The housebuilding sector has been at the forefront of the UK's return to work from lockdown with many construction sites re-opening in May. However, even though construction work may have stopped, planning work by housebuilders never entirely did so.
To find out the impact of the Covid-19 pandemic and consequent lockdown on housing providers' planning activities, Planning spoke to seven of the country's largest housing providers; five housebuilders and two housing associations. These were among the top 40 housebuilders by annual turnover in the most recent survey by Building magazine, or one of the top ten housing associations by number of homes built per year in the most recent survey by Inside Housing magazine.
All seven respondents have reduced the rate at which they submit planning applications
The recent hiatus in activity is reflected in the rate at which housebuilders submit applications to councils, which all respondents said has decreased during the lockdown. For five of the seven respondents this decrease was "slight", but two said it has been "significant". Ian Anderson, chief executive of consultancy Iceni Projects, says the first couple of weeks of the lockdown saw housebuilders putting projects on hold. Andrew Taylor, head of planning at housebuilder Countryside Properties, says he is not surprised at the survey's finding: "If you see a big shock like this, the natural reaction is to pause."
Even if they were keen to push ahead, developers had to deal with hold-ups in local authority development management processes as they adjusted to new methods of decision-making and officers got to grips with remote working, often without the same levels of IT backup that their private sector counterparts enjoy. This "chaos" in local authority planning departments has had a "big impact" on the speed with which they determine applications, says one consultant, who did not wish to be named. "It's not a matter of capacity on our side, but it's slower getting through the process," says Greg Hill, deputy chief executive at mid-sized housebuilder Hill.
Four out of seven providers say local plan site promotion activity is unaffected
The lockdown has had less of an impact on the housebuilders' engagement with local authority plan-making, our survey shows. Four companies reported that the rate at which they are promoting sites in local plans crisis has been "unaffected", although two said it had "significantly decreased".
However, the local plan process itself has been "very much affected" by the lockdown, says Andrew Whitaker, planning director of the Home Builders Federation, who described it as "broadly stopping". Robin Shepherd, a partner at planning consultancy Barton Willmore, says there has been "slippage" in developers' site promotion activity, partly due to being unable to "engage with communities as we might have done".
Taylor says he hasn't seen many local plan consultation exercises kick off since the beginning of lockdown in late March. While some councils may have had good reasons to slow down plan-making, Hill says the current hiatus could be a "pretty convenient excuse for others".
Six out of seven respondents say housing delivery will be slower as a result of Covid-19
Any drops in site promotion and application submission have implications for future housing delivery. Six of the seven housing providers said that delivery will be slower than anticipated as a result of Covid-19, with three of those saying it will be "significantly slower" and the rest claiming it will be "somewhat slower".
The rate of delivery will depend on how the housing market responds to the economic and health and safety conditions that will exist once the lockdown has eased, says Anderson. "How quickly we get back to the new normal is what will dictate how enthusiastic people are about putting spades in the ground on new schemes." Simon James, managing director of consultancy DLP Planning, agrees. "Inevitably, there will be a slowdown in build rate that may last 12 to 18 months until the market reaches a new stability, whatever that stability is," he says.
Hill says his company is still taking reservations on a "daily basis", and expresses confidence that there is still "latent demand" in the housing market. Despite economic uncertainty, the "structural demand for quality housing in the right location is not going to change", he says. But Shepherd says history shows that the trajectory of growth in housebuilding and GDP growth have been "almost identical".
Shepherd says schemes are likely to take longer to build out in a cooler housing market, which may mean authorities have to bring forward more sites to demonstrate a five-year supply of housing land and thus ensure they are not vulnerable to appeals against refusal of unplanned schemes. "Those sites that otherwise would have sold eight homes a month will sell four a month," he said.
Six out of seven providers have asked, or plan to ask, local authorities to vary community infrastructure levy (CIL) payment schedules
Against concerns about delivery, six of the seven surveyed housing providers have asked or plan to ask, local authorities to vary community infrastructure levy (CIL) payment schedules. Of those, three had asked "quite widely" and three on "one or two occasions.
Gary Day, land and planning director at McCarthy and Stone, says that local authorities have been "pretty good" at allowing developers to defer section 106 payments, but doing the same for CIL is "more of a challenge" because there had been less flexibility in the CIL regulations (although in May the government promised to address this for smaller firms).
In the event of a recession, CIL payment schedules should be up for discussion, says Whitaker: "If it turns into a full-blown recession, renegotiations will need to happen."
