With Labour’s desire to increase housebuilding, Kevan Carrick of JK Property Consultants discusses how changes to planning and legislation will be essential to housing development to deliver 1.5m new homes
The new Labour Government is committed to delivering 1.5m homes in five years in a boost to housing development.
Chancellor Rachel Reeves announced plans to reintroduce mandatory local housing targets and to reform the National Planning Policy Framework, consulting on a new, growth-focused approach to the planning system before the end of the month, including supporting local authorities with 300 additional planning officers across the country.
There will also be changes to the system itself and to the way ministers use powers for direct intervention.
The planning service has been the subject of much criticism. The National Planning Forum, together with the Royal Institution of Chartered Surveyors (RICS), is currently consulting on the matters required to address such criticism in relation to delay in the planning system.
Co-operation will be key for housing development
A partnership at all levels, such as between the National Planning Framework and RICS, government, combined authorities, local authorities, professional services, house builders, housing associations, and registered providers and construction sector, is required to deliver, with determination, the essential change.
Housing, as part of sustainable growth, needs to be accompanied by a wide range of infrastructure, commercial, recreational and community services, as well as having convenient access to places of employment.
The shortage of housing is constantly driving increases in price, rents, and land to develop.
Rising house prices are frequently quoted as a proxy for a healthy economy, but this is short-termism. People choose to buy rather than rent on the assumption they will own an appreciating property asset in the long term. It is important that housing, as a suitable security for lending purposes, is not undermined. However, policies that lead to excessive house price inflation are resulting in younger buyers being priced out of the market.
It is essential that policies ensure the early delivery of housing affordability with planning and economic policies, creating a stable and affordable market while avoiding unacceptably high house price inflation in many areas. The market is also showing the impact of housing shortage with the increase in rental, where those with a lower income are finding it even harder to secure accommodation.
Change in policy is needed
Change is essential and a national government policy, based on a 20-year strategy, is crucial to achieve a thriving and robust housing delivery programme of adequate numbers, of a good quality standard, and that meet social, environmental and cultural goals. Such a strategy, delivered through the Combined Authorities, would accelerate housing delivery, particularly for the much needed affordable and social housing.
Consideration has been given to industrialising the construction process, by building off site and with timber frame. There are challenges with a volatile housing market that make investing in innovation difficult, but a 20-year strategy would resolve these challenges and encourage investors.
Even so, investing in the training and skills for traditional construction, retrofit to improve sustainability, and innovative styles of building is equally essential.
Land plays an important role as an asset-class supporting many kinds of enterprise, its price being determined by transactions based on market metrics. Its use and development is highly regulated, and its role in climate mitigation measures increasingly elevate a wider public interest role, making it increasingly subject to public policy measures to achieve these aims.
The desire to move compensation for the acquisition of land for development to existing use value and benchmark land value, are such policy initiatives. Policy-based metrics are attributions of value based on a policy aim rather than being market determined. Policy must distinguish driven metrics from market metrics to avoid confusion in the market.
This confusion can frustrate the supply of land available for development. The proper and proportionate costs of development must be adopted in arriving at a fair price for the payment of land for development. Such costs for the improvement of infrastructure imposed by the development and the social infrastructure to support that development, such as schools and medical services, require payment from the development gain. Current examples for recovery of such costs from development gain are s106 agreements in planning for contributions, including that for affordable and social homes, and/or Community Infrastructure Levy.
Changes to planning will also benefit prices
Arriving at a fair price for land to use in development is essential to a stable market operation that encourages land owners to sell and buyers to deliver viable development. There are many complex and variable factors that determine market price. These comprise the component parts of the total costs for development. Some costs are relatively straight forward, others less so, such as planning design, content, and density of development, with contributions for affordable and social housing, transport and highways, education and health, community, site services and utilities, remediation, and below ground structures including mines and minerals reservations.
These factors can also delay or frustrate the delivery of development. To reduce risk, the RICS set up an expert working group, which I have the honour to chair, that has produced a Practice Statement for surveyors negotiating heads of terms for Land Agreements. These comprise development agreements and option agreements to acquire development land or buildings. The intention is to reduce the considerable risk of delay and additional costs by seeking to bring clarity to the process of the agreement of price for development of land and buildings
The increasing qualitative standards for environmental matters increase development costs. This increase in quality might create improvements that benefit the occupier and increase value that meet, if not exceed, those additional costs. The RICS is producing a Practice Statement for ‘sustainability and residential property valuation’ to keep up-to-date on changes impacting the valuation of property.
Also of benefit to more accurately assessing viability in development, is the proposed Practice Statement on ‘Affordable housing developments – valuation considerations’, to be published soon.
Finally, a plea to all to consider the use of mediation as a method to resolve disputes at pace and keep matters moving. Mediation offers a flexible, low-cost approach. Whether in the planning system, between landowner and developer, during construction, or in the management of the estate for service charges.
Please note that the views expressed in this article are solely those of Kevan Carrick and do not reflect the views of affiliated organisations such as RICS.
