Legal Report - Public land release is key in meeting homes target

Kevin Gibbs, a partner at solicitors Osborne Clarke, Planning, 10 October 2008

The report (Planning, 26 September, p1) is the result of a year-long study. It exonerates house builders of the accusation that they have been acquiring and hoarding prime vacant land to manipulate the supply of homes and suppress competition.

It examines two key allegations:

- Insufficient residential land is being released by landowners.

- House builders do not build on consented land but instead hoard it in land banks and so restrict output and affect prices.

Complexity seen as constraint

The OFT's suggestion that the planning regime acts as a constraint on land supply probably comes as no surprise to practitioners. It notes that the system is complex and uncertain, with 37 per cent of English applications now rejected as opposed to 23 per cent in 1999-2000. Successful applications take an average time of 22 months and in extreme cases can take a decade.

This makes acquiring planning permission a risky venture. The planning system is also costly. Application costs are not refundable and can routinely run to hundreds of thousands of pounds for a development of as few as 50 homes. Experts from as many as a dozen different disciplines are often involved in completing an application.

Interestingly, the code for sustainable homes is one regulatory factor that the OFT finds might decrease land supply by increasing regulation. Together with other regulatory requirements such as land remediation, the code can make schemes unviable and thus lead to a reduction in supply.

The OFT makes little reference to other measures that deplete value, such as the level of affordable housing and the cost of social and physical infrastructure common in section 106 agreements. However, it does make observations on the community infrastructure levy. It predicts that the Planning Bill requirement for levy payments on commencement of development will unfairly prejudice smaller house builders.

The study also found little evidence of implementable consents being banked. Given the delay and complexity of the planning system, house builders need to build up a stock of sites at various stages in the process because of the time taken to promote them. The report reveals that 82 per cent of the land in house builders' land banks comprises so-called "strategic" sites that may be some years away from securing planning permission.

Less than one-fifth of land banks is made up of sites with outline or detailed permission or where construction is taking place. Of sites with detailed permission, the proportion of land not under construction is approximately 22 per cent. This is largely due to requirements such as discharging conditions and other external factors that hold up implementation, including section 278 highways agreements and Environment Agency, DEFRA and English Nature licences.

Land banks match system pace

Data submitted to the OFT show that the average land bank for sites directly under house builders' control is a little over three years, which appears to be consistent with the time typically taken to achieve detailed planning consent and agree reserved matters. This seems to underline the central finding that house builders are acting in a competitive manner and have little influence in improving the delivery of housing in the UK.

A striking feature of the report is the huge amount of public sector land - almost 40 per cent - suitable for residential development as a proportion of the total. Clearly, a lot more public land has to be made available to builders if the government is to meet its homes targets. The report notes that the five-year supply of deliverable sites and the requirement not to refuse consent on grounds of prematurity in PPS3 may help to meet targets.

However, the constraining influence of the planning system, coupled with the global credit crunch and tougher conditions for house builders, now makes meeting the government targets almost impossible. It would seem that urgent action is required. The release of more public sector land must be made a priority to have any chance of moving towards these targets.