Missing target

Standing on a building site in Hammarby, Stockholm, David Birkbeck is stunned at how quickly the Swedish showpiece development is being built. “When you go back after a fortnight, you can see another shell of another apartment block; it’s astonishing,” he says. The contrast with the UK is telling. But you don’t have to go as far as Sweden to see a sharp contrast with the way the UK delivers housing.

Across the Irish Sea, the Republic of Ireland has recently been achieving housebuilding rates that put the UK to shame. In recent years, the annual number of completions in the republic has climbed to nearly 30,000 in a country with a population of just over 4.1m. Extrapolate those figures to the UK, Birkbeck points out, and we would be seeing half a million new homes a year, far more than was achieved even in the heady days of the 1950s.

These figures put the UK’s anaemic housing delivery rates into perspective. The number of new homes per year has recently crept up to 185,000, around 50,000 more than the historically low level of starts being delivered at the turn of the millennium. But confidence that housing delivery had turned the corner received a jolt in August when government figures were published showing that the number of starts had fallen by 8%.

The months running up to Christmas will see an intense focus on housing delivery. Gordon Brown has upped the government’s annual housebuilding target for England to 240,000 units. Former Crest Nicholson chief executive John Callcutt is on the verge of delivering his long-awaited report on how to deliver the prime minister’s target. Why is it so hard to deliver housing in the UK? And will the government’s attempts to fix the system in this month’s Comprehensive Spending Review make life easier? The answers are complex. And they shed a harsh light on planners, Whitehall’s over-centralised decision-making and the City of London’s financial short-termism.

Roger Humber, adviser to the House Builders Association, puts the recent fall in starts down to short-term market fluctuations, triggered by developer concerns about the impact of rising interest rates. The fall has been exacerbated by the current focus on high-density development. “The emphasis on high-density apartments means that it only takes a few developers to pull in their horns for a big fall to take place,” he says.

Yolande Barnes, head of research at Savills, says recent rate rises have impacted most heavily on the buy-to-let investors, who have kept the flat market buoyant, because rents have not risen in line with borrowing costs. “Where they [developers] can get hold of greenfield land for more standard family housing, they are going ahead with it. It’s very specific on certain types of sites.”

John Walker, former chief executive of the Commission for New Towns, is not surprised the numbers are unimpressive. He says government ministers under-estimated the difficulties of delivering growth. “They expected growth would happen because they said it would. The push for new development requires quite long-term improvements to planning systems. Everybody’s keen to get to the sharp end, but it doesn’t work.”

Robin Tetlow, managing director of the planning consultancy Tetlow King Planning, says the problems start early in planning. “It goes back to the strategic planning level. For many years we have not been planning for enough dwellings and the overall numbers are wrong.” Humber points out that while Brown wants 240,000 new homes in England per year, adding up the country’s nine regional spatial strategies gives a figure of 198,000 dwellings.

Regional spatial strategies

The government is proposing to tackle the issue by getting regional development agencies to prepare regional spatial strategies instead of the council-dominated regional assemblies. But this change is unlikely to come into effect for several years and in the meantime the soon-to-be abolished assemblies are unlikely to look kindly on government pressure to up their targets. Recently, the government has taken the matter into its own hands by raising regional spatial strategy housing levels, but again it will take time for those figures to feed into local plans.

That assumes, of course, that local councils have plans in place. Very few of the new style local development frameworks, which are meant to replace the local plans, are in place yet. An example is West Northamptonshire, where efforts to drive development in line with the area’s designation by the government as a housing growth area are being frustrated by the absence of an up-to-date LDF. As Tetlow says, “The government has, as a result of its recent changes to the forward planning process, made the system vastly more complex.”

Meanwhile, developers face ever more stringent requirements when they present schemes for approval. The London borough of Croydon, for example, is now insisting schemes meet EcoHomes Excellent level, a requirement which has stopped at least one major scheme in its tracks. While the decision by government not to press ahead with the planning gain supplement is a relief, landowners are increasingly twitchy about selling sites, given the escalating cost of section 106 agreements.

Resources

Then there is the fact that the planning system remains severely under-resourced and over-stretched. Alan Cherry, chairman of Countryside Properties says it is taking a lot longer to get schemes through the planning system than at any point in his 50-year-plus career. He says: “We’ve got a scheme in Barking where a lot of the issues should have been thought about early on but you get the impression that people read the evidence at the last moment.” After two years of wrangling with the local authority over the 1,200-home scheme, Countryside is now preparing to appeal. “We are more inclined now to start the appeal process at the earliest possible stage,” Cherry says.

John Walker, who advises government on its growth plans, acknowledges that arrangements in many areas are still very stretched. “The number of people who have been focused on delivery is still quite small and revenue funding has been a particular issue,” he reflects.

Here, the government’s decision to increase its support for council planning departments to £500m should make a difference. Sir Simon Milton, Conservative chairman of the Local Government Association believes the higher grant will be an incentive for authorities to put resources into planning.

However many councils in high-pressure areas claim they can’t grant permission for developments unless they receive upfront infrastructure investment first. And decisions on paying for infrastructure projects are taken in Whitehall, not at the local level. The most glaring example of delay is the pan-London Crossrail project, which has taken more than 20 years to secure approval. Nicholas Falk, director of planning consultancy Urbed says: “If you can’t sort out the finance and the infrastructure, you will never make real progress.”

Even where planning conditions are favourable, there are still problems getting development off the ground. Research carried out by the Greater London Authority shows there are 90,000 unimplemented planning permissions across the capital, where the housing market has been in bull mode for the most of the last decade. Statistics like these generate scepticism about housebuilders’ claims that the system must take the blame for housing under supply. But the evidence is being gathered: the Callcutt review has been asked to examine whether the industry model is capable of delivering, and the Office of Fair Trading is investigating whether housebuilders are landbanking.

Design for Homes’ Birkbeck argues that the way the City treats housebuilders is impeding delivery. “The recessions of 1973/4 and 1991/2 taught housebuilders never to hold stock. It also made the City dump their shares and taught them that one prerequisite to holding a housebuilder’s shares is that the company has hardly a house unsold and healthy forward orders. What this means in reality is that most of the time there is hardly a home available for a quick purchase and completion.”

The City’s predilection for large landbanks acts as a perverse disincentive to speedy delivery, he adds. “This is part of the problem with our City-driven model. The type of housebuilders the City likes are obliged to hold more and more land as they grow. Many of these sites are not ready to build on tomorrow but a good number would come forward more quickly if they were in the hands of unquoted firms, RSLs and even those quoted builders like Barratt working on shorter landbanks who would prioritise them.”

Keeping the City sweet

This comes down partly to the way the City operates, but is also a result of the rationing of land by the planning system. The consequence is an unhealthy cocktail for the purposes of housing delivery. Restrictions on land supply mean housebuilders have a lot of capital tied up in sites, explaining why they are reluctant to build out more quickly than they have to, particularly when they have City analysts breathing down their necks. The same need to keep the City sweet makes it hard for big quoted companies to rapidly increase output.

This raises the ultimate question over whether housebuilders are best placed to deliver major development projects, like the Greenwich peninsula or eco-towns, that rely on big upfront investment. “They’re housebuilders, they are not suited to sort out infrastructure,” says Falk. “In Germany or Holland they would not ask the private sector to do it. They divide sites up into small manageable chunks that are easily built by small builders. You take the risk out of the business.”