Planning reform alone won’t solve the housing crisis

As the new Government confirms its commitment to getting Britain building and tackling planning reform, Emma R. , HBF’s Director of External Affairs, examines the broader issues Labour and the home building industry must address if they are to deliver Government’s ambitious housing targets.

Ask any developer about the main barriers to housing delivery and the majority would likely mention planning.

And understandably so, with the chronic under resourcing of Local Planning Authorities, delays in the granting of applications and the discharge of conditions, abolition of mandatory housing targets, poor land availability and the increasing politicisation of decision-making causing near paralysis in the process across the country.

Consequently, many discussions around tackling the housing crisis and increasing delivery are becoming increasingly synonymous with planning. This has never been truer than in the fortnight following the Labour Party’s 2024 General Election victory.

While the Party had stated for months it would “back the builders, not the blockers”, the fact that the Chancellor, Rachel Reeves, made planning the centre piece of her maiden speech just days into the administration clearly signalled the importance the new Government places on fixing planning not only to increase housing supply but also, economic growth.

This was cemented by the King’s Speech (17 July) in which the Government announced it would be introducing a new Planning and Infrastructure Bill (which will include boosting the resources of Local Planning Authorities (LPAs) and modernising planning committees) because “reforming the planning system is key to unlocking our country’s economic growth”.

Undoubtedly, with the number of planning permissions being granted at record lows, this was a very welcome development and something HBF and its members have been wanting to see for many years.

However, planning reform is not the silver bullet that will solve the housing crisis and there is a danger that unless the conversation starts to move on, the many other challenges threatening delivery may fall by the wayside.

Who’s going to build the homes we’re planning for?

Take, for example, the issue of skills. The home building industry has long faced a considerable skills shortage for reasons including:

• A shortfall in the number of recruits entering roles through the education system - Only a small proportion of those in full time college and other further education courses are entering the industry directly – approximately 25% of the 100,000 doing construction college courses.
• A severe loss of skills during the Global Financial Crisis – it is estimated that 40-50% of skilled labour left the industry during this period.
• An ageing workforce – 25% of the homebuilding workforce is aged over 50 meaning the sector is facing an impending retirement cliff edge.

Through its Home Building Skills Partnership, HBF and its members have been taking steps to help develop the industry’s talent pipeline, but the scale of the challenge is huge. To put it into context, it is estimated that for every 10,000 new homes built, 30,000 new recruits are needed across 12 key occupations.

Tackling this challenge cannot be achieved quickly or by industry working in isolation and so it is fortunate that skills policy is a priority for the new Government. However, across home building we need to start raising our voices about the specific changes this industry needs to see.

Take, for example, the Apprenticeship Levy. The Labour Party accepts it’s not working as intended and has announced that it will be replaced with the Growth and Skills Levy. But if we want to ensure the new Levy works for the industry, we need to set out what is not working in the current system and how to fix it, including the issues around the transference of levy payments from larger companies to SMEs and the quality of apprenticeship courses.

HBF has communicated these issues to the new Education Secretary, Bridget Phillipson, along with a call for the Government to publish the outcome of the ITB review as soon as possible and take the necessary steps to amend the Scope Order of the CITB.

It is puzzling at best and detrimental at worst, that home builders are required to pay the CITB levy but that two of the industry’s main occupations, plumbing and electricians, are out of the CITB’s remit.

This is particularly concerning at a time when the industry’s reliance on these skills is increasing with the transition to net zero housing.

And so, while we must continue to plan for many more homes, we must also plan for how we are going secure enough skilled workers to build them.

More first-time buyer support

By the same token, we also need to support more people to buy new homes, especially first-time buyers (FTBs).

The choppy economic waters of the past couple of years have been difficult for everyone looking to buy a property but none more so than those aspiring to get a foot on the first rung of the property ladder.

With low interest rates now consigned to the history books, the average deposit hitting £50,000 last year, and spiralling rental prices, home ownership is looking increasingly like a pipe dream for anyone who is not a high earner or without financial support from family.

Indeed, HBF analysis of English Housing Survey data from 2022-23 found 45% of FTBs used either inheritance or a gift or loan from loved ones for their deposit, up from 36% in 2015-16. Furthermore, 58% of FTBs were found to earn in the top two income quintiles. Clearly, the future of the home ownership tenure is not sustainable if it continues along these lines and will simply ensure that housing wealth is entrenched further.

The Government, to its credit, has recognised the issue and has set itself a target of achieving 70% home ownership.

While the ambition is admirable, its proposed means for achieving it (making the Mortgage Guarantee Scheme a permanent fixture of the housing market), leaves many questions unanswered. The main one being, while this policy helps significantly to resolve the deposit issue (purchasers only have to put down a 5% deposit), how will it help those who cannot afford the repayments on a 95% Loan-To-Value (LTV) mortgage?

Ultimately, it is vital that any solution tackles not only the challenges of saving for a deposit, but also mortgage affordability.  Achieving this, we believe, will require the introduction of a new equity loan scheme targeted specifically at FTBs and which could involve developers paying a fee similar to the ‘commercial fee’ payable by mortgage lenders for access to the Mortgage Guarantee Scheme.

Unsurprisingly, support among different quarters for the introduction of another equity loan scheme is far from unanimous. However, the previous Help to Buy scheme was successful in supporting almost 400,000 buyers into home ownership, giving developers the confidence to invest and build and generating almost £700 million return on investment for the Exchequer from repaid equity loans up to March 2023.

With the new Government’s first Budget set to take place in the autumn, it is vital that all parties involved in the buying, selling and purchasing of new homes take this opportunity to make the case for a broader solution to the problem.

Let’s widen the debate

Of course, home ownership and the skills pipeline are far from the only issues that need to be addressed by the new Government. This list also includes the direction of the Future Homes Standard, dwindling appetite for S106 Affordable Housing units among Housing Associations and the future of the Building Safety Levy, to name a few more.

Nevertheless, they all demonstrate that the discussion around the housing crisis cannot and should not be restricted to the National Planning Policy Framework (NPPF), housing targets and green/grey belt alone.

Quite simply, while planning may be one of the biggest challenges facing home builders, it is not the only challenge. And as industry, we cannot afford to develop tunnel vision if we are to deliver the new homes, communities and economic growth that this country so desperately needs.

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