Britain’s Broken Planning System Makes Home Buying a Pipe Dream
(Bloomberg) — Britain’s acute housing shortage, snarled planning departments and local protectionism are combining to divide a nation where homeownership was once seen as a right of passage.
A shortfall that some estimates place in the millions is set to take center stage in local elections across the nation this week, pulling in issues from inequality across generational lines to climate change, conservation and basic social services. But beyond the thorny issues is a quieter reality: a decade of budget cuts have left local governments with too few people to keep up with approving new homes.
Four years after the Tories pledged to build 300,000 new homes a year — and then fell short in every subsequent year — battles over homebuilding are set to be a key decider in elections of more than 8,000 seats at 230 councils across England on May 4. Some 71% of households in England were homeowners at the turn of the century but that’s since fallen to 65% and the drop is more pronounced in younger age groups.
“If the Conservatives continue to insist that housing is a local issue, devolved to local authorities with no mandatory housebuilding targets, we can expect Labour to look to exploit the resulting continued downward pressure on new house numbers,” said Nigel Hugill, chief executive officer at regional developer Urban & Civic Plc.
Conservative leaders used to face accusations of being too cozy with homebuilders. Now, major property firms are publicly livid at obstacles they face, and the government is facing divisions in its own ranks. In December, Prime Minister Rishi Sunak had to back off a plan to impose mandatory housebuilding targets on local councils to appease backbenchers. Since then, planning applications in England have plumbed lows and 25 local authorities have abandoned development targets — adding to another 30 who dropped their plans before the u-turn.
Freedom of Information requests compiled by Bloomberg show that staff counts and budgets in local authority planning departments have been dropping for years. Average annual funding has tumbled 44% since 2010, restraining the speed and efficiency of processing planning applications. That’s based on responses from local authorities for 13 boroughs of London, plus Birmingham, Leeds, Liverpool and Manchester.
Meanwhile, the average number of employees in those departments has more than halved since 2010, down to an average of 78 from 173, according to responses from local authorities for 14 London boroughs, plus Birmingham, Leeds, Liverpool, Manchester and Sheffield.
“Planning is experiencing a shortage of qualified professionals with many local authorities having multiple vacancies in their teams,” said David Jackson, head of planning at broker Savills Plc. “If the issue of resource is not addressed, then no amount of reform will deliver the efficient and effective planning system that we all want.”
The effects for those wishing to get on the property ladder are devastating. The number of residential development projects being granted permission has dropped to such levels the Home Builders Federation is warning housing supply may hit record lows. House prices have risen more than 58% since the start of 2013, according to Nationwide Building Society, far outstripping wage gains in the period.
In addition, the Bank of England has embarked on its fastest tightening spree in three decades to combat inflation, impacting mortgage rates, which are now as much as three times higher than recent lows. That’s also feeding through into rental prices, where the average monthly amount paid for a newly let home in Britain rose almost 11% year-on-year to £1,236 in March, according to broker Hamptons International.
Read more: UK Mortgage Rates Triple in ‘Nasty Shock’ for Homeowners
Homeowners, meanwhile, have watched as their property values have surged. New homes create more traffic, put pressure on local services, threaten their view and undermine prices. Politicians appealing to so-called NIMBYs, standing for ‘not in my back yard,’ are canvassing all over the south east of England, where demand for housing is at its greatest.
Britain’s planning system puts homebuilding decisions in the hands of local councils, which invite residents to share their views before voting on applications. This means local people can shape the future of their neighborhoods, but the democratic system can, and often does, choke homebuilding in areas where NIMBYism is prevalent.
Local authorities typically have eight weeks to make a decision, or up to 13 weeks for major housing projects. However, almost two in 10 applications were not resolved in time between October and December last year, according to government statistics.
If planning permission is refused, applicants can appeal to an independent reviewer, known as the Planning Inspectorate. Still, it’s an expensive process which can take dozens more weeks to conclude.
Housing on Ice
In Epsom and Ewell, a constituency on the border of south London where the majority of councilors are derived from a local political party called the Residents’ Associations, the council voted in March against plans to build thousands of homes. Over 100 residents gathered outside a heated meeting at the Town Hall to protest against proposals to build 40% of all new properties around the district’s farms, hospitals and sports fields by 2040.
The decision means plans to build 5,400 homes have been put on ice, pleasing the 10,000-plus residents that signed an online petition to protect the land. In the meantime, locals are urging the council to search for more homebuilding opportunities on so-called brownfield sites where previously developed land is no longer being used.
But there’s a problem. Even if homes were built on every brownfield site in England, it would equate to less than a third of the 4.5 million homes that are needed over the next 15 years, according to a report put together by planning consultancy Lichfields and published last year by the Land Promoters and Developers Federation.
The situation is most acute in the south east — the region home to Epsom and Ewell — where the amount of brownfield sites only covers 22% of the area’s 15-year housing need, the report says.
