Attaching automatic planning permission to land allocated for housing in local plans in England would have a limited impact on the supply of new homes, according to planners, surveyors, developers, financiers and other experts interviewed for a new study commissioned by the Royal Town Planning Institute (RTPI).
The study, published this month, tested how developers would react to a system akin to the ‘zoning’ approach used in the US and explored the importance of planning risk, which is often cited as a major development cost and barrier to accessing finance. It found that planning risk is used to describe a wide range of factors, a large proportion of which do not relate to the granting of the permission itself.
The research also concluded that the recently introduced ‘permission in principle’ (PiP), where development rights are laid out for particular areas in advance, might make it easier for smaller developers to secure finance since lenders know development would be permitted. However, interviewees were sceptical whether PiP would speed up the planning process.
Property Week caught up with Tom Kenny, acting head of policy and research at the RTPI, to find out more.
Why did you decide to conduct the research?
Originally it was in the context of the PiP being introduced, which is an attempt to provide certainty in planning. But in a wider context, it was really about this narrative from developers and others as well that planning risk is slowing down development and preventing them from accessing finance and that accordingly they need very high profit levels to take account of planning risk.
The PiP was introduced in 2016 in that context and is a way of deregulating planning, so what we wanted the researchers to investigate was what the industry thought the likely impact would be and also what the impact of an even more deregulated system would be.
What was the evidence base for the report?
There were 23 people interviewed and then two workshops. The interviewees were developers, providers of finance, local authorities, planners, professional bodies and consultants. The workshops were cross industry too.
How did the different parties regard planning risk?
There was a variety of views. Planning risk isn’t a homogeneous thing. If you’re a land promoter and your business model is about finding land that is unlikely to get planning permission and therefore has a high potential profit if you do get it, then obviously it’s desirable to work with a high level of planning risk. There isn’t a single approach.
What sorts of companies find it most problematic?
Planning risk is more of an issue for SME developers, simply because they have fewer sites, so if they fail to get planning on one it can be a large chunk of their business. Large developers work on the assumption that they will secure a certain proportion of sites and work that into their long-term business plans.
To what extent is the PiP being used in practice? Have any sites come forward through the regime?
One finding is that there is a resource issue for local authorities in terms of compiling and maintaining PiP registers. At the time the research was done, there wasn’t a single decision that had been made using the system.
Permission in principle: a primer
- In 2015, the government pledged to introduce a zoning-like system for brownfield land. The goal was to reduce planning uncertainty and its associated cost and thereby speed up housing development.
- The pledge was translated into legislation in the Housing and Planning Act 2016, