Planning matters

Rumours have been circulating in the last few days that the revised National Planning Policy Framework (NPPF) is about to be issued in draft form. The current expectation is that it will be launched on Monday, 5 March.

Almost two and half years have passed (or four housing ministers - you choose) since the original consultation on changes to national planning policy was launched by then-Communities Secretary Greg Clark. As political priorities within the Government have changed, the consultation on the NPPF revision has repeatedly been put back.

Last year’s Housing White Paper provided some clarity over the extent of the revision that was then envisaged for the NPPF; in particular, it would be setting out a series of new, housing-focused policy. Since then, further consultation documents have been launched and policy announcements have been made, as housing has ever-increasingly become a political priority nationally, as highlighted by PM Theresa May’s clear message at last year’s Tory Conference.

In order to better understand what we now expect in the new draft NPPF, we have identified four broad policy areas:

• Plan-making
• Housing needs and requirements
  
• Use of land
• Housing delivery

Given that 53% of English local authorities do not have an up-to-date, post-NPPF local plan in place (as of 31 January 2018), it is no surprise that plan-making is a particularly crucial area for the Government to address. Pledges in the White Paper clarified that the expectation for each local authority to be covered by a single local plan will be removed, while the revised NPPF will also make it clear that plans and policies should not duplicate one another.

National policy will also be amended to encourage local authorities to take a more ‘proactive approach’ in bringing forward new settlements in their plans, for meeting housing requirements. The test of ‘soundness’ for local plans will be changed, at least to make it clear they should set ‘an’ appropriate strategy (rather than ‘the most’, as in the current Framework).

In terms of proposals that the Government has not yet responded to (i.e. has not fully committed to), neighbourhood plans may potentially be further strengthened.  Neighbourhood planning groups may be provided with local planning authority housing requirement figures, as well as being expected to set out clear design expectations - through use of design codes - for their areas (this would also apply to local plans, and more detailed development plan documents, such as area action plans).

The September 2017 consultation ‘Planning for the right homes in the right places’ highlighted details on a proposed Statement of Common Ground, which would see neighbouring authorities setting out how they would work to address shared strategic issues and housing requirements.

The Government is also increasing its focus on viability; proposals have been consulted on already for when policy requirements have been tested for viability, the related issue should not usually need to be tested again at planning application stage.

The spotlight in terms of change for assessing housing needs is focused on the outcome of the 2017 consultation on a new standard methodology, which depending on how it is introduced will have significant impacts on local planning authority housing targets and planning strategies. Other than that, there are few certainties. No firm pledges have been made on affordable housing, nor on housing for the elderly – both being areas of particular focus for MHCLG ministers in recent months, and even years. But the White Paper did at least propose to strengthen national policy so as to ensure that local planning authorities have ‘clear’ policies in place for addressing the housing requirements of groups with particular needs, such as elderly and disabled people.

A revised definition of the range of affordable housing products will be included in the consultation, with a draft list having been included in last year’s Housing White Paper. Of most interest is the proposed inclusion of ‘affordable private rent housing’, the Build-to-Rent type of affordable housing. It will also be interesting to see what the latest position on starter homes will be, an initiative that has lost much of its traction following changes in Government over the last few years (confirmed by the fact that none of the Housing and Planning Act 2016-related sections has been commenced so far).

Also of interest in this context is the proposed 10% minimum requirement of all homes on individual sites (which are delivering 10 or more units) to be affordable home ownership products.

How land is used is an area of concern for the Government; there is a clear political tension in working hard to identify solutions which would both ensure greater housing delivery (moving towards the 300,000 homes/year target), while also protecting the Green Belt and prioritising brownfield over greenfield sites.

The revised NPPF is very likely to retain existing protection of the Green Belt, as proposals in the White Paper have already highlighted that boundaries should only be amended where it can be demonstrated that councils have exhausted all other available options. When Green Belt reviews take place, it has also already been proposed that local planning authorities should focus on previously developed land and/or sites around transport hubs first.

Relating to housing supply, we know that the revised NPPF will be amended to allow local planning authorities to agree their housing land supply on an annual basis, fixed for a one-year period. We also know that measures to encourage the use of small sites - with the requirement that 20% of local housing land supply should be made up of sites of 0.5ha or less - will be consulted on as part of the revised NPPF consultation process. The December 2016 Written Ministerial Statement on neighbourhood planning will also feature in the revised Framework, although it is not known whether this will be amended from how it was proposed in the Housing White Paper consultation.

Intensification policies will also be included, as MHCLG has already confirmed that there will be greater support for upwards residential extensions (up to two extra storeys), and for using brownfield land within settlements for housing. The 2017 Autumn Budget also highlighted how the Government will consult on amending the NPPF to reflect its broad support for the conversion of empty space above high street shops, as well as for minimum housing densities in city centres and around transport hubs.

Finally, and in relation to increasing housing delivery, the revised NPPF will support the development of local policies to foster the development of small windfall sites. Design, often considered as one of the key causes of local opposition to new homes, is likely to feature more in other national policies, applying to pre-application design discussion and the inclusion of design expectations in statutory plans.

As already stated in the Housing White Paper, the Housing Delivery Test will be introduced to monitor delivery across England’s local authorities; the details of the Test will be crucial, and the Government clarified at the 2017 Autumn Budget that it will consult on strengthening the proposed tiered approach in cases of under-delivery.

In terms of diversifying housing market ‘players’, small and medium housebuilders will benefit with increased policy support for developing small sites, while the revised NPPF is also likely to explicitly refer to Build to Rent and set out policy expectations in relation to affordable private rent.

Last of all, and to ensure the implementation of permissions, the Government is likely to confirm policy proposals for the reduction of implementation timescales from 3 to 2 years (unless this will hinder viability/deliverability); this measure clearly aims to tackle the alleged ‘land banks’ of larger housebuilders, despite reports questioning this claim.

Of course, we still have another week or thereabouts to wait, before we can discover what the revised NPPF will include, and what further measures are out for consultation. The current expectation is that the final revised Framework will be in place by this summer, although further delays will not be totally unexpected (given the previous track-record).

What is already clear though is the direction the Government is taking in terms of national planning policy. While the 2012 NPPF was published after the last recession and, therefore, strongly focused on viability and deliverability of housing (in particular), the revised NPPF will reflect the current housing crisis and, in particular, issues regarding affordability and the appropriateness of developments.

From an analysis of all that has officially been said so far, the revised NPPF will centre around five main goals: increasing overall housing delivery; increasing affordable housing delivery; strengthening design considerations (particularly at plan-making stage); retaining existing Green Belt protection; and (as a consequence), promoting intensification and increased density in well-connected locations (such as city centres and around transport hubs).

The wait for up to date national policy has not been short, and expectations are surely high amongst development sector stakeholders. Now it is for the Government to demonstrate that the sector has not been waiting in vain, and that the revised NPPF will directly address at least some of the issues currently detrimentally affecting the planning process in England.

By providing the essential investment to support and drive economic growth, we all know that the development industry makes a hugely important contribution to the UK economy. But relatively few organisations can point to specific evidence or tangible examples of the wider benefits delivered by their day-to-day activities and operations.

The concept of measuring the social and economic impacts of corporate activities has, however, started to attract greater focus and attention within the development sector. Leading organisations increasingly want to take a strategic perspective of the contribution they make to the national and local economy through their development portfolios and investments. Within a competitive and often crowded marketplace, they are coming to realise that to effectively influence stakeholders requires a clear and compelling narrative, justified by a robust and objective evidence base.

At Lichfields, we work with some of the largest and most successful companies in the sector including commercial developers, housebuilders, retailers and industry bodies, to help them assess their economic contribution.

Friday we were delighted to launch our most recent collaboration with Landsec, the UK’s largest listed commercial property company, having supported them to measure their sizeable contribution to the UK economy for the first time. The findings show Landsec’s annual contribution to the UK economy through buying, selling, building and managing commercial property.

 

But with so much to potentially cover and include, where’s the best place to start? I’ve set out some key questions for any organisation thinking about how to measure their contribution:

For large companies, there is often a case to break down activity by specific divisions or geographical trading areas. Some examples include:

• Company-wide activity (e.g. Landsec’s UK operations);
• Divisional (or regional) operations (e.g. Barratt David Wilson Southern Region);
• A portfolio of sites, assets or developments (e.g. Manor Royal Business District);
• Individual development schemes (e.g. Long Marston Airfield); and
• Industry-wide activities (e.g. UK house building).

This will determine the types of impacts and metrics to explore, as well as the outputs required. Once the added value generated by a business has been quantified, this can be applied in a number of contexts including corporate social responsibility reporting, communicating wider value to stakeholders (such as investors, local councils, government) and providing differentiation from competitors (for example within competitive bidding situations). This could focus on ‘real time’ impacts such as revenue generated for UK plc as well as longer term impacts such as investing in the workforce and local communities (e.g. supporting people to (re)enter the labour market).

Think about what kind of data and information is already held in-house (for example on a company ledger or payroll) and what might need to be captured through primary data collection or surveys. For many of our clients when undertaking this exercise for the first time, this can help to shine a light on the type, scale and quality of a wide range of company data and often helps to improve and streamline internal systems going forward. In reality we find that it’s an evolving process, with the range of metrics reported expanding and diversifying over time. Our analytical framework is flexible and scalable, and draws on the latest data and national best practice to consider socio-economic contribution across a range of direct, indirect and wider impacts including creating jobs and expenditure, supporting public resources and services and building sustainable communities (Figure 1).

This provides an opportunity to look beyond the obvious metrics (such as number of people directly employed by an organisation) to quantify the value supported across the wider supply chain and economy. For instance, the ‘catalytic’ and place-making role played by major developments, such as kick starting the regeneration of a town centre or unlocking a new piece of transport infrastructure to enhance connectivity and consequently enable an area to secure additional investment.

This will partly depend on the intended audience, and it may be that a suite of different outputs are required. We have used our experience and polished suite of graphics tools to communicate key messages in a visually appealing way, through clear and user-friendly outputs such as infographic summaries, interactive tools and creative, engaging reports (some examples below).

What’s clear is that more of the development sector’s key players are realising the value that comes from measuring and communicating their total economic impact, and we expect to see a growing appetite over the coming months as government looks to secure new sector deals. At Lichfields we are well placed to help and simplify the process, drawing on our market-leading expertise and unparalleled track record of economic impact assessment, as well as our ‘tried and tested’ tools that have been independently reviewed and verified.

Please get in touch to find out more and to discuss how we can help.

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.

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:

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[2].

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.