Communities and Local Government - Planning, housing and growthWritten evidence from the Federation of Master Builders
Summary
1. While many of the Government’ reform proposals are welcome, most will have little impact on the SME sector which provides the greatest potential for growth, both in terms of new homes delivered, and jobs created.
2. Since 1988 the number of house building firms registering less than 100 units per annum has fallen by 69% with the loss of over 8,000 firms from the SME sector of the industry.
3. According to the London School of Economics we have the capacity within existing communities to create all the new homes we need by making use of small and micro sites.
4. However, small sites are up to 70% more expensive to develop than general estate housing as they are typically brought forward by SMEs who cannot take advantage of economies of scale, and who struggle most with the burden of regulation.
5. As such the Government must look at introducing a raft of measures to encourage SMEs and self builders to bring forward proposals for small developments.
6. The FMB calls on the government to significantly reduce planning fees for small site applications.
7. The FMB calls on the government to implement a return to meaningful outline planning applications.
8. The FMB calls on the government to significantly reduced contributions on small sites under section 106’,agreements, Community Infrastructure Levy, and to locally imposed policies that go over and above national requirements.
9. The FMB calls on the government to immediately introduce a moratorium on the introduction of all new burdens on the house building sector for the remainder of the Parliament.
Evidence
10.The Federation of Master Builders (FMB) is the largest employers’ body for small and medium sized firms in the construction industry, and with nearly 10,000 members is the recognised voice of the SME building sector.
11. Over the life time of this parliament new household creation will outstrip net additions to the dwelling stock by around 521, 600 units. This is around 100,000 units more than the dwelling stock of our second largest city, Birmingham.
12.While many of the Government’ reform proposals are welcome, most will have little impact on the SME sector which provides the greatest potential for growth, both in terms of new homes delivered, and jobs created.
13. Large house builders will be the primary beneficiaries from: New Buy; Get Britain Building, specialist teams from DCLG looking renegotiation of 106 agreements; and Planning Performance Agreements.
14.With the nine largest house builders delivering 45% of our new housing, the emphasis on large builders is understandable, and must be part of the solution but it is a medium term strategy that is unlikely to see results in the next three to five years.
15.With the volume builders having stabilised at a lower level than most would want, far more attention should be paid to getting a wide variety of smaller sites started because that is where developers can get on-site and complete houses quickly.
16. The last time more than 200,000 homes were built in a single year in England was 1988. An analysis of NHBC statistics shows that in 1988, firms completing less than 500 units per annum delivered two thirds of UK housing. However SME house building is in long term decline and by 2010 the proportion of new homes delivered by small firms had dropped to just one third.
17. Over the same period the number of house building firms registering less than 100 units per annum fell by 69% with the loss of over 8,000 firms from this sector of the industry.
18.According to the London School of Economics we have the capacity within existing communities to create all the new homes we need. Small available sites of under two hectares within built up areas are rarely counted, and micro sites of half an acre are literally to numerous to count.
19. However, an analysis of data from the Building Cost Information Service shows that, on average, the mean cost per m2 for “one off” developments of three units or fewer has been 70% higher than for general estate housing.
20.Any effective solution to the housing crisis will need to focus on releasing this land and encouraging SME builders to bring it forward for development. This will require a comprehensive package of measures specifically targeted at small sites and the small builders who build on them.
21. Such a package of measures will need to address the five major “pinch points” in the development process that are deterring SME engagement in house building.
22. The first is the cost of submitting a planning application. If the chances of achieving an implementable permission for a financially viable project are not sufficiently strong to outweigh the time and expense of submitting a planning application, no application is made. The erosion of any meaningful distinction between outline and full plans applications means that, in such uncertain market conditions, SMEs are not taking the risk of even making an application.
23. The second is obtaining an implementable permission to build. Although the National Planning Policy Framework is in place, the general consensus amongst leading planners, lawyers and developers is that it will take several years of appeals and court decisions to clarify a number of key issues.
24. The intended revocation and repeal of requirements for Regional Strategies (RS) has not occurred because Government is undertaking Environmental Assessments of the effects of the revocation of each strategy. Thus they remain the statutory plan, even if with diminishing weight, and many local authorities are unwilling to prepare local plans because they would still have to be in conformity with the RS.
25. The third is the combined cost of section 106, national policy, local policy and increasingly, Community Infrastructure levy (CIL). The cost and complexity of section 106 and local policies are well known, but the cost of CIL is increasingly a factor. Originally expected to cost between £5,000 and £10,000 per property, front runner authorities are regularly imposing significantly higher CIL costs, with one authority imposing a charging schedule that would impose a £52,000 CIL charge on an average size home of 91m2. The Government must reexamine the introduction of CIL urgently and either suspend or amend the regulations. A developer cannot develop if the accumulated cost of publically imposed burdens at national and local level renders the development unviable.
26. The fourth is development finance. Even with an implementable permission for an economically viable project, development cannot take place without finance being available at acceptable rates. 72% of respondents to a recent survey of FMB’s house builders cited lack of finance as a main constraint on ability to build more homes.
27. The fifth is the market. The demand for both public and private housing is high, but cannot be realised due to lack of funding. This problem is particularly acute for private buyers owing to the remaining tightness in mortgage lending criteria. If buyers cannot raise the finance to buy, builders cannot build even if all of the other criteria for a successful development remain in place.
28. As such the Government must look at introducing a raft of measures to encourage SMEs and self builders to bring forward proposals for small developments such as: a significant reduction in planning fees for small site applications; a return to meaningful outline planning applications; significantly reduced contributions on small sites under s106, CIL and local policies; targeted finance aimed specifically at SMEs, first time buyers, and home owners; and a moratorium on the introduction of new burdens on the house building sector for the remainder of the Parliament.
September 2012