New data reveals scale of housing challenge for London

New analysis from the Fifty Thousand Homes campaign has revealed that a third of new homes consented in London are not built.

According to the campaign, launched by lobbying group London First, since 2014, just over 50,000 flats and houses have been granted planning permission each year – putting the Mayor of London’s target of 50,000 new homes for London just in reach.

But, on average, around a third of these homes (36%) are not built after planning permission is granted.

Also, at current rates of construction, it takes around three years from planning permission for front doors to start opening on average, with building only beginning 13 months after planning permission is granted.

Jasmine Whitbread, chief executive of London First, who launched the Fifty Thousand Homes campaign said: “The Mayor rightly said the election was a referendum on housing but it’s a huge job ahead. We’ll update these ‘scores on the doors’ every six months, tracking London’s progress and working with planners and developers to get to the bottom of what’s holding up housebuilding in the capital. A huge number of businesses are worried about their staff being priced out of the city, we have to act now to keep hold of the people that make London work.”

The analysis examines the pipeline of housing development and uses detailed Ordnance Survey data. It shows the porportion of consented homes has increased from 28% in 2010 to 36% in 2013.

The campaign say sit will update the data every six months.

Why do so many not get built?

Some sites are taken through planning by companies who never intend to build out their consent. They want to sell the land on with permission to build homes, having increased its value. Sometimes this strategy fails, and the land is no more attractive with the consent than it was without. Often the new owner will want to change the plan, submitting new ones of their own.

Sometimes, the time taken to get consent means the plans are no longer economic – and this could well be part of the reason for the proportion of unbuilt consents growing over time. We can probably expect Brexit uncertainty to ensure that trend will continue.

Why so slow?

Those sites which are sold between consent and breaking ground clearly take time to sell. A land deal is complicated and can take over a year if there are covenants or rights of way to be investigated.

There is a limited labour pool. A recent report from Arcadis estimated the UK construction sector generally is around 200,000 skilled trades people short of having capacity to meet the Government target of a million homes by 2020, while one from the Mayor of London suggested one in four of London’s 400,000 construction workers are from the EU, and may therefore be leaving the UK in the medium term without being replaced by their younger compatriots. We don’t have enough workers, using current methods of construction, to deliver more homes.  Housebuilders are unsurprisingly not willing to speed construction on their sites by paying higher wages than their competitors.

Those sites where the organisation gaining consent intends to build out the scheme are subject to planning conditions, which often have to be discharged before construction can commence. They range from the simple and easily discharged – a dust suppression plan for example – to the more complex, including drainage. These conditions should take 8-13 weeks to discharge, but when there are many, they can stack up, making work for developers, and increasing the load on planning departments.

Steve Morgan, of Redrow Homes, who often blames planning for holding up homes delivery, said in an interview recently that he has seen the number of conditions grow fro around a dozen on an average scheme, to over 60. Such growth would certainly cause a slowing of building works commencement.

Then of course there is the natural desire of those with consents to regulate the flow of new homes supply to the market. If they build all at one time, then sale prices would be lower.

Broken System?

It’s a complex problem, and one not easily solved except with a huge amount of public money spent either on speeding up planning, or building public housing. Neither of these seem likely.

Shelter’s interim chief executive, Graeme Brown, said: “With renters facing huge housing costs, meaning more young people are packing their bags to leave the capital, there is a mountain to climb when it comes to fixing London’s broken housebuilding system.

“We are encouraged by the Mayor’s commitment to build more homes and make sure they are genuinely affordable. It’s crucial he delivers on those plans if we are to give Londoners a place to call home.”

Sacha Romanovitch, Chief Executive, Grant Thornton who provided the analysis, said: “There is a desperate need to increase supply across the capital, and our analysis identifies those areas that need attention.

“Solving London’s housing crisis could be key to unlocking future growth in the capital at a time when the economic outlook has weakened.”

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