The Planning Bill And The UK Real Estate Market

Central to the Queen’s speech last week stood the Planning Bill – the biggest shake-up of Britain’s planning framework since 1947. The idea is to level-up the uk real estate market by simplifying and speeding up delivery of homes and infrastructure.

18 May 2021

Central to the Queen’s speech last week stood the Planning Bill – the biggest shake-up of Britain’s planning framework since 1947. The idea is to level-up the uk real estate market by simplifying and speeding up delivery of homes and infrastructure.

Not surprisingly, the fine print remains to be seen, but the general gist of the bill includes:

Clearer rules-based planning

The bill proposes a new traffic light system. Under this, each local council will designate areas for “growth”, “protection”, or “renewal”.

Whilst “protection” and “renewal” areas will be subject to restrictions, “growth” areas will see current planning restrictions largely swept away. Automatic planning-in-principal will be granted for schemes delivering housing, offices, hospitals and shops provided they meet local rules. The aim is to reduce the approval time of new schemes to 30 months (currently averaging approximately 7 years).

Greater involvement of  local communities

Changes include a move from the traditional document-based planning system to a digital one. The intention is that this will provide greater access to plans to encourage local residents to engage more with proposals.

Under the Planning Bill it would become more difficult for existing homeowners to block new housing schemes. Currently around 30% of proposals fail at the early stages of the planning process through local opposition (NIMBYism).

Ensuring local areas have defined housing plans

Local planning is to provide more certainty over the type and design of permitted development in order to preserve the character of communities. This includes reforms for locally-led development corporations to ensure access to support for growth and generation and a fast-track system for visually appealing buildings.

The Housing Secretary – Robert Jenrick – has stated his objective for SME developers to contribute “a substantial chunk” of new homes provision. This is recognition of the vital role SME’s play in the UK real estate market. Contributing around 40% of new supply in 1990, the figure has to just 12% currently.

Scrapping Section 106

The Planning Bill proposes to scrap the current complex Section 106 altogether – the legal agreement between developers and local planning authorities used to mitigate the impact of new housing developments on the local community and infrastructure.

This is currently a negotiated settlement of substantial monetary contributions towards improvements to transport, schools, employment and the environment. A new Infrastructure Levy proposes to take its place.

Eco-friendly development and sustainability

The Green Space Preservation Act of 2018 is to be observed, with further protection provided by focusing on the developing brownfield sites. There are also provisions demanding the inclusion of ‘natural’ features in all new development proposals such as recreational areas or tree-lined streets.

The Planning Bill underlines a commitment to achieving the government’s 2050 carbon emissions targets. It aims to ensure all new homes are ‘zero carbon ready’ with no need for retrofitting until that date.

Will the bill help the UK real estate market?

Undoubtedly, the reforms will have an impact on the provision of much-needed housing. Recent progress made towards making the delivery of new homes both easier and quicker has enabled entrepreneurs to step into small-scale property development – particularly on sites typically overlooked by larger developers – and deliver homes. The government’s commitment to further reforming the planning environment can only accelerate this. 

The failures of the existing, outdated planning system have been a barrier to investment and growth in many local areas and these reforms will put pressure on local authorities to come up with modern, fit-for-purpose plans.

The idea of the zoning system is a better way of managing the infrastructure of communities than the incredibly slow, case-by-case process currently employed. The fast tracking of approval will remove one of the main barriers to growth of the UK real estate market. Provided the Planning Bill actually encourages eco-friendly development in more affordable areas, then a greater supply of homes should correct the chronic supply-demand imbalance which has intensified since the end of the Coronavirus lockdown.  

Cutting red tape and building a modern, flexible planning system whilst ensuring local authorities have the knowledge and resources to prevent a development Wild West can only be a good thing. That’s the theory…

What are the chief concerns?

The reality, however, requires increasing investment from private development finance lenders into affordable housing in the UK real estate market. This is something that has proven somewhat elusive in the past.

Affordable housing typically means lower returns on investment. Not surprisingly, this means less appetite from the private sector to build. Especially when measures such as Help to Buy ensure demand regardless of whether a development is affordable or not. Just because it’s easier to build affordable houses doesn’t mean affordable houses will be built.

There is the argument that, with less control over planning, local councils – whose job it is to ensure affordable housing quotas are met – will have less power to dictate the type of housing to be built. Likewise, there are concerns that the Planning Bill threatens not only the delivery of affordable housing, but also of its quality. Effectively ripping up planning regulations could lead to housing built in undesirable or inappropriate areas lacking facilities, or the supply of slum housing in the pursuit of maximising profits.

Environmental groups voice concerns that the proposed reforms are too sweeping and give too much free rein to private developers. The Campaign for the Protection of Rural England, in particular, believes the bill would lead to “open season for developers on large parts of the countryside”. Its policy director, Tom Fyans, believes the bill would prioritise housebuilding firms over local residents and “…could slow the delivery of genuinely affordable homes in many areas”.

Too early to tell

Of course, this is all theoretical at the moment. We don’t yet know for sure which proposals will actually be enacted and, furthermore, we don’t know the details. What shape planning ultimately takes and what commitment there will be to future proofing housing remains unclear. The reform of the system may be worthy of a ripple of applause right now. But we need to see the details before we can go congratulating the government on a job well done.

What are the underlying conditions of the market? Download our uk residential real estate market report to find out.