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08/06/2017

Legal landscape: To build more houses, we need to think small

The housing white paper may have reframed the housing debate, but transformation in housebuilding won’t happen until local authorities prioritise the needs of small and medium-sized builders, says Bernadette Hillman.

Small and medium-sized builders could be doing more to help plug the housing shortfall and increase housing density in urban areas, but local planning authorities must prioritise the delivery of more ‘development-ready’ sites.

At the last count, the country needs an additional 230,000 homes a year to keep pace with demand; but the last time more than 200,000 homes were built in a single year was in 1988. As has been identified in the government’s housing white paper, a diverse approach is needed to help solve this problem and planning teams must play their part.

Currently, there is a tendency for under-resourced planning authorities to prioritise the needs of larger housebuilders. According to the latest research by the Home Builders Federation, 293,127 homes were granted permission in 2016 but the number of sites fell by 11 per cent, indicating a shift towards larger schemes.

This willingness to give priority to larger developers is not surprising when we consider that eight of the largest housebuilders are responsible for more than half of all new homes built, according to the House of Commons’ Communities and Local Government

Committee. Backed by the right incentives, however, smaller builders could be doing much more to develop smaller sites and increase housing density in built-up towns and cities. 

"SMEs could also be given more public sector or local authority-backed projects, with planning permissions in principle or an equivalent type of permission"

Back in 1998, two-thirds of all new homes were built by SMEs (small and medium-sized enterprises), but over the past 18 years this has dropped significantly. Some small and medium-sized developers are being driven away from housebuilding altogether because of deeply frustrating delays and rising costs in the planning system and this is adding to the housing crisis. 

By way of example, the planning team at Shakespeare Martineau has supported clients that have had to wait for more than a year for planning permission from a local planning authority, while their planning-related fees have risen significantly. The uncertain economic outlook is also making it harder for SME builders to plan ahead and this is leading to a more cautious approach.

While it is still early days, the government’s Home Building Fund, which was launched in October 2016, aims to provide funding to support SME developers. The housing white paper also proposes a number of measures to support accelerated construction by encouraging partnerships between small and medium-sized firms, other private sector partners and contractors.

The housing white paper has certainly helped to reframe the housing debate by focusing on measures that will boost supply in the medium to long term. Practical steps are needed now to support SME builders. In particular, these developers need access to more development-ready sites, which are backed by the right infrastructure and planning permissions. Such opportunities will make it easier to secure the finance needed to get projects under way quickly.

Incentives provided by the government to support the development of larger sites have not been forthcoming when it comes to smaller projects. This imbalance must be addressed. SMEs could also be given more public sector or local authority-backed projects, such as building homes for councils, housing associations and central government, with planning permissions in principle or an equivalent type of permission.

The housing white paper is promising to do all the right things, but local planning authorities need to be doing more now to prioritise the needs of SME builders to stand a fighting chance of meeting housing requirements in the future. 

Bernadette Hillman is a partner and head of the London planning team at Shakespeare Martineau

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