Is working from home causing a planning gridlock?

The return to working from home courtesy of the Omicron variant has brought many of us right back to the chaos of March 2020, when organisations up and down the country moved to remote working wholesale over the course of a frenetic few days. Whether this latest return to “WFH” reminded you happily of the freedom presented by liberation from the office, or brought you out in hives at the prospect of social isolation and death-by-MS-Teams, probably depended on your personality.

Many local authority staff, of course, had never returned to the office. And, increasingly, housebuilders are pointing the finger at council home-working as the principal cause of a deepening planning gridlock across the country, which is increasingly being described as the worst ever experienced. Despite last year’s covid recession, it is actually supply-side problems, most particularly planning, that are giving the nation’s housebuilders sleepless nights.

In short – they don’t know how they are going to find the land with permissions to build the homes that their customers want. Some suspect it is even going to impact the government’s ability to hit its 300,000 homes-a-year housebuilding target. So how bad is the situation, and is it realistic to think that WFH is really to blame?

Worst ever

Since building sites reopened in the wake of the spring 2020 shut-down, the industry has experienced unprecedented demand for homes – with 2021 likely to have witnessed the highest number of house sales since before the global financial crisis. Gwyn Jones, chief executive of Castle Green, the Northwest-based regional builder backed by former Redrow boss Steve Morgan, says this demand is being exacerbated by a deepening planning crisis, which is now the main constraint on the firm’s growth.

“We had 18 people camped outside our office for a week before our last site launch,” Jones said. ”That has not been the case previously. For every site now, we have people camping out.

“There’s huge demand for housing, which is just not going away. The challenge though is getting sites through planning – we’re having a really torrid time.

“One of my land colleagues told me it was the worst he had seen the system in his 40 years in the industry. It’s the worst it has ever been.”

The problem, says Jones, is that current high demand means that housebuilders are “burning through sites quicker and quicker” in order to hit business plan numbers, but then new sites aren’t coming into the hopper at the other end because of local authority delays. And he does not think he is alone. “All the housebuilders are building on fewer outlets than ever, but selling more.”

The testimony from other housebuilders and analysts suggests that he is right to think the problem is widespread. Greg Hill, deputy chief executive at Essex-based builder Hill, said the design-led firm does not in normal times face big difficulties securing planning consent.

“But now we’re seeing that the simplest, policy-compliant, mid-sized schemes on allocated sites are getting challenged on the principle of development,” he said, citing both planning department resources and more antagonistic local politics as likely causes. “In my opinion it’s the worst it has ever been. It’s seriously tough at the moment.

“I think it’s going to create a major delivery issue in the coming years. We – and, I think, others – are just not getting sites to start when we should.”

Congestion

The problem continues up to the country’s biggest developers. In November, listed builder Gleeson said planning “congestion” was delaying work, while Jennie Daly, group operations director at Taylor Wimpey, says the “ability of the planning system […] to come out of lockdown as strong as the housebuilders have, has proved to be a challenge.”

These concerns are also starting to be reflected in the official figures on planning performance at local authorities. The most recent figures still show a distinct drop-off in the number of approvals within the government’s statutory time limits of 13 weeks for a major application (more than 10 homes), and eight weeks for a smaller scheme.

“One of my land colleagues told me it was the worst he had seen the system in his 40 years in the industry. It’s the worst it has ever been.”

Gwyn Jones, Castle Green

The proportion of major residential planning applications decided on time between July and September fell to 81%, the lowest figure for more than five years, while the proportion of minor residential decisions made on time fell back to 78% - again the lowest quarterly figure since 2016.

This is despite the fact that the actual volume of such decisions being taken was nothing like the level seen during that earlier period.

Other evidence supports the idea of a deepening crisis. A survey of SME builders, published last week, found 94% believe that delays to the planning system are a major constraint on their business, up sharply on the year before, while just today a report by the House of Lords’ built environment committee has found that cuts to planning resources were causing an “evolving crisis” in the system, increasing delays and staff shortages in local planning authorities.

Retirement housebuilder McCarthy & Stone told the committee that the average time taken from validation to determine its applications was 46 weeks – over three times the statutory time limit.

Clyde Lewis, deputy head of research and head of the building team at broker Peel Hunt says planning is now the big challenge for housebuilders. “The housebuilders are keen to find more land and grow their outlets. But, on average, I would suspect the listed housebuilders – if you look at the total number of sites they’re operating from – are about 10% down on where they want to be.”

Nightmare

Shane Carberry, building analyst at broker Goodbody, cited Persimmon as another example of a builder stymied by planning delays. “They’re very confident in terms of demand, the issue for them is getting outlets open – planning is a massive issue. They are extremely frustrated about it,” he said.

Andrew Whitaker, planning director at the Home Builders’ Federation, says the official figures are likely to understate how bad the situation really is, because they can be “gamed” by local authorities looking to protect their stats.

For example, he says, many builders are experiencing delays in simply getting applications registered – as this is the point at which the official clock is started for councils to make a decision. Some are also using agreed extensions of time as a “tool”, he says, to fool the stats.

