There are few topics that can command the same media attention as housing. One might think that the level of interest, scrutiny and desire to overcome the challenge would mean new reports and analysis would reflect how far the conversation should have come, with ‘nuance’ as the watchword. But, alas, it appears not.
One story that does the rounds every year or two is what the Local Government Association calls ‘unimplemented permissions’. In its latest iteration, the LGA claims that more than 400,000 homes have been granted permission but have been left unbuilt and that they are taking longer to build those homes too. The implication to this is threefold: 1. planning is not the problem in housing delivery; 2. housebuilders are likely to be landbanking; and 3. the government may need to take a more interventionist role.
But in the name of nuance – and before we rush to designing policy solutions – we should understand a bit more about the analysis.
The data the LGA uses is from Glenigan, a firm that provides planning data on all development in the UK. Importantly, Glenigan mostly tracks schemes through the planning system and have a network of stakeholders and partners but what they do not do is visit every site to see precisely how many have been built. Back in 2016 – the last time this analysis was undertaken and released – it meant that units on sites that were not fully complete would be classed as ‘unimplemented’ i.e. a site of 1,000 units that was 99% complete would have all units counted as ‘unimplemented’.
This year, they have estimated the number of ‘unimplemented units’ on site by using the median construction time of projects with similar characteristics (project size, type and region) completed in 2015/16 and 2016/17, assumed that no units were completed during the first 16 weeks of a project and that unit completions were evenly distributed across the remainder of the construction phase. This is certainly an improvement to the methodology – which is welcome – but the analysis still doesn’t highlight key considerations which are vital if we are to create useful and effective policy.
Our extensive analysis from 2017 on this topic drew two key conclusions. First, even if we set aside the specific and detailed issues the LGA has not considered, it is still a relatively small number of units considering three factors: 1. the number of homes built each year; 2. the length of time the different sizes of sites take to build out; and 3. the number of sites in the pipeline required to signal to investors that developers are worth investing in.
Secondly, given that differently-sized sites take different timescales to plan and build, and that every site has unique ‘build profile’ that extends into the future - i.e. not all units on site are built in the year they are granted permission – it is entirely understandable that there would be ‘unimplemented units’ and, indeed, in a period when output is increasing after a slump the ratio between permissions and dwellings completed each year will naturally increase.
Recognising this build-out profile, our analysis uses two different housebuilding scenarios to show that there needs to be a stock of units with permission to sustain housebuilding in the future and this stock would initially increase at a faster rate than supply in order build the pipeline necessary to match increased targets. With this in mind, our modelling showed that a stock of between 0.9 and 1.1 million units would be required to ramp up future housebuilding to hit 300,000 homes per year by the mid-2020s (Figure 1) – a target subsequently adopted by the Chancellor.
This leads one to conclude the LGA figure of 423,000 unimplemented units is a sign not of landbanking but of an urgent need for more permissions.
Figure 1: Trajectory of Permissions and Output
Source: Lichfields analysis
Image credit: Columbia Pictures Corporation
This week, the City of London Corporation opened a consultation on a proposed non-immediate Article 4 Direction to remove the Class O permitted development right (change of use from office to residential) across the entire City. If approved, it will come into force on 31 May 2019, the day following the expiry of the City’s current exemption from the permitted development right by virtue of its status as Article 2(5) land – an ‘exempt’ status granted to only 17 local planning authorities.
If approved by the City’s members and assuming the Direction avoids a Secretary of State veto, it will mean a smooth transition from exemption to removal of the right. The Article 4 Direction and its timing are no real surprise. Since the amendments to the 2015 General Permitted Development Order in April 2016 made the permitted development right permanent and signalled an end to the exemptions under Article 2(5) after 30 May 2019, it seemed obvious that local authorities would seek to replace the exemptions with Article 4 directions (see previous blog post for more details).
Indeed the Mayor makes it clear that he supports Article 4 Directions in London ‘exempt areas’, noting:
To ensure that London’s key business locations are safeguarded, the relevant boroughs are developing a co-ordinated approach to introducing Article 4 Directions. The Mayor is providing strategic support to help the boroughs achieve this.”
In fact this is one matter on which the current and previous administration share common ground - Boris Johnson having assisted the Boroughs in achieving exempt status previously.
Of the 17 local authorities with an exemption for part of their jurisdiction (with the exception of the City and RB Kensington and Chelsea, which both received full coverage exemptions), 11 were in London. And the City is not the first to make a proposed Article 4 Direction to replace the exemption. As the table below shows, based on a review of the relevant authorities’ websites, a further six local authorities have pending Article 4s.
Of the above, with the exception of East Hampshire, the pending Article 4 Directions appear to cover, at a minimum, the same areas covered by the current exemptions. In East Hampshire’s case, probably the most peculiar of all of the areas granted the original exemptions having been given exemption for 10 parishes (including significant amounts of residential land), they have slimmed down the Article 4 Direction area to include key employment locations only.
And based on the local authorities that have started the necessary consultation process, and on the dates of the Directions coming into force, it’s not clear that there has been any obvious ‘co-ordinated approach’ between the London Boroughs, as suggested by the Mayor.
Of the local authority areas yet to formally begin the process, there is still plenty of time, with over 12 months left until the exemptions expire. This allows sufficient time to make a non-immediate Article 4 Direction and it still seems likely that the remaining 10 local authorities will shortly begin their own consultations (something my colleagues have written a useful guide about here). However, for landowners with B1(a) office space in those areas, it may be worth monitoring the local authorities’ activities now, if the potential of a change of use to C3 residential is of interest.
If you have any questions in respect of the above, or require any advice or guidance on permitted development rights or Article 4 Directions, please do contact us.
 https://www.london.gov.uk/what-we-do/planning/who-we-work/working-government/permitted-development-rights-changes-use Westminster City Council are yet to begin their consultation but propose to introduce the Article 4 Direction http://westminster.moderngov.co.uk/mgIssueHistoryHome.aspx?IId=13158&Opt=0