Start to Finish: how quickly do large-scale housing sites deliver?

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Start to Finish: how quickly do large-scale housing sites deliver?

Start to Finish: how quickly do large-scale housing sites deliver?

Grant Swan 08 Nov 2016
Most people now agree that we need to build significantly more homes than we currently do. And the Government wants planning to think big in how it goes about achieving this objective. With its ‘locally-led’ Garden Towns and Villages agenda and last December’s consultation on proposed changes to the National Planning Policy Framework to encourage new settlements, local planning authorities and developers are being encouraged to look closely at bringing forward large-scale housing development projects.

On paper, this emphasis on large sites is useful – with just one site of several thousands of homes, a district can meet a significant proportion of its housing requirement. Moreover, their sheer size can stimulate the local economy and drive innovation as the site and infrastructure are developed.

However, large sites are not a silver bullet. Their scale and complexity mean that they take time to plan and require significant upfront capital investment. Furthermore, there is a need to be realistic about how quickly they can deliver new homes – such sites are not immune to the challenges and risks of the market.

Our latest research report, Start to Finish, provides wide-ranging insight and analysis on the lead-in times, planning period and delivery phases of housing sites. This blog post sets out the key findings from the report.
Planning period
Before any homes can be built on-site, an outline or full planning application needs to be submitted and planning permission (followed by reserved matters approval for outline applications) has to be granted. A s106 obligation will generally need to be entered into. Pre-commencement conditions need to be discharged before any development start on-site. Our research shows that both the planning period (from application to decision) and the period of time between permission being granted and the first home being built depends on the complexity of the site, which frequently correlates with its size.

The larger the site, the longer the planning application determination period. Sites outside of London of between 100 and 499 units take, on average, 2.5 years – at least half the time required for sites of over 1,000 units – reflecting differing levels of site complexity.
Smaller sites take longer to deliver the first home after planning approval. This period of development takes just over 18 months for sites - outside of London - of under 500 units, but perhaps surprisingly, this is significantly quicker on larger sites; in particular, on the largest 2,000+ dwelling sites the time period from planning to first completion was under a year. This could be because larger sites may more often have larger housebuilders on board by the time an implementable permission is secured, thus be able to mobilise resources quicker.

Figure 1: Planning period by site size


Source: NLP analysis

Housing delivery rates
It is widely recognised that build rates on sites are dictated by the number of sales outlets and market absorption rates. Self-evidently, large sites will frequently have more than one housebuilder building and selling homes. The larger the site, the greater the number of outlets (different housebuilders) on-site and the faster the delivery rate. Based on our research, we found that, on average, sites of 100 to 1,000 units will typically deliver 60 units, each year while sites of 2,000 or more will deliver over 160 units per annum. However, it is worth noting that while larger sites have a higher delivery rate due to the number of additional outlets, they take longer to plan and start on-site. There is also significant variation from the average – some sites can be quicker, others slower. And there are fluctuations from year to year.

Figure 2: Housing delivery by site size


Source: NLP analysis

Our analysis shows that markets really do matter for housing delivery rates. Using estimates of land value with residential planning permissions at local authority level – as a proxy for market demand and economic strength – relatively stronger markets tend to have higher delivery rates. This raises an important point about absorption rates – in stronger areas, housebuilders are able to build homes at a faster rate and sell them at the value they expect.

Figure 3: Housing delivery rates and market strength


Source: NLP analysis

Housing sites with a larger proportion of affordable homes deliver more quickly, where viable. For both large and small-scale sites, developments with 40% or more affordable housing have a build rate that is around 50% higher compared to developments with less than 10% affordable housing.

The relationship between affordable housing provision and delivery rate is complex and rests on a variety of factors including viability and the level of grant or subsidy available to housing associations. On large sites, securing affordable housing ‘sales’ can benefit housebuilder cash flow by providing financial certainty, which can be beneficial, particularly early on in a larger scale development. However, it does demonstrate that – where viable - a tenure mix that extends beyond just housing for sale can help overcome the natural limitations associated with absorption rates. So the introduction of self-build and private rented properties might similarly increase rates of development.

Figure 4: Affordable housing provision and housing delivery


Source: NLP analysis

If we are serious about achieving the Government’s target of one million homes built by 2020 (or indeed, deliver the 300,0000 per year that are needed), we need to recognise that it is about much more than just having a headline number of units in plan allocations or with planning permission. We need to understand trajectories of development – the length of time it takes for sites to come forward and the rate at which they deliver homes. Every site is different, and there is a need for local authorities to understand the barriers and drivers of delivery in their area, seek to allocate appropriate housing sites in response and then closely monitor their progress.