“I have friends who are doctors that are struggling to buy their own house,” said James Abrahams, a 35-year-old Ewell resident who runs a small tech company. “Planning policy should serve the interests not only of today’s residents, but prospective and future residents too.”
The planning system remains the biggest barrier to homeownership in Britain, Tim Roberts, chief executive officer at developer Henry Boot Plc, said in an interview. Roberts is among a slew of homebuilder CEOs to criticize the system in the past six months, warning that the land market is set for a subdued year in the face of an ever-tougher planning environment.
“We have a dysfunctional planning system and local authorities that are not properly resourced,” he said. “That’s not good for people wanting to get on the housing ladder, or the British economy.”
The London Borough of Hounslow has seen its annual planning spend drop by almost half since 2010, plummeting to £2.6 million in 2022 from over £5 million. Other London boroughs including Southwark have seen their budgets fall by more than 50% since 2010, according to data compiled from Freedom of Information requests.
“Without strong and stable teams at local authorities, it is impossible for a planning system to function,” said Jonathan Stoddart, co-lead of UK planning at broker CBRE. “Increased planning application fees may generate a few extra pounds but that doesn’t scratch the surface.”
In Sheffield — one of Britain’s biggest cities — staff numbers in its local authority planning department have dropped by more than 50% in the past 10 years, plummeting to 71 this year from 155 employees in 2013. Birmingham, Liverpool, Manchester and several London boroughs also reported drops in their headcount over the past decade, the Freedom of Information requests show.
Eden to Thatcher
A policy of home ownership for everyday Britons was a winning political strategy for the UK Conservative party for generations.
Anthony Eden famously set a goal for the country to become a “nationwide property-owning democracy” during a party conference speech in 1946. Winston Churchill won the 1951 election backed by a manifesto with housing a priority second only to national defence. Margaret Thatcher evoked Eden’s words in her own party conference speech in 1975 before making Right to Buy a flagship policy of her first government. David Cameron insisted Eden’s dream was still alive in 2015, and later introduced the Help to Buy policy that turbo charged profits for housebuilders.
The policies engendered a cozy relationship between developers and the Conservative party. Homebuilders repaid the kindness by making political donations.
In 2021, advocacy-focused media platform Open Democracy accused the Tories of being too dependent on money from property developers and construction businesses. Their investigation found that 20% of donations to the Conservative party between January 2010 and March 2020 came from the property sector.
At first it wasn’t obvious that the Grenfell Tower blaze in London that claimed the lives of 72 residents in 2017 would sour that relationship. But in the years since, the government has forced the industry to pay an estimated £5 billion to make buildings safer and has also insisted they sign a pledge that commits them to repairing unsafe cladding on apartment blocks or face banishment from the market.
Relations have sunk to such a low ebb, that the Secretary of State for Levelling Up, Housing and Communities, Michael Gove, didn’t attend the Home Builders Federation’s annual policy conference in May last year, an event where the housing minister typically gives a speech.
Criticism of the government is also flowing freely from housebuilders. In recent earnings reports, all four of the UK’s biggest homebuilders complained about the planning system for snarling supply.
“It’s the single most important thing that’s constraining affordable housing,” Greg Fitzgerald, chief executive officer of homebuilder Vistry Group Plc, said in an interview. “It’s embarrassing when you go to some cities in this country and see what their planning is like.”
Some developers say the only solution is to build homes on the so-called green belt, which refers to strips of countryside surrounding villages, towns and cities where building is prohibited. The concept was first introduced in London in 1938, before later expanding across the UK in a bid to contain urban sprawl after a post-war development boom. The green belt now covers 13% of the England’s land, according to Centre for Cities.
More adults oppose rather than support changing planning laws to enable building on greenfield or rural land around the edges of large towns and major cities, according to a poll done exclusively for Bloomberg News by Deltapoll.
Of the 1,060 respondents, only a third of 18-to-24 year olds said they would oppose building on the green belt, compared with almost two thirds of over 65s, underscoring the divide in opinions between young people needing housing and older residents who are more likely to own a home.
What’s more, 51% of respondents who voted for the Tories in the 2019 general election said they would oppose a change in legislation, compared with 41% of Labour voters.
Some 93% of homebuilders say securing planning permission is a major barrier to delivering new homes, according to a separate survey of 220 small and medium UK developers conducted by the Home Builders Federation, Close Brothers Property Finance and Travis Perkins Plc.
More than 75% of respondents believe local authority staff and resource shortages are a major constraint on the planning process and more than 25% said planning costs had risen by almost a third in the last 12 months, in part due to an increased reliance on the expensive and time-consuming appeals process.
“The majority of our planning successes have had to be won on appeal,” one respondent wrote in the survey. “Why can’t the councils and councilors make the right decision and not just think of politics.”