As the UK begins to slowly come out of lockdown, SME housebuilders will once again have to grapple with a planning system that has arguably never been more complex, according to a report by Aldermore Bank
UK housebuilders have experienced a tough year with Brexit uncertainty shackling investment and the Covid-19 pandemic putting construction work on hold for months. The impact though has been even harder on many SME housebuilders who are stuck with many newly built homes lying empty, because buyers pulled out of purchases, and new developments paused as the country entered lockdown.
Complications over acquiring planning permission add significantly to development risk and can have a major impact on margins. For smaller developers this can mean the difference between profit and loss, and from being able to introduce environmentally friendly measures or not.
In the 1990s, SME housebuilders were responsible for building most new homes in the UK. They were praised for their dynamism and ability to build quality housing. Today, if the government hopes to meet its target of building 300,000 new homes a year, then we need to encourage and support SMEs housebuilders more than ever.
Below are four of the key takeaways from the report:
Local Planning Authorities (LPA) are suffering from severe staff shortages which must be addressed.
According to the APPG report, LPA staff shortages and expertise were the top issues faced by SME housebuilders in their attempts to engage with the planning process. More resources at LPA level are needed, especially in the training of planners and sustaining talent within the public sector planning process.
Staff shortages, experience and expertise are increasingly cited by housebuilders as the reason for delays. Well qualified, quality planners would address this widespread blockage, which is evident across many local authorities.
Time is money
Delays in the processing of a planning application can have a serious impact on the finances of an SME housebuilder. Delays can mean interest payments compound over time, leading to projects becoming unviable or worse financial ruin. To help address this, the APPG recommends that the Government needs to review and amend its Planning Guarantee to determine applications within 26 weeks, with a further 26 weeks for an appeal if necessary.
This system is currently rarely used as LPAs insist on applicants agreeing an extension of time before the 13-26-week time period is up. LPAs need a financial incentive not to extend this time limit, as this will help focus minds and ensure that the use of extensions is not readily abused.
Availability of land is limiting housebuilders
The UK has a housing shortage and more land needs to be sustainably unlocked for development. LPAs need to identify adequate land to meet housing needs and then apply the presumption in favour of sustainable development to release housing land.
There’s often a high degree of uncertainty about the length of time it takes for a planning decision to be made, which makes financial planning very difficult for SME housebuilders.
Planning delays mean developers are unable to draw down funds and often accrue charges or delays in utility works. The need for more consistency in terms of time is therefore critical.
Overall, the APPG report provides a constructive contribution to the reform debate that the Government is about to kickstart with its Planning White Paper. Aldermore is pleased to support this report and looks forward to engaging with our customers and others in the sector to get Britain building.
Read the full All-Party Parliamentary Group (APPG) for SME House Builder’s report here.