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Driving housing delivery from large sites: What factors affect the build out rates of large scale housing sites?
On the day of publication of Sir Oliver Letwin’s final review report, we release some initial findings from Lichfields’ own new research on the build out rates on large housing sites. This updates our award-winning research report – Start to Finish – from November 2016, which won the RTPI Research Award in 2017, and which is a regular point of reference for plan-makers and Inspectors in considering the realism of housing trajectories in local plans and five-year housing land supply statements. Planning for housing involves more than just allocating sites in local plans and granting planning permission for development to take place, although the latter is obviously a pre-requisite. With the National Planning Policy Framework (NPPF) requirement for local plans to identify sites and broad locations over a 15-year timeframe, for local authorities to demonstrate five-year housing land supply, and also be confident that they will pass the housing delivery test, planners nowadays require a much sharper focus on what sites will contribute in practice, and thinking about how they can – in the words of Kit Malthouse MP – do more, better, faster. Sir Oliver Letwin’s review focusses on examining why it is that some large-scale housing sites are not delivering homes fast enough and what can be done to increase the speed of build out. His draft analysis was based on a relatively small number of sites (17, of which 15 had data) primarily in the south of England. This reflects the difficulties gathering good quality information on the build out of sites, and explains why many local plans have consistently over-estimated the speed at which developments come forward and then build out. This reflects that many such developments are inevitably complex to bring forward, with significant upfront infrastructure obligations in many cases. Nevertheless, paragraph 72 of the revised NPPF makes clear the Government view that: “The supply of large numbers of new homes can often be best achieved through planning for larger scale development, such as new settlements or significant extensions to existing villages and towns, provided they are well located and designed, and supported by the necessary infrastructure and facilities. Working with the support of their communities, and with other authorities if appropriate, strategic policy-making authorities should identify suitable locations for such development where this can help to meet identified needs in a sustainable way.” It goes on to require that in identifying locations, plan makers should: “[…] d) make a realistic assessment of likely rates of delivery, given the lead-in times for large scale sites, and identify opportunities for supporting rapid implementation (such as through joint ventures or locally-led development corporations).” To help inform that analysis, Lichfields has assembled an updated evidence base on lead-in times and build out rates, based on the identification of additional sites, and with two additional years of build out analysis (2016 to 2018).   Our updated analysis considers close to 200 housing sites, including approximately 100 large-scale housing sites and a similar number of smaller housing sites for comparison. These were spread across England and Wales, and ranged from 10  to 15,000 homes. Our analysis considered a wide range of factors which might affect build out rates, including levels of demand, the number of sales outlets, and delivery cycles. Our analysis measures the “planning approval period” from the validation date of the first planning application on the site, to the decision date of the first application for dwellings in the scheme (whether full, hybrid or reserved matters); as well as the “planning to delivery” period, that is, the period from the approval of the first application for the development of dwellings and the completion of the first dwelling. The analysis highlights how a site size of 500 units seems to be the tipping point for much longer planning periods (going from 2.3 years to 4+ years, and 5-6 years for sites over 1,000 units). Whilst the planning to delivery period (from planning permission to first completion) is longer for larger sites (on average), this is perhaps less significant a difference than one might expect given the complexities involved. Our research looks at how fast such sites build out once started. The analysis shows the size of a site is one of the key metrics which determines its build out rate. Whilst some very large sites can deliver upwards of 250-300 dwellings per annum for short periods, many sites do not delivery particularly quickly, with the average for sites of 1,000-1,999 homes being around 100 per annum. Nevertheless, sites for over 2,000 homes in our sample delivered on average about twice as many per year than sites of 500-999 dwellings. Our research finds that the average number of outlets on a site over the entire build out period has a relatively strong correlation with average annual build out rates as a percentage of total units on site, suggesting that more ‘flags’ and product have a positive impact on the delivery of new housing – a key initial finding of Letwin’s Draft Analysis too. Our sample of sites with outlet data finds that each additional outlet resulted in an average of approximately four homes being completed per month, although a review of annual reporting for major housebuilders suggests the average is closer to three homes per outlet per month (and that there is surprisingly little variation, albeit that they are national averages and may be counted differently be different housebuilders). Reflecting our original analysis, we also found that very high levels of affordable housing (making up more than 40% of the total units on site) could have a similarly positive impact on build out rates to additional outlets. We also estimate that greenfield sites may build out up to 21% quicker in delivering, for their size, although on average these take 7% longer from first application until the time they deliver. Our findings point to the ongoing need for realism and depth in understanding the rate at which large-scale housing sites build out, and also that the most significant element of the time it takes for such sites to move from conception to delivery remains the time it takes to be granted a full, implementable planning permission. There are clear factors that determine the different rates at which sites build out – notably the differentiation in product, the number of outlets and so on – and the extent to which there are policy levers to pull in speeding up build out once sites have started has been a focus of the Letwin Review. Whilst public sector market interventions – e.g. by Homes England in unlocking sites, or pump priming new infrastructure such as access roads to open up new ‘frontages’ – are already part of the solution, there are limits to the capacity for this type of intervention, and the vast majority of large sites will be privately-delivered. In this regard, interventions will inevitably be via the planning system and how infrastructure is at the very least part-funded via planning obligations and community infrastructure levy for delivering homes. Here, there are risks of unintended consequences of possible planning policy changes that could stall large-scale site promotion, thereby stymieing the necessary investment in up-front infrastructure. If you would like to speak to someone at Lichfields to find out more about our latest research on build out and land supply calculations, please contact Matthew Spry or Rachel Clements.    