But offering too much flexibility to developers on CIL payments could be short-sighted, says Sarah Platts, strategic planning and infrastructure manager at Kent County Council, who is also president of the Planning Officers Society, which represents public sector planners. "You end up risking lot of necessary infrastructure and community facilities," she says. "You want to do as much as you can to deliver the homes when we really need them, but we also want schemes that are well-designed with the correct infrastructure and will be good places to live."
Since the survey was conducted, the government has announced that it will amend CIL regulations to allow councils to temporarily relax some rules for smaller developers with an annual turnover of less than £45 million, including allowing authorities to defer payments, to disapply interest on late payments and to return interest already charged. However, this would not apply to the providers we surveyed, all of whom have a turnover above this threshold. But the government has also advised councils to use existing CIL rules to take a flexible approach towards enforcement when it came to delayed or insufficient payments by larger developers.
Three out of six firms said they asked, or plan to ask, local authorities to vary or Renegotiate section 106 agreements
Three of the six respondents said they have asked local authorities to vary or renegotiate previously agreed planning obligations, like section 106 agreements, "on one or two occasions". McCarthy and Stone's Day says local authorities have been "pretty good" at deferring section 106 payments.
But so far, there appears to be little appetite for renegotiating affordable housing requirements. Four out of the five providers who answered this question said they had no plans to revise these agreements, and only one said it expects to do so. Whitaker said he is aware of developers seeking to renegotiate trigger points for section 106 agreements, but not so far on the overall quantums of agreed planning obligations.
There are sound commercial reasons for taking this approach in the current uncertain market, says Whitaker. "The challenge will be getting people to buy homes again. Building homes and selling them to housing associations is good for cashflow. Where people have contracts to provide affordable housing for [registered social landlords], they will be fulfilling those, because it's low risk." Affordable housing will be key to maintaining delivery in what threatens to be a slower market, says Platts: "Social housing is one of the ways we can deliver on the ground and developers can have assurance of getting the first few houses occupied."
If the economic picture continues to darken, James predicts that more housebuilders will seek to renegotiate section 106 agreements. "If there is a loss of confidence, developers and housebuilders are not going to commit to very substantial stuff that may be required by section 106 obligations. If they don't know what the rate of return on those sites is going to be, there may be moves to renegotiate planning obligations."
Four out of seven housing providers have instructed, or plan to instruct, planning consultants to stop work on their projects or applications
While three respondents said that their use of planning consultancies continues as before, four reported instructing consultants to stop work on their projects. This includes two who said they had made such instructions on "most or all" of their schemes.
Consultants putting staff on furlough has held up planning work, say developers. This can be particularly problematic for developers seeking to obtain more specialist advice, such as environmental and highways assessments, when putting together applications. "If they [consultants] are not available, it's difficult for us to respond to a local authority," says Day.
Variation of CIL payment schedules was the most popular choice of potential planning policy measures to help housing providers recover from the Covid-19 crisis
According to our survey, variation of CIL payment schedules was the most popular choice of potential planning policy measures from government to help housing providers recover from the pandemic, with six out of seven firms saying that would be the most helpful for their business. Instructing councils to allow the renegotiation of planning obligations and extending planning permission duration were both supported by five firms. Four out of seven companies said the government should instruct councils to vary site opening hours where they are set out in planning conditions.
Many in the development and planning sectors have been calling for consents to be extended to prevent permissions from lapsing during the pandemic due to firms being unable to work on sites. Countryside Properties' Taylor suggested that the Scottish government's early move to extend consents during the lockdown should be mirrored south of the border. He said: "Hopefully, the UK government will be able to do the same thing in England."
It is a call that has also been made from public sector bodies such as POS. In what is shaping up to be a tough environment, the private and public sector will have to pull together, says Platts: "Regardless of which side of the fence we sit, we realise that we must keep development moving and the construction sector is vital to the wider economy and the recovery."
Five out of six respondents have furloughed planning staff
Five out of six respondents told Planning that they have either taken advantage of the government's jobs retention scheme or announced that they are intending to do so. But only two out of five said they had introduced temporary pay cuts for members of their planning teams and none said they had made planners redundant. And as they reopen sites, housebuilders are now bringing such staff off furlough, says Andrew Taylor, head of planning at Countryside Properties.
Four out of seven respondents have either asked authorities to vary planning conditions around site opening hours or intend to do so
Two out of seven firms said they had asked local authorities to vary planning conditions around site opening hours during the lockdown, both saying they had asked "quite widely". A further two said they had not asked but expected to do so. In mid-May, a written ministerial statement from the housing secretary Robert Jenrick instructed councils to take a positive approach to any such requests from developers, for instance by not enforcing or agreeing to amend conditions that restrict working hours.