14 July 2017

by Rico Wojtulewicz

Shelter report: phantom homes or a faulty approach to planning?

On 7 July, Shelter published a research document titled “Phantom Homes – Planning Permissions, Completions and Profits”.

This research looks at how the largest five developers’ balance sheets have matured since 2012 and whether there is a shortfall between planning permissions and housing completions. This analysis and its ensuing recommendations successively fed into Shelter’s “New Civic Housebuilding” manifesto, aiming to provide a better choice of good-quality affordable homes and infrastructure.

The House Builders Association (HBA) welcomes Shelter’s research. Their report highlights the crucial role of planning in making housing supply more easily deliverable, as well as identifying some of the barriers faced by small and medium-sized (SME) developers.

Shelter identifies three main barriers to enabling better supply: speculative development, planning permissions shortfall, and land prices. Their assessment draws the conclusion that that speculative development and the price of land contributed to reduce the quality and affordability of homes, as well as encouraging housebuilding in the wrong places.

For SMEs, this couldn’t be further from the truth. Employing within a 15-mile radius of their head offices, SMEs win work on reputation. Therefore, high-quality workmanship is imperative. SME developers typically build more quickly than volume housebuilders and are reflective of market need and cost.

The HBA wholeheartedly supports market diversity, but does not believe that an extra level of bureaucracy through ‘New Civic Housebuilding’ would address the factual barriers to supply.

For HBA members, it is frustrating that Shelter has not represented the delivery or business model of SMEs. However, owing to the data selected and available, we can understand why.

Statistics recording ‘on time’ planning permissions include those with extension of time (EOT) requests. These can add many months of delay to a planning application and typically – motivated to maintain strong relationships with local planners – developers will accept them. This will result in few planning permissions being achieved within the statutory 13 week period, even on the smallest sites.

Shelter has also defined small sites as delivering between 50 and 500 units, whereas SMEs typically build on sites below 100 and, in this climate, under 50. In the NHBC’s “Small house builders and developers: current challenges to growth” report, only developers delivering fewer than 50 units a year were consulted. Results showed that the ‘planning process and associated cost’ were described as the main business challenge.

The housing crisis benefits from comprehensive analysis. The HBA hopes that Shelter’s next piece of research will better understand delivery from the point of all clients and developers and not simply the major housebuilders.

To read the full report, click here.