Insight

Planning for New Homes: how bad does the NAO say we are?

National Audit Office 800w

We aren’t building enough homes, and the National Audit Office is asking why. Their latest paper “Planning for new homes“, looks at the role of the planning system. That includes the Ministry of Housing, Communities and Local Government (MHCLG), local authorities, the Planning Inspectorate and developers.

The Government wants 300,000 new homes a year by the mid-2020s and we are currently well short of achieving that target.

The NAO says:

  • Local Authorities are getting planning applications through the system within the time limits (though in part because many bigger applications are having extended times agreed). That’s despite councils having fewer staff and less money.
  • Local Authorities have done less well on producing local plans, with only 44.1% having an up-to-date plan. Councils are expected to have a plan that’s less than five years old, meaning that they should be on an almost-constant treadmill, having to start work on the next local plan almost as soon as the previous one is approved.
  • MHCLG is struggling to deliver the support Local Authorities need. It is wielding the stick – for example by threatening to punish authorities where too few new homes are built (the NAO estimates 50% will fail the test in 2020). But the positive support is less forthcoming: budgets continue to be cut, and promises to train up more planners haven’t yet come to fruition.
  • The Planning Inspectorate grants 43% of appeals, but is taking too long to decide them. Over the last four years, the average determination time has increased from 30 to 38 weeks. It has lost staff and funding.
  • The system for getting infrastructure in place is a mess. Only 47% of Local Authorities have implemented a Community Infrastructure Levy (CIL). Developers are paying out less, relative to house prices, in Section 106 agreements and often negotiating down payments after planning permission is granted.
  • Average profit margins of the top five house developers increased from 12% to 21% between 2012 and 2016.
  • MHCLG has a poor understanding of the planning skills shortage: it doesn’t have the figures.
  • The system for providing infrastructure is not sufficiently joined-up. Local authorities provide some. Other elements are paid for by developers. The Housing Infrastructure Fund provides a £5.5b pot to bid into, and the Department for Transport has the ultimate say on big-ticket items. But Local Authorities have no way to be certain what central government will end up agreeing, which makes large-scale planning something of a lottery.

The NAO says we have a disjointed system where councils are working hard, but lack the skills and money they need. Central government waves a threatening stick at local government, but isn’t doing its bit on funding, planners or providing certainty over large-scale infrastructure.  The NAO also accuses some developers of gaming the system to increase profits, whilst alleging that the Planning Inspectorate is too slow in making decisions.

Infrastructure isn’t just a technical challenge – it’s one of the main objections that opponents of development raise. How will my area cope with all these extra houses when the schools are full, surgeries are busy, there aren’t enough shops, the roads are jammed, the rail and bus service is poor, and there’s no way to cycle safely? This report reflects the reality facing councils up and down the country: that they are being pushed by MHCLG to approve local plans and get homes built, but do not have the tools they need to provide much of the infrastructure that’s needed.

The approach, “build now, sort out the mess later”, neither leads to the best outcomes nor encourages popular support for new development.

The NAO report makes some sensible suggestions for improvements at MHCLG, and they mostly come down to “get more data and work better with Local Authorities”. The report does not address the private house-building industry’s limitations: it has never got anywhere near to building 300,000 homes a year. When higher numbers have been achieved, it has always been with the help of substantial public sector house-building. Much more work will be needed if the problems are to be overcome.

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