Planning for Housing in the UK

Introduction and Contextual Background

One of the significant imperatives of most people in the United Kingdom is to own a house of their own with the propensity to do so being much more pronounced than most other countries in Europe. Further, with the rise in migrant population and nuclear families, there is an ever-growing need for sustainable planning and development techniques in the UK housing policy. It is in this backdrop that the Government has undertaken to add to the existing housing supply in the UK by 240,000 new houses, with the long-term objective being a target of three million new homes by the year 2020 (Blears & Andrews, Government Bill, 2008).
One of the significant dependencies for the successful achievement of the above target is the number of planning applications for development of new projects. However, these planning applications have dropped by a significant 27% over the past year as of October 2008 (Barbour ABI, Dec 2008). This report assesses the link between the planning process and housing supply, highlighting key considerations such as availability of land, infrastructure and funding. It goes on to recommend suitable measures to augment the efforts of the Government towards the housing targets while operating within the principles of sustainable development.

Definition of basic terms – planning and development

Barker’s interim report on housing (2004) defines planning as ‘the process of integrating and, where necessary, balancing a complex set of competing economic, environmental or social goals within a framework of democratic accountability.’ It is known to incorporate the three E’s (Cohon, 2004), namely efficiency by ensuring a coordinated approach to housing, equity by ensuring equal opportunities to access affordable housing, and environment through careful regulation of location and development design. Spatial planning is a more inclusive exercise where land development policies are integrated with other programmes in the overall area of extracting the most out of scarce land resources, thus according a higher level of rationality to the planning process (Allmendinger, 2002). An indicative set of factors that need to be considered, as part of the spatial planning process is available in Appendix 1 at the end of this report. The overwhelming considerations inevitably mean that the planning initiative needs to be collective one, involving multiple stakeholders, a summarized depiction of which is available in Appendix 2.
The bill indicating housing targets in the UK marks a shift in focus from grant funding social housing to infrastructural development and regeneration, thus making optimal use of public sector land one of the main considerations in the process of achieving the targets laid out (Blears & Andrews, 2008). This has also been emphasized by Kate Barker (Dec 2006) in her final report on the review of land use planning. Striking this balance between supporting economic development and generating high quality jobs in the face of globalisation on the one hand, and sustaining the environmental resources within the United Kingdom for the longer term on the other is also a key mandate in a white paper tabled in this regard by ministers (Kelly et al, May 2007). This underlines the need to approach any measures to increase housing supply from this balanced perspective.

The development plan system

A pictorial representation of the current approach that is followed by the UK in spatial planning for land use has been reproduced in Appendix 3 at the end of this report. Planning was historically relegated to an ancillary function as prescribed by statute, its objectives being constrained to the use of land (Hall, 2002). The scope of the planning activity has since considerably broadened to include other fundamental objectives with the ownership for the plan being shared jointly by the local councils and a whole gamut of agencies who agree on key aspects of strategy and delivery (Dimitriou & Thompson, 2007).
The spatial planning process begins with a clear definition of the planning policy statement at the national level (Tewdwr-Jones, 2002), detailing various aspects of land use planning in the nation. It sets out the various planning acts and policy statements, outlining local plans and development control practice (Barker, 2008). This also has the effect of clarifying the various dimensions apart from use of land resources and provision of affordable housing to the residents in the UK.
The regional spatial strategies (RSS) are then developed, which lay out the broad development strategies that will be followed over the next eight to ten years, indicating how the land within the given region will be developed and used (Cullingworth & Nadin, 2006). From the housing perspective, the RSS specifies the number of new houses to be built in the region over the plan period including high level details concerning where they will be physically located within the region. A number of factors form inputs to the formulation of the RSS including the regional economic strategy, the projected number of households and the growth rate estimated over the plan period (Cullingworth, 1999).
The finalised RSS document then results in local development frameworks (LDFs) being put together, which includes ground-level details of how the proposed RSS is expected to be delivered for a particular local area within the region (Booth, 2007). The preparation of the documents that together constitute the LDF is scheduled as a programme, also called Local Development Scheme (LDS). Plan-reviewing authorities submit Development Plan Documents (DPDs) and other supplementary information, that provides guidelines covering a wide range of issues including areas like efficiency of land utilization, sustainability of scarce resources, etc (Gallent et al, 2008). Finally, planning applications are invited from development companies and builders that are in line with the overall planning policy, the RSS and the LDFs.

