Stand-off in the housing market: House building plummets by a third in 2020

House building plummets by a third with developers blaming local authority planning delays more than the pandemic

  • Britain’s seven largest house builders have reported housing completions are down, on average, by 35 per cent from a year ago
  • Small and medium sized developers have also warned their housing completions will be down this year – by up to half in some cases 
  • The vast majority are blaming planning permission hold-ups and poorly resourced local authorities for the drop – less than half blame Covid
  • Local government says planning isn’t the problem, instead pointing to approved developments still not started

Builders are set to deliver fewer than two-thirds as many new homes this year amid the ongoing pandemic and escalating planning tensions between developers and local government.

With barely six weeks of 2020 left to go, Britain’s seven largest house builders have reported property completions are down, on average, by 35 per cent from a year ago. 

Together, these developers account for 43 per cent of Britain’s new housing supply.

Small and medium sized developers have also warned their housing completions will be down this year – by up to half in some cases. 

Both new housing starts and completions dropped in the first half of 2020

Both new housing starts and completions dropped in the first half of 2020

While the effects of lockdown and the coronavirus pandemic have taken their toll on builders’ ability to deliver new homes, the vast majority are blaming planning permission hold-ups and poorly resourced local authorities for the drop.  

According to a survey from the Home Builders Federation and development finance provider Close Brothers Property Finance, 83 per cent of developers also claim planning permission delays and discharging of planning conditions by local authorities will stall new home delivery over the next 12 months.

A lack of resource in local authority planning departments was the second most-blamed barrier to building new homes, accounting for 73 per cent of developers  reporting lower output forecasts. 

The effects of Covid-19 on new home delivery were blamed by just 44 per cent of developers by contrast. 

Earlier this year Government opened a consultation with industry and local authorities on a newly proposed overhaul of the planning system in a bid to deliver a million new homes by 2025.

It has not been welcomed by those responsible for planning and delivery of new housing developments. 

In response, the Local Government Association rejected allegations that planning policy is acting as a barrier, instead pointing the finger at developers hoarding land and restricting starts. 

‘With nine in 10 planning applications approved by councils, and more than a million homes given planning permission but not yet built, it is clear that it is the housing delivery system that is broken, not the planning system,’ it said. 

‘Raising the number of homes required without incentivising or compelling developers to build will not lead to more homes.’ 

Barriers to new home completions over the next 12 months 
Major barrier Minor barrier Not a barrier 
Delays in securing planning permission or discharging conditions 83% 16% 1% 
Lack of resource in LA’s planning departments 73% 24% 3% 
Consumer confidence 45% 45% 10% 
Effects of COVID-19 –  site closures, social distancing etc. 44% 51% 5% 
Mortgage availability 36% 51% 14% 
Land availability 32% 46% 21% 
Development finance 20% 39% 41% 
Supply/cost of materials 20% 66% 14% 
Supply/cost of labour 19% 64% 18% 
Source: Close Brothers Property Finance   

Frank Pennal, chief executive of Close Brothers Property Finance, said: ‘If these supply and demand dynamics persist then we could see further house price inflation as a result. 

‘We need 2021 to be the year of build, build, build, to not only provide the homes which this country needs, but also to reap the wider economic benefits that this industry brings to local communities in terms of employment and the wider supply chain.’

In its December 2019 election manifesto, Government pledged to deliver 300,000 new homes a year over its time in office.

Covid support for business not always reaching small builders 

SME developers have had varying degrees of success in accessing the Government’s financial support measures for businesses introduced in the wake of the coronavirus pandemic, according to Close Brothers’ research. 

They say some have faced numerous challenges including delays, inconsistent approaches from lenders and a refusal by some to lend to the real estate sector, in their attempts to access financial support.

Just over half of the respondents have tried to access supports through the Coronavirus Business Interruption Loan Scheme and of these, just 44 per cent of respondents had been successful.

The latest figures from the Ministry of Housing, Communities & Local Government for England reveal building work had begun on 15,930 dwellings in the three months from April to the end of June, down from 33,188 between January and the end of March when Covid restrictions were introduced.

This showed housing starts were 67 per cent below their Q1 2007 peak and 7 per cent below the previous low in Q1 2009.

Both new housing starts and completions dropped in the first half of 2020, with completions down 15 per cent to 147,180 compared to the same period a year earlier.

More worryingly, 121,630 starts were recorded in that same six months, 26 per cent down on the same period a year earlier and indicating a further decline in completions to come. 

Pennal said: ‘To reverse this decline in housing supply, we must remove the barriers in the way to delivery and also seek to redress the balance in the housing market away from what the Prime Minister has called the existing oligopoly.                            

‘SME developers overwhelmingly state planning as their largest barrier to growth and are disproportionately affected by planning delays – often with only one or two active sites at any one time, where costly and lengthy planning delays can bring their business to a halt.

‘Planning reforms will remove the constraints on supply from the whole industry, but also act as a spring board to SMEs – accelerating their supply chains and also creating greater diversity in design and innovation. 

‘Housebuilding is not a tap which can easily be turned on, developments take months, and sometimes years, to come to fruition, so time is of the essence to implement these reforms.’ 

The consultation closed on 29 October with Government now ‘analysing’ responses. No firm date has been given for the publication of final plans.  

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This post first appeared on dailymail.co.uk

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