Planning matters

It’s a sobering statistic that 2023/24 had the second lowest number (4,754) of new home completions in Wales since Stats Wales started keeping records in 1974/75. Only during the COVID period of 2020/21 was output lower (4,616).

In the context of increasing housing need and spiralling house prices, the need to boost the supply of housing has never been more critical.

There has been a steady decline in house building activity in Wales over the past 25 years. Average output has fallen by 45% from over 9,200 in the 1990s to 5,110 [1]dwellings in the first four years of the 2020s. By contrast in England over the same period house building activity has increased by 15%[2]. Despite this fact there are very different messages emerging from Welsh Government and UK government about housing delivery. In England the call is for further increases in house building across all tenures, but in Wales the focus seems solely in relation to delivery of affordable housing.

 

Lichfields and many of the clients we represent are concerned that there is a national policy vacuum in Wales in relation to open market housing delivery. Whilst there is a target for affordable housing delivery there is no similar policy led target for open market homes. As new housing completions reach an all-time low there is no Welsh Government policy impetus to reverse it or planning policy mechanism to intervene when the plan-led system is failing to lead.

The UK Labour government has a step-change in house building as a central pillar of its manifesto. Within weeks of taking power, it has established a challenging housing target for England of 370,000 new homes per annum and re-established the need for local authorities to maintain a five-year supply of housing land. If successful, this would double the national annual level of housing output delivered in recent years in England.

It will be interesting to see whether the recent changes in personnel at the Senedd together with the strong messages on planning reform from a Labour UK government will result in a closer alignment in approach on housing delivery between England and Wales.

  

The Competition and Marketing Authority (CMA) recently published a report into housebuilding across the UK[3]; it included a specific summary paper for Wales. The report raised few surprises: 'too few houses are being built, especially in the areas in which they are most needed, which is having a negative effect on affordability.'

The CMA highlighted evidence of three key concerns whereby the planning system is limiting its ability to support the level of housebuilding that policymakers believe is needed:

1. Lack of predictability;
    
2. Length, cost, and complexity of the planning process; and
    
3. Insufficient clarity, consistency and strength of LPA targets, objectives, and incentives to the meet housing need.

Since the Welsh Government decided to revoke TAN1 (Joint Housing Land Availability Study) and to remove the five-year housing land supply policy in March 2020, the accountability of Local Planning Authorities (LPA) for housing delivery has been severely reduced, with limited (if any) consequence for not meeting LDP housing targets.

The Welsh Government prioritises a plan-led system, in the same way as the rest of the UK. However, this long-held cornerstone of our planning system only works where local plans are updated regularly and without delay. LDPs identify the land required to deliver new homes and need regular review to replenish those sites that have either been built out or that have failed to come forward for reasons such as viability.

When first adopted LDPs are living documents that provide certainty to stakeholders about where new development should be located. As they age and sites are taken up they no longer provide a positive basis for planning and simply become development management documents that fail to provide an up to date basis for investment.

The requirement is that an LPA must review its LDPs no longer than 4 years from the date of adoption[4]. In reality delays in LDP preparation have been widespread across Wales, with only 7 out of 25 plans being less than 5 years old. Of the remaining 18 LDPs 11 are time expired and therefore fail to offer a robust basis for forward planning.

In the absence of either up to date LDPs or alternative policy sanctions there is no incentive to ensure that LPAs are delivering the required amount of housing. Neither is there the ability to bring forward sustainable housing sites quickly to resolve the situation. The UK government appears to have recognised this issue in England and proposed measures to address it through the reintroduction of the requirement for a five-year supply of housing land.

In some quarters it has been argued that the failure to deliver new housing is primarily a result of private sector house builder land-banking. The CMA report finds no evidence of such land-banking in Wales and by contrast acknowledges the need for these house builders to have a ready supply of land given the uncertainties in the planning process.

 

Welsh Government’s housing planning policy is overwhelmingly focused on affordable housing delivery. Whilst there is clearly a need for increased affordable housing provision this does not mean that the private market should be downplayed. Increased open market house building would in Lichfields view enhance affordable housing delivery rather than diminish it by ensuring the private sector deliver considerable numbers of affordable homes through s106 agreements.

Lichfields is concerned that Welsh Government’s current approach means that open market housing needs not being properly addressed whilst an important source of affordable housing delivery is also being constrained. The consequence is that whilst the proportion of affordable housing delivery may at first glance be increasing this is only as part of diminishing overall output.

Welsh Government has a target of delivering 20,000 new low carbon homes for rent 2021 to 2026. Between 2021-2023 WG Affordable Housing Provision data records 6,045 additional affordable homes[5]. This figure, however, includes acquisition of existing stock. Based on Stats Wales Housing Completion data the actual number of affordable new build dwellings was 3,825[6]. Of these 1,738 (45%) were delivered via s106 agreements from private enterprise schemes.

 

Lichfields is concerned that Welsh Government is failing to acknowledge the contribution that private enterprise activity plays to affordable housing delivery. If open market house building rates returned to those experienced prior to the 2008 crash (i.e. in excess of 7,500pa) there would be a significant uplift in associated affordable housing provision complementing the increasing direct provision by RSLs and local authorities.

The current low levels of house building are undermining achievement of the seven well-being goals. The planning system has a real opportunity to address these matters and to significantly boost the Wales economy through the house-building sector. Rachel Reeves has repeatedly referred to the importance of increased house building to achieving economic growth in England. This is surely something that we should also be aspiring to in Wales.

 

Whilst Future Wales includes estimates of housing need across the regions it states that these are not a housing requirement for Wales. The affordable element of need contained in the estimates does include a policy aspiration to meet existing backlogs as well as newly arising need however the open market element is purely a backward-looking trend-based figure. Lichfields considers that there is merit in setting out a policy-on housing target for Wales that provides a proper assessment of need across all tenures as well as sending a signal about the need to increase total housing delivery.

It is understood that Welsh Government is working with LPAs to try to improve up to date LDP coverage across Wales. It is important this work is progressed as a matter of urgency, but the reality is this will take several years. In the interim there needs to be a mechanism to increase housing delivery from the historic lows currently experienced in Wales. The re-introduction of TAN1 and the requirement for a five-year land supply in PPW would not only address this need but encourage LPAs to ensure that up to date LDPs are in place. If LPAs have up to date LDPs they are more likely to have a five-year land supply and retain control over where new housing is located.

Welsh Government has clearly set out its policy requirements in terms of sustainable placemaking and promoting active travel. New quality development in sustainable locations that responds positively to this policy agenda should, in Lichfields view, be allowed where there are clear deficiencies in land supply. The return of TAN1 and the associated five-year land supply requirements would not mean a free for all, housing development would still need to accord with these key planning policy requirements. In this way ensuring an ongoing supply of land for new housing will assist in delivering national well-being goals, including addressing social inequality issues around access to housing whilst promoting economic growth.