by Jo Hanslip
In the following paper https://www.urbanissta.co.uk/wp-content/uploads/2023/11/Planning_working_paper_-_Housebuilding_market_study.pdf published on the 15th November, the Competition and Markets Authority (CMA) has prepared a paper looking at the planning system. Comments are sought until the 6th December 2023.
In the summary to the Paper, the purpose is states as:
“housing is the single biggest expenditure faced by most consumers, two market outcomes are particularly concerning:
(a) The number of new homes that have been delivered by the market has been below the assessed level of need, expressed in government targets and other officially-endorsed assessments – not enough homes are being built;
(b) The homes are not being built where people want to live, ie the under- delivery of housing has been especially concentrated in areas of high demand.”
The key aims of the Paper are identified as being the following:
“A key part of our market study is to investigate why these persistently poor market outcomes have arisen. In general, there are three broad areas that we have been considering as potential explanations:
(a) First, despite increasing house prices, profit levels for building houses may be too low to attract more supply to the market, due to increasing costs to supply. We are considering the profitability of housebuilders as part of our market study.
(b) Second, and separate to the profitability of housebuilders we are considering as part of our market study, the actions of market participants may slow or delay the delivery of housing, particularly where this allows them to maintain higher prices and profits. This may be particularly the case where firms individually or collectively have market power, and may mean those wishing to enter the market, or expand within it are prevented from doing so. In the housebuilding market, a lever often considered as part of this type of explanation is the land banks held by large housebuilders: more specifically, whether these allow such housebuilders to control the rate of housebuilding in particular areas or act as a barrier preventing other builders from building more houses. We consider issues relating to land banks in the other working paper we are publishing today and are considering any wider issues around how downstream competition in the market is working as part of our market study.
(c) Third, firms may face barriers to entering or expanding, which taken together prevent the market as a whole from expanding supply sufficiently to address the ongoing under-supply. Possible barriers to entry and expansion include things like limited availability of appropriately skilled labour, materials or access to finance, as well as regulatory and policy barriers. We are considering these types of barrier in our market study.”
The Paper indicates that as the CMA’s market study, they have assessed:
“(a) Assess the extent to which different aspects of the planning system are influencing outcomes in the housebuilding market;
(b) Map the landscape of policy options that could be pursued with the aim of supporting improved market outcomes; and
(c) Set out the wider policy trade-offs that pursuing these options would entail. “
The Paper acknowledges that:
“(a) There is no single reform that would, on its own, address all of our emerging concerns in relation to the planning system. We therefore consider that the options we set out should not be considered as individual reforms, but rather as potential components of a wider package by policymakers;
(b) Some of the policy options would require significant preparatory action to be workable and to produce successful outcomes, and there are interdependencies between the options. Again, this speaks to policymakers considering these as potential components of a longer-term strategic plan;
(c) The planning system is constantly evolving, with a number of policy reforms having been introduced recently, or the process of being introduced, such that their impact cannot be fully evaluated yet;
(d) Some of the options we discuss have been considered and rejected by policymakers in the recent past. Nonetheless we think it is important to set out the options in full, noting that these will be relevant over an extended period of time, during which the wider political and market context may change significantly; and,
(e) The planning system is extremely complex, and external stakeholders will have a far more detailed understanding of it than we could hope to achieve ourselves within this study. We are therefore offering our emerging thinking in the form of this working paper; we invite comments from stakeholders on all aspects of this work, which we will consider carefully as we complete the market study. “
The Report has the following detailed sections which can be viewed here: (attached as above)
- Background to the planning system
- Analysis of the planning system
- Planning system outputs and new home delivery
- Issues in the planning system
- Lack of predictability
- Cost, length and complexity
- Insufficient clarity, consistency and strength of LPA targets, objectives and incentives to meet housing need
- Impact of the planning system on SME housebuilders
- Options for reforming the planning system
Some of the key findings of the Paper include:
- Paragraph 1.23 – “Looking at the regional level within England, we find that 51 of 306 LPAs in our analysis achieved less than 75% of their need-based Housing Delivery Test (HDT) in 2021, while 214 (70%) achieved more than 95% of their HDT…. Of those areas that did not achieve their HDT, the majority (37) are in the South East, East of England or London”
- At paragraph 1.48, the Table below sets out short-, medium- and longer-term policy options to address some of the identified sortals in the current process.
Source SMA Report 15th November 2023 Table at Paragraph 148
A series of questions are set out in the Paper including:
Analysis of the GB planning system (Section 4)
- Do you agree that planning risk is a key issue for the planning system?
- Do you agree with our analysis of the causes of the uncertainty in the planning system and how they contribute to under delivery of housing?
- Are there any other factors that we should consider?
- Do you consider there to be any significant difference in the level of planning uncertainty between England, Scotland and Wales
- Do you agree that the current level planning, policy and regulatory costs could threaten the viability of development at some sites? To what extent do you think that this is currently happening? Are some sites and areas more at risk than others?
- Do you agree with our analysis that’s how the length and complexity of the planning system may contribute to underd elivery of housing?
- Do you agree that we have identified the key causes of delays in the planning system? Are there any other factors that we should consider?
- Do you consider there to be any significant difference between England, Scotland and Wales in: i) the extent to which planning policies and costs threaten the viability at some sites; and ii) the causes and extent of planning delays and their impact on delivery of housing?
- Do you agree with our analysis the in some cases local targets may not accurately reflect underlying housing need and the reasons for this? What impact do you consider this has on housing delivery?
- Do you agree that in some the planning system lacks internal consistency within its objectives, meaning that LPAs may be insufficiently focused on meeting housing need?
- Are there any other issues relating to targets, incentives of planning constraints that we should consider?
- Do you consider there to be any significant differences between England, Scotland and Wales in either how targets are set, the balance of incentives faced by LPAs and the extent of local planning constraints? If so, how do you think they impact housing delivery?
- Do you agree with our analysis of how the planning system may be having a disproportionate impact on SME housebuilders?
- Do you agree that we have identified the key issues faced by SMEs due to the planning system?
- Doyouconsiderthanthecurrentplanningsystemisincentivisedtodeliver housing on larger sites? If so, what are the implications of this for the housing delivery?
- Are there any other aspects of the planning system that have an impact on SME housebuilders that we should consider?
- Do you consider there to be any difference between how the planning system impacts SMEs between England, Scotland and Wales?
Options for reforming the planning system (Section 5)
- Should the UK, Scottish and Welsh governments be considering changes to their various existing methods of assessing housing requirements? If so, should providing certainty, stability and consistency to the housebuilding market feature?
- Arethecriteriawesetoutinparagraph5.19appropriatefordeterminingan improved methodology for target setting?
- Whatisthemostappropriatemethodofforecastinghousingneed–nationally and locally?
- How could the financial and resourcing constraints facing LPAs in the production of local plans be mitigated whilst incentivising LPAs to produce local plans on time?
- We note in Section4 above that land supply constraints, such as urbanisation or greenbelt land, affect the availability of sites for local plans. These constraints would not be directly changed by financial incentivisation. How could land supply constraints be managed in an effective way?
- What is the most appropriate method for implementing are formed, rule-based system that is designed rigorously and resilient to future changes in planning policy -and which minimises disputes about the lawfulness of developments?
- To what extent would increased planning fees materially affect the viability of certain developments? Are there particular circumstances where this is likely to occur?
- How could the availability of qualified planners be improved?
- What measure would be most effective in supporting SMEs to navigate the planning process effectively?
All comments are sought again by the 6th December and the final CMA report is due to be published by the 27th February 2024.