Planning and Housing supply

Based on the above description of the planning process overall, this section seeks to identify the impact on the supply of housing, the alacrity with which this is managed in response to changes in requirements and the measures that can be taken to allow for a more coordinated linkage between housing needs and corresponding planning processes. Firstly, one of the key factors based on which planning applications are made by developers is the projected population and rate of growth of the same over the planning period. The inherent uncertainty surrounding these projections is a key deterrent to ensuring timely and affordable supply of housing within the United Kingdom, a fact evidenced by the Kate Barker (2008) report, highlighting a mean absolute error of 0.5 million over eight years and 1 million over sixteen years in population projections.
A number of reasons cause this considerable variance in population estimates. The most significant of these are the improvements in the field of healthcare and medicine, which increases life expectancy (Hawe, 2008) and the immigration policy (House of Lords, GB Parliament, 2008) followed by the UK with significant changes to these policies reflecting in the form of a change in the households in the UK and hence the housing needs. The social factors such as rise in nuclear families and fragmentation of multiple members of a family living together, separations, etc. also add to this uncertainty. Finally, intra-national migrations that result in people from one set of areas in the UK moving to other more popular and employment-friendly regions also contribute to these variances; for instance, projected household growth in London for 2021 fell by 7.5% between 2004 and 2007, while the figure for the North West rose from 11800 to 25400 (Barker, 2008). Given that RSS plans are usually over a period of ten years, household projections used for planning purposes at the outset of these periods could be significantly different from what they actually turn out to be, thus having vital ramifications on housing supply at the end of the period.
Another important impact of the comprehensive planning process followed by the United Kingdom on housing supply is the fact that while it accords certainty and better levels of organization for all stakeholders involved including the builders, developers, local authorities, etc., it takes up too much time if it is to be conducted in earnest. This has the effect of further intensifying the effect of social, demographic and environmental changes on the housing needs, and other infrastructure related decisions that influence the local area. Accordingly, the only scenario where the right level and kind of development is delivered at the right time to an area based on the planning process is when there is minimal influence of extraneous variables, which is almost never the case.
To sum up, two key measures need to be taken from the perspective of the overall spatial planning process to augment the efficacy of the planning in actually alleviating the housing supply issue. Firstly, the difficulties of accurately estimating environmental, economic and social factors influencing the need for housing, the impracticality of accurately projecting population and household growth need to be acknowledged and tolerance levels built into the planning process to account for these imperfections. Potential conflicts among various dimensions of spatial planning also need to be accounted for. A second measure that will help in alleviating the housing supply issue is by reducing the overall timelines surrounding the drafting, submission, approval and delivery initiation of a plan.

Infrastructure provision and funding

Not all of the problems associated with housing supply lagging behind demand can be attributed to the planning processes in place (Evans, 2004). There might be obstacles in the path of providing the necessary infrastructure that is a prerequisite for the development of sites based on approved development plans. These could be delays in provision of drainage facilities, traffic lights, road junctions, even cabling for essential utilities such as telephone and electricity. Besides, another key issue with developing sites that already house a critical mass of inhabitants might also result in social pressures on the developers originating from existing occupants of the area who are concerned about new development overburdening the existing infrastructure that they use in the area in question.
Besides, there is an inevitable lag from the time development is initiated to the point where the work is operational in full swing given the problems with acquisition of land, the delays in assembling the paraphernalia necessary for the construction, the delays encountered in coordinating the workforce with varied skills working together such as the plumbers, masons, carpenters, architects, designers, etc. This is especially the case when these professionals are very busy and the resources are hard to come by, which happens during periods of overheated market activity, i.e. when house prices are high and increasing.
Finally, securing funding for the delivery phase of the development before the completion of the project is very difficult, especially when financing is also required for development of infrastructure that is required ahead of the actual start of construction. It is on account of this paucity of funding for these projects, the complexity behind the negotiations involved in the implementations, intense information requirements in preparation and submission of plans involved, etc. that companies tend to consolidate through mergers and acquisitions, so as to increase their size and scale, which could negatively impact housing supply due to fewer number of players in the marketplace who can submit plans and undertake development of these sites.

