressed.

These proposed reforms should help to remove the current uncertainties around planning by allocating land into 3 broad categories: Growth, Renewal and Protection. In the first two categories, permission to develop will be assumed in principle, subject to the scheme meeting pre-agreed design standards and requirements. This levels the playing field for SME developers who don’t have the budget to fight delays in applications like the bigger and more national housebuilders. SME developers will also be pleased to see changes to the threshold for affordable housing thereby potentially making more sites viable.

There is some concern that cutting the red tape is shorthand for cutting standards and avoiding social housing. Critics have referenced the previous changes to Permitted Development Rights in 2013 allowing conversion of offices to residential. To some, this has created substandard private housing whilst supporters have pointed to cheaper units being delivered quickly, thereby helping social mobility and tackling intergeneration unfairness.   

In the case of these proposed planning reforms, supporters point out that it’s not a case of standards being cut rather that they will be agreed and understood upfront.

There is also a concern from critics about local opinion being over-ridden and housing schemes being forced upon them. The process for incorporating local views remains to be seen but Local Authorities will have around 30 months to create Local Housing Plans. This has in fact raised some questions around short term delays in planning as a result, with shares in national housebuilders dropping upon the day of the announcement.

Some commentators suggest that the Government has not been ambitious enough by including all of the current Green Belt in the Protected category. Those commentators point out that part of the official Green Belt, especially around transport links, is not attractive and could be considered for development.

Overall, the current Planning Process needs updating for the 21st century. The aim is to remove uncertainty and speed up the process whilst at the same time ensuring standards in housing are maintained. Whilst there is still much to understand in the detail, it is a positive first step.

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