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26 Nov
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Please Sir, can we have some more… housing

Blog written by Andrew Strachan

Published alongside the Autumn Budget late last month, the findings of Sir Oliver Letwin’s review into the root causes of England’s low ‘build out’ rates have been eagerly awaited by the planning and development industry.

The review, announced by last year’s autumn budget, has identified what Sir Oliver considers to be the main roadblocks to faster housing delivery, and suggests a number of changes should be made to the way in which the large house builders, planning profession and wider process of land valuation operate.

At the core of his analysis, Sir Oliver identifies the main barrier to boosting housing numbers as the market’s inability to handle influxes of ‘relatively homogenous products’, in part as a result of the way in which land for development and new homes themselves are valued.

There are of course a number of other factors that feed into this equation, but the idea that slow delivery of housing numbers can simply be put down to the major house builders engaging in ‘land banking’ or deliberately withholding land from the market (in attempts to increase profits) has been ruled a red herring. This, in fact, was found to be wholly inconsistent with the business models of house builders, who rely upon profit found in actually building homes.

Issues with slow deliverability was found to be most pronounced on large development sites, with the average time for these to complete following an implementable consent standing at 15.5 years. Even more concerning, the findings would indicate that the larger the site, the more likely it would be to have a low build out rate.

What does Sir Oliver propose?

Ensure site diversity

As mentioned, the review is critical of what is described as a ‘homogenous’ housing offer by many of the large house builders. Letwin recommends that some large sites should therefore be packaged up into smaller parcels, with different developers brought in to build-out the consent. This, would hopefully introduce greater variety of type and tenure and help to bring in the smaller house builders.

Incentives to encourage diversity on existing sites of over 1,500 units in areas of high housing demand could also be brought in. This would see future government funding made available for house builders or potential purchasers of such sites conditional upon the builder accepting a Section 106 agreement which conforms with new planning policy on these sites.

Establish a National Expert Committee

The creation of a National Expert Committee will be necessary to advise local authorities on the interpretation of diversity requirements for large sites and to arbitrate where the requirements or arbitrate in cases of an appeal resulting between local authority and developer.

Change the Planning Rules

Planning rules will need to adapt to this approach to developing larger sites. A new set of rules specifically designed to apply to all future large sites (initially those over 1,500 units) in areas of high housing demand, will seek to require those developing such sites to provide a diversity of offerings. Guidance on diversification principles will therefore be set out in a new planning policy document.

Give more power to Local Planning Authorities

Letwin recommends that Local Planning Authorities in places with high housing demand be given increased powers to:

  1. designate particular areas within their local plans as land which can be developed only as single large sites, and to create master plans and design codes for these sites which will ensure both a high degree of diversity and good design to promote rapid market absorption and rapid build out rates;
  2. purchase the land designated for such large sites compulsorily at prices which reflect the value of those sites once they have planning permission and a master plan that reflect the new diversity requirements (with guidance for local authorities to press the diversity requirements to the point where they generate a maximum residual development value for the land on these sites of around ten times existing use value rather than the huge multiples of existing use value which currently apply); and
  3. control the development of such designated large sites

Set up a large site viability fund

Funding should be set aside to prevent any interruption of development on existing large sites that could otherwise become non-viable for the existing builder as a result of accepting the new diversity provisions.

Although many agree with Sir Oliver on his definition of many of the issues, there is some fear that the response and solutions proposed are overly bureaucratic and complicated, which in themselves may end up costing time to build out rates.

The government is currently absorbing the conclusions of the review, with an official response expect in February of next year. However, what is clear is that much of what the Letwin review recommends will take time to write in applicable legislation. 

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