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Getting on the ladder – could entry-level exception sites be part of the solution?
When the new National Planning Policy Framework (NPPF) was published in July 2018, several notable topics dominated much of the discussion: design policies, viability, the housing delivery test, land assembly and the definition of affordable housing in particular. But, buried within the new NPPF was one small change – an addition – which could potentially have a significant impact on the Government’s aim of delivering the right homes in the right places. But it has attracted little attention so far. This small change is the introduction of entry-level exception sites – as the name suggests, exception sites providing housing suitable for first-time buyers or renters. In the draft version of new NPPF, entry-level exception sites were required to comprise a “high proportion” of entry-level homes for discounted sale or affordable rent. In the final version, “high proportion” has gone (now implying that the site must be wholly comprise of entry-level homes), and sites can now provide one or more of any of the types of affordable housing set out in the new NPPF. Sites could therefore provide, for example, 100% discounted market housing, 100% affordable rented housing, or a mix of these and/or other types (such as shared ownership, rent-to-buy or starter homes). They should be on unallocated land adjacent to existing settlements, and are subject to a few other criteria, e.g. not being more than 1ha. in size or exceeding 5% of the size of the existing settlement[1]. It isn’t explicit in the NPPF how ‘entry-level’ exception sites relate to the Green Belt, but the provision of [limited] affordable housing for local community needs (i.e. ‘rural’ exception sites) remains an exception to inappropriate development in the Green Belt, and the new definition of ‘affordable housing’ encompasses affordable homes for purchase. Despite the housing crisis, the great British dream of home ownership remains alive for many young people; 59% of privately renting households expect to buy at some point in the future, but of those who don’t, affordability is by far the main reason[2]. Yet households increasingly find themselves in expensive rented accommodation, spending just over one-third of their income on rent, which is more than any other tenure, and the private rented sector has become the fastest growing in the last decade[3]. Unsurprisingly, many first-time buyers increasingly look to family for help when buying a home. In many areas, particularly the South East, there are significant shortfalls in the income households need in order to move out of the private rented sector and into home ownership. This is likely to be contributing to trends of growth in the private rented sector, given households simply cannot move into home ownership as easily as previous generations. It could also have implications for economic prosperity, given that having affordable housing within reach of employment represents a central facet of any efficiently functioning economy. So, providing affordable homes for purchase on entry-level exception sites (like discounted market housing) in areas where households otherwise could not access market housing could provide a much-needed to home ownership. Figure 1 shows the gap in annual household income needed to rent and to buy by local authority in England. It is these households ‘stuck in the gap’ – i.e. those who can afford to rent in the market but can’t afford to buy – that affordable homes for purchase on entry-level exception sites are most likely to help. Figure 1: Difference between annual household income needed to rent and buy in the market Source: Lichfields based on ONS/VOA In locations where the cost of housing is lower, households that can afford to rent an entry-level, 2-bed home in the market are likely to have enough income to buy entry-level housing (subject to having the necessary deposit, etc.). However, in many parts of the country, the cost of even entry-level housing in the market is so high it is out of reach for many living in the private rented sector. Unless these households can raise a substantial deposit (all the more difficult, given the amount of income spent on rent) and/or raise funds from family, the ability to move into home ownership in these areas is limited. Table 1 shows the top three areas by region with the largest gap in annual household income needed to rent and to buy in the market. As expected, the greatest gaps are in London, but large gaps also exist across the wider South East, particularly in Metropolitan Green Belt areas. Many such areas could benefit from entry-level exception sites providing affordable homes for purchase, particularly where those areas rely on attracting and maintaining a workforce to support a strong economy. Housing affordability issues are not limited to London and the South East however, with parts of the Midlands (particularly in Northamptonshire and Warwickshire) seeing gaps of up to £17,000 between income needed to buy, and rent. In the northern regions, the greatest gaps are found in rural areas, which may wish to attract and retain young people and families so as to maintain services. Table 1: Top 3 LPAs by Region - Gap in annual income needed to buy and rent Source: Lichfields based on ONS/VOA If entry-level exception sites do take-off, they have the potential not only to directly assist those looking to buy their first home, but could help with a wider re-balancing of local housing markets. A move of households from the private rented sector into new affordable homes for purchase could moderate growth in the cost of renting, potentially increasing the supply homes for sale in the market and reducing relative price growth. It’s clear that entry-level exception sites have the potential to provide a discrete but important contribution to achieving the Government’s ambition of planning for the right homes in the right places but the case will not make itself. Lichfields has developed a new framework to help clients and local authorities assess the need and demand for affordable first-time buyer housing and understand what type of housing (e.g. discount market, shared ownership, etc.) could best meet those needs. Our framework can be used to identify opportunities for entry-level exception sites, as well as provide evidence to support applications and appeals. It can also inform local plan policies. If you would like to speak to someone at Lichfields about entry-level exception sites, including site-finding, development appraisal and evidence preparation, please contact Martin Taylor or Bethan Haynes. [1] As set out in paragraph 71(b) of the new NPPF[2] Source: English Housing Survey 2015/16: Future home owners report[3] Source: English Housing Survey 2016/17

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