“All of our members are saying it’s an absolute nightmare, everywhere I go in the country, every single meeting,” he says. “Even basic administrative tasks like registering or validating applications is getting really difficult.”

Resource challenge

But, if few seem in doubt that planning delays are worse than ever, what is the reason for it? The most obvious answer is resources – with many citing the lack of local authority planning officers needed to process and make decisions.

The HBF’s Whitaker says: “Planning officers all complain of massive case files like never before”, while Taylor Wimpey’s Daly says: “It’s the level of resource which is the biggest challenge”. Greg Hill echoes that there is a “major major challenge on the resource”.

“Even basic administrative tasks like registering or validating applications is getting really difficult.”

Andrew Whitaker, HBF

Local government funding numbers back this up: according to the Institute for Fiscal Studies, council planning departments saw their budgets cut by 42% between 2010 and 2019, the biggest reduction in any local authority service. Planners and developers have long highlighted these cuts as an issue – indeed the Royal Town Planning Institute has been campaigning for the past two years for a £500m funding boost to local authority planning departments.

Shirking from home

But while resourcing is clearly a problem, it has been an issue for at least a decade – so it’s hard to see resourcing alone as the cause for the current crisis in performance. Many housebuilders believe it is instead the pandemic and working from home which has forced the current crisis.

Castle Green’s Jones says: “It feels like we’re trying to recover and be industrious, but the public sector is still all at home, and has no interest in being industrious.

“There’s no specific reason clear but planning departments are just saying ‘covid’s here’, so everything’s got to slow down.”

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Goodbody’s Carberry says: “It feels like it’s the working from home piece that is driving it. It turns out the system is not as virtual as it should be. The WFH lifestyle has elongated the processes.”

While Jennie Daly is more cautious in her phrasing, the same meaning is apparent. “Some local authorities have had a very good covid crisis,” she says. “But many haven’t. There’s a level of congestion there which we need to see movement on.”

Unsurprisingly, planners themselves flatly reject the notion that there has been any dip in productivity from moving out of the office. Mike Kiely, chairman of the Planning Officers’ Society (POS), says that, while there is a “significant shortage of planners,” the description of a drop in productivity “is not something I’d recognise.

“The feedback I’ve had is that home working is working well,” he says.

Shock

A recent blog including a series of anonymous testimonies by council planners themselves paints a picture of chronic underfunding and understaffing issues brought to crisis point by a huge increase in householder applications and a desire by councils to divert resources elsewhere in the pandemic.

Planning consultant Catriona Riddell, also an adviser to the POS on strategic planning issues, likewise says: “Any developer who thinks planners are sitting at home twiddling their thumbs drinking tea should work in a planning department for a day and they’d get quite a shock”.

She says the crisis has been caused by the piling up of the chronic resourcing issue alongside a huge wave of applications and a more and more dysfunctional relationship between planning officers and councillors.

With recent local government elections seeing many councillors elected on anti-development tickets while the government is pressing for more permissions, this combination, Riddell says, is leading to worsening morale.

The figures back up the idea of a huge uptick in the number of applications being received. The smaller but more numerous householder applications, which developers don’t see, were up 37% in the most recent quarter.

But even if developers were right that WFH has driven a drop in productivity, how exactly could this have happened? The pandemic, after all, has seen many employers in various industries report equal or even improved productivity, in the short term at least, from WFH.

Andrew Whitaker believes the answer lies in the difficulty of efficiently enabling the kind of collaborative working that planning requires in a WFH context. “I think they’re not helped by the hierarchical structures in place at many authorities.

“When they’re working from home, and their work needs to be signed off by others, who are also working from home, it’s harder to get that sign-off when previously you could walk across the office and see your boss.

“The teamworking processes seem to be slowing things down.”

Whitaker also says it often appears to be harder to contact planning officers than it was before the pandemic, when developers and their agents knew the relevant officers’ desk numbers. “They seem reluctant to divert their phones to their homes, so it’s hard to get answers to simple things.”

Greg Hill echoes this: “With covid there’s less resource in the system, but it’s also less easy to co-ordinate. It’s less easy with working from home because things often need big Teams meetings to get resolved.”

“Any developer who thinks planners are twiddling their thumbs drinking tea would get quite a shock”

Catriona Riddell, consultant

But whatever the reasons, the impact on housebuilders could be material over the next few years, particularly as the huge demand sparked by the pandemic and the 2020 lockdown fades.

Cenkos analyst Kevin Cammack says concerns over the ability to bring forward and open new outlets had not impacted housebuilders’ sales so far because of the sheer pace at which each site is able to sell, meaning that volumes had so far remained healthy. “The question is how do housebuilders grow from here,” he says.

“I don’t think anyone expects the extraordinary level of sales demand we’ve seen recently to be maintained. So, volume growth is going to require selling from a greater number of sites.

”That is the challenge for the industry – that it wants to grow outlets. It’s trying to push more through.”

The government promised a review of resources for local authority planning as part of the 2020 planning white paper, but with the government’s planning reforms delayed, there is no imminent sense that the government is about to bail out the system.

For the moment, housebuilders will have to keep battling through the system as best as they can – even if it means that the growth they achieve in the years ahead is not what it could – or should – be.