Is planning a guiding light to economic recovery or a handbrake on growth?

I spoke at the Sweet & Maxwell Planning Law Conference on the 11th February under the banner The planning system: a guiding light to economic recovery or a handbrake on growth? and very topical it was too. 

Interestingly, one of my suggestions to a question from the floor on speeding up the planning system has supposed support from the Liberal Democrats; abolish Secretary of State decisions. 

Why do we need Secretary of State intervention? When one stops to think about it, it’s the antithesis of Localism, brings a strong whiff of politics into decision making, and it undermines the process and impartiality of the Planning Inspectorate. I think there’s plenty wrong with the planning system, but the quality and integrity of appeal inspectors is not one of them. 

The fact that the Chief Planning Inspector, Helen Adlard, was sat next to me had absolutely no bearing on my support for her appeal inspectors, albeit I was a bit sheepish about the title of my topic paper: RIP The Development Plan System. I’m not sure I got away with claiming it stood for ‘reasonable improvements proposed’. 

Anyway, Helen took my comments in good grace, and made a few scribbles. My main gripe is that development plans are far too preoccupied with due process and being ‘sound’.  What I want them to do is to enable developers to put forward sites, have the proper scope to quiz local authorities on their emerging proposals, and fundamentally ensure that developers and landowners feel suitably engaged to participate in development planning. 

John Walker of Westminster City Council and Jonathan Bore of Kensington & Chelsea (from the floor) made a number of comments that would have heartened the development industry. In fact, it was remarkably how much consensus there was in the room: John’s comment that planning has become a bolt-in for a plethora of other environmental and social requirements (affordable housing, sustainability, flooding to name but a few) certainly resonated across the public and private sector representatives. 

Thanks to Simon Smith of Sweet & Maxwell for giving me the platform to vent my spleen. 

The real issues for planning new homes in London

The idea of preventing (or limiting) wealthy investors – of any nationality – from acquiring London properties is folly, and a complete diversion from the real issue: we are not building enough houses.  It defies logic to make London a more difficult place to invest, when London is the self-styled home of international commerce.  That is a good thing, and fundamental not only to our economic recovery, but long-term growth.  Frankly, whether a Russian oligarch lives in his £50m pound property or not has little bearing on the average Londoner.

What does count is that we are not building enough ‘£500,000’ family homes.  That is partly a consequence of an over-reliance on flatted developments as the colour of the property owners’ passport, but also, the overall pace of development.  Flatted developments require forward-funding to make them viable.  If we don’t want units snapped up in Hong Kong (or London) property fairs, the free market or the state will need to think more laterally about how a developer is expected to fund a hugely complex, multi-phased scheme and balance the risk-reward.  And even if it is funded without foreign investment it will be substantially skewed towards smaller units.          

With a housing scheme, a developer can ‘build one and sell one’, which means the cash flow is much easier to manage. With a flatted scheme, a developer typically has the full outlay on a block without the sales returns. That is why off-plan sales appeal, as it can finance a scheme. When an entire development can be forward-sold in a single weekend (typically at an oversea property fair), it’s not difficult to see why that is appealing – but crucially, it provides the funding partner with the confidence to put the development finance into a scheme. 

If we genuinely want affordable (in all meanings of the word) family accommodation, we have to stop misleading the public that the likes of Vauxhall-Nine Elms-Battersea will make a material difference.  It won’t.  It will revive an under-utilised area of the Southern banks of the Thames, and it will result in some very smart residential buildings. but it won’t, for example, be any cheaper than existing properties in what has already become a gentrified area. 

The existing use value of any brownfield site in zone 1 or 2, coupled with the planning costs of development (s106 contributions and community infrastructure levy) create a high hurdle rate for viable development. That necessitates building to high densities, which means going upwards, and with a disposition towards smaller units. The inevitable consequence is a housing product attractive to investors, but financially prohibitive, and largely unsuitable, for families. It partly explains the sustained interest in London’s Victorian housing stock; it may be narrow cold and rickety, but it has four bedrooms and a back garden. How many of London’s next generation of flagship redevelopments will be able to make that claim?

The real opportunity lies in a managed release of employment land in ‘mid’ London, and appropriately sited new build schemes on the periphery of the City, close to existing rail and tube stations and existing facilities.  That will not be universally popular.  But If the planning system coordinates the release of these sites through development plan allocations, they can throttle the uplift in land value, and dictate the make-up of sites.  Additionally, property investors are less interested in houses, and there is equally less demand for developments that are not perceived to be in the shadow of Big Ben and Tower Bridge.

A final point.  The availability – or otherwise – of 50,000 homes in London is a great sound bight.  It represents roughly what we need to build every year to keep up with demand.  We are building roughly 20,000 homes.  That is the real madness.