Promised guidance will dictate who foots the bill for greater housebuilding diversity, by Chris Brown

There were widespread rumours over the last few months that civil servants in the Ministry of Housing, Communities and Local Government (MHCLG) were not over-enthusiastic about delivering the Letwin approach to speeding up housing delivery.

Their rationale seemed to be that the system is not broken so there is no need to fix it.

The announcement, in a written statement by the secretary of state last week, of the government's lukewarm response to the Letwin review suggests the rumours were right.

The message was that we are already diversifying housing supply through the National Planning Policy Framework, we will get Homes England to look at some sites (although with exactly what purpose isn't clear) and we will kick everything else into the long grass.

Letwin is an experienced operator, but perhaps his rebellious position on Brexit undermined his influence.

The powerful housebuilders do not like interference in their businesses and - as I witnessed at the small and medium-sized enterprise (SME) housebuilders' summit this week at the MHCLG, where the Home Builders Federation was speaking - have an obviously cosy relationship with the department.

This government is non-interventionist by nature and the politicians have other things on their minds.

The Letwin proposals would have come at a cost to the housebuilders, unless they were accompanied by financial carrots, which might have been politically challenging given how unloved the housebuilders are.

The cost to housebuilders would have come had the government responded to Letwin by telling them that, to ensure more diversity in the market, they would in some circumstances only get planning permission, for land they have already bought, for lower-value uses such as build to rent - and if their production volumes had then fallen and undermined their scale advantages and profits. SME developers might have welcomed this rebalancing of competitive advantage.

Housebuilders' current Help to Buy-fuelled profitability, and senior management remuneration levels, do not seem to have undermined their position, and I wonder whether they suggested that any significant immediate intervention would undermine new site starts.

It will be interesting to see whether the proposed, Letwin-prompted, "additional planning guidance on housing diversification" is designed to work, slowly, through the plan-making system, rather than the decision-making process.

If implementation of the new guidance is delayed, the financial impact will be mainly built into the cost of future land purchases, impacting current landowners but not the housebuilders. If introduced gradually, the guidance might allow alternative delivery models such as build to rent, community-led housing, increased affordable housing, age-in-place housing and custom build to grow to fill the gap left my any drop in speculative market sale housing.

Meanwhile, housebuilders might even welcome Homes England buying parts of their sites at current market value in order to ensure diversification, especially if Brexit turns out badly.

There is an interesting policy balance to be struck here. The Letwin proposals aimed to increase the speed of new housing supply on large sites by diversifying the delivery model away from one dominated by speculative housebuilding, with its glacially slow sales rate.

This acceleration would need to be greater than any reduction in speculative housebuilding, or developable land coming to the market, caused by the introduction of the new planning guidance.

While governments have a lengthy track record of getting interventionist policies such as this wrong, there is reasonable international evidence that our current system is suboptimal. The case for substantial change was significant and likely to have been popular, but not without risk.

Chris Brown is executive chairman of Igloo Regeneration


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