Section 106 for funding development projects

One important constituent, and indeed a determinant of the funding for these development projects was constituted in 1990 by the Town and Country Planning Act, which proposed a Section 106 (S106) as the foundation on which planning obligations could be mutually agreed (Pitman, 2001). The subsequent amendment to this Act in 1991 made S106 a key component for consideration before submission of the planning applications (Bramley et al, 1995). On a more detailed level, S106 fundamentally determines the basis for local authorities and councils to facilitate the development process as part of granting planning permission, either through directly providing for underlying infrastructure requirements, or making funding available for these projects.
The benefits of S106 are obvious, as it seeks to provide for sources of finance to the development of projects, and make the availability of this financing apparent at the planning phase, thus providing incentives to developers for submission of their plans. The Government has further demonstrated its commitment to the S106, by drafting other ancillary pieces of legislation to bolster the effectiveness of the S106. For instance, in October 2007, the proposal to introduce a Planning Gain Supplement, or a windfall tax for granting of planning permission was withdrawn, and replaced by a statutory charge for proposed new development (Royal Town Planning Institute, 2006).
While the S106 has its benefits, it does carry with it, some drawbacks that need to be acknowledged while conducting a critique on the planning process in the UK. First, while the Section sound promising at the formulation stage, the implementation-level details have proven difficult to handle. The way in which the S106 will be applied differentially to diverse areas that are responsive to varying degrees to circumstances is difficult to determine. Secondly, it is always a struggle to provide funding for infrastructure even before the construction activity has actually started. Further, the complexity of the negotiations surrounding S106 agreements also provide larger developer firms with more clout compared to smaller players, thus providing another stimulant to mergers and takeovers within the industry (Barker, 2008).

Land ownership constraints

Besides the problems associated with infrastructure and funding, the supply of timely and adequate housing also has constraints in terms of land ownership. Given the spatial planning agenda, one of the parallel objectives the UK Government wishes to achieve is the use of brownfield land or pre-developed land (PDL) in the process of adding to the targeted increase in houses at nearly 240,000 per annum (Guy & Henneberry, 2002). However, the cost of redeveloping the areas that are categorized under PDL locations is much higher than developing fresh land, due to the extent to which the previous developments on the site would have potentially contaminated it (RTPL, 2003). Depending on the extent to which previous infrastructure is enshrined in PDL, it can also be highly complex to redevelop these areas. Further, there can also be uncertainties surrounding the ownership and title holdings to PDL and a considerable proportion of PDL is also located in areas prone to high flood hazards, limiting the utility of any form of redevelopment in these areas.
The above fact means that invariably, the UK Government will end up having to use undeveloped land for a considerable proportion of their development initiatives, in spite of their preference of building on brownfield sites. This in turn would entail significant environmental costs, which would be in conflict to one of the parallel objectives the UK Government has set for itself as part of its overall development plans i.e. that of sustainable development of land. In the interests of a focused approach towards the central target of three million new houses being added by 2020, it becomes even more imperative that the authorities and developers alike are clear on the relative prioritization of these seemingly conflicting requirements.
Further, as clarified in the previous section, the property developer industry in the UK represents a consolidated industry that would obviously mean a concentration of land ownership among a chosen few (Barker, 2008). This in turn results in a lower propensity among UK residents to construct self-build houses. This is in comparison to Germany where development land is often available, and indeed sold off in the form of individual plots where buyers construct houses for themselves. This overemphasis on accumulating property would also often translate into a compromise on the quality of architecture and housing development on these plots of land. Thus, land ownership issues reflect not only in the form of scarce quantities of houses, but also degradation in the quality of these finished homes.

Housing affordability

One other vital aspect of housing that derives in a contrived fashion from the planning process and the constraints and delays endemic to the same is the affordability of housing options available to maximum number of residents of the United Kingdom. The failure of housing supply to keep pace with the demand in the United Kingdom due to the abovementioned factors have resulted in housing affordability having taken a hit with average age of first time buyers having increased from 30 to 34 since early 1980s (International Union of Housing Finance Institutions, 2004). The rise in status of homes from a purely utilitarian perspective to one of the most coveted assets in one’s investment portfolio has resulted in a stupendous rise in value of these houses, thus making them even more elusive for the common man to aspire for.
Decline in affordability has also resulted in social malaises – there is considerable inequity between generations with older generations being more likely to fully own the houses they occupy, and the younger generations being forced to rent. Further, even within the same generation, low affordability exacerbates social inequality with those inheriting houses from their parents being better placed than others (Bratt et al, 2006). Thus, those with the resources and access to finances tend to buy larger houses or a second house, while the vast majority have to rent from others or resort to social housing from the local council.

The effect of the global financial crisis

At this stage, it is vital to introduce the specific ramifications that have hit the housing industry on account of the recent credit crunch and the associated financial crisis that has completely stalled almost all forms of commercial and economic activity across most countries of the world. Ironically, while the financial crisis has brought with it, an ongoing decline in the prices of houses in the UK, it has also resulted in an elevated concern over financial and job security of people within the UK, which coupled with an acute scarcity of credit and mortgages from the financial services industry has meant that shortage of avenues to buying one’s own house still persists as a socio-economic problem within the UK. Further, while the UK Government has introduced a number of financial stimulus packages to redeem the economy from the global economic crisis, the only initiative that has been proposed to further the interests of home ownership is a stamp duty holiday for a limited threshold amount, which has failed to stimulate the housing market (The Guardian, 02-Sep-2008).

A comparison with planning controls in Germany

The planning process in United Kingdom can be compared with that of Germany to highlight significant similarities or differences, so as to derive pointers for improving the planning process within the UK for development of better quality and higher numbers of housing, thus achieving the targets set by the UK Government. Like the planning process in the UK, the German spatial planning model begins with an overall spatial structure of the federal territory, which guides the country planning for the Federal states, and forms the basis for the planning of local areas or municipalities (Turowski, 2002). A pictorial representation of these three levels of planning and their interlinkages is replicated in Appendix 4. However, one significant difference is the reverse flow of participation from the municipalities upwards to the planning for the federal states, which could provide valuable feedback on ground level constraints and needs specific to local areas, which in turn should contribute to the overall planning policy on an ongoing basis. This is found lacking in the UK planning process. Another important difference is that while the German system has an overall national plan, which then guides the regional plans, the UK does not have a national plan per se, the highest level of planning is at the regional level.
Further, like the RSS in the case of the UK, Germany’s regional planning and urban or town planning levels also function on a ten to twelve year planning period, and hence suffer from the same levels of uncertainty over environmental influences and uncertainties over population projections (Turowski, 2002). However, the informal planning tools at the disposal of the local level designers and the higher decentralization of the planning function compared to the LDF in the UK would suggest that the planning system in Germany would be much more responsive to local needs in terms of housing and make a stronger case for local infrastructure requirements instead of trying to typecast these local plans and align them with the regional or national planning considerations. Besides, the German planning at the local municipal level is also highly participative, and involves the local stakeholders including companies, institutions and authorities, thus ensuring that the plan that is worked out is much more detailed compared to the UK local plans (Larsson, 2006). However, this could potentially be more time-consuming, thus affecting turnaround times from planning to the final delivery of the developed site.
Other cultural and demographic differences between the UK and Germany are also critical in the relative assessment of housing supply in the two countries. The home ownership is much lower in Germany, with most families owning their homes living in apartments, and fewer in single-family houses, a fact that suggests that Germany, which has a population density comparable with the UK, uses the land at its disposal more efficiently. This is predominantly due to a marked preference among British residents for owning a house rather than an apartment within a building (Williams & Holmans, 2007).
The higher legality of the B-plans in Germany ensure that the developers are much more certain about exactly what is expected of the delivery that they are engaged in, while this is not the case with the corresponding UK equivalent plans at the LDF stage (Larsson, 2006). This might however also be considered a drawback with the German system given that it adds an element of inflexibility in the overall planning and development process, making introduction of essential amendments to the plans that much more difficult.
Finally, as a result of the global financial crisis, Germany has suffered as much as the UK, in addition to having to shoulder the responsibility of supporting other ailing countries that share the Euro currency with them. While the German Chancellor, Angela Merkel has announced a fifty billion euro stimulus package on 20-Feb-2009, this is mainly towards funding public spending projects such as schools and colleges and cutting the tax rate for those in the lowest income brackets. As a result, this will only facilitate housing supply in an indirect fashion by alleviating cash flow problems of those most in need, but not significantly encourage increase in home ownership.

Measures to encourage housing development

From the above discussions, some of the basic recommendations to encourage housing development and achieve the overall target of three million additional houses by 2020 are apparent. The first would be reasserting the set of central objectives that the Government seeks to achieve as part of the spatial planning exercise, and communicate the same to all stakeholders down to the regional and local levels. This needs to be further embellished by a more participative process, whereby the overall spatial planning policy at the national level and the RSS initiatives are more responsive to the market and its changing needs while delivering sustainable development (Barker, 2006). Secondly, in keeping with environmental concerns, the need for development land should be managed and a balance drawn between development undertaken on PDL and undeveloped land, with suitable incentives being offered for development on PDL.
One of the qualms of developers and local authorities alike is the uncertainty surrounding the planning process, a concern that the Government should take tangible steps to alleviate, possibly by emulating some of the German planning system that accords higher degrees of legitimacy to local plans rather than a top-down approach to planning. The overall timeframe between the preparation of a plan to its approval and initiation of delivery needs to be reduced to improve housing supply turnaround times if the Government is to achieve its housing objectives. Finally, the appeals system needs to be made more proactive and responsive and localized incentives offered to developers after assessing their readiness or reluctance to undertake development or even submit plans for doing so in any given area.
The multifaceted nature of spatial planning also implies that there is a salient role for contributions from other Government departments to the spatial planning process. For instance, the immigration policy of the UK directly contributes to the influx or exodus of people in the UK, thus affecting the number of households and hence housing demand. Another related department is that of Work and Pensions, whose policies often shape the propensity of foreign workers, skilled or otherwise to enter the country in search of a job. Healthcare influences the life expectancy, which in turn impacts population projections, and health and safety needs and Pubic Services plans influence the infrastructure that needs to be in place before development of eco-towns or even residential complexes can be undertaken. Similarly, the environmental conservation policies adopted by the UK would have a direct bearing on the requirements that need to be satisfied by builders as part of planning and development. The role of these departments needs to be acknowledged and hence incorporated in a concerted manner in the overall planning process and the tracking of the ensuing development of the housing facilities. The understanding of the planning process for key personnel from these departments also needs to be enhanced (UCL & Deloittes, 2007).
During the current times of recession, it has been observed that while the leading cities of the UK would suffer heavily on account of the concentration of jobs and financial services organizations in these cities, from a housing development perspective, the regeneration areas are expected to be the most vulnerable (Parkinson et al, 2009). Accordingly, it is important especially during the current times of financial crisis to intensify efforts on development in these regeneration areas, not treating these as easy choices for cuts in public spending for incentivisation of development here. On the other hand, the Government should also take into account, a realistic assessment of the desirability for foreign migrants to move to the UK in search of jobs and settlement following the especially severe impact of the global crisis on the UK. Here again, the role of the Immigration and Work and Pensions Departments in shaping the projected need for housing is apparent, as any new restrictions on foreign migrants could influence the households in the UK over the medium and longer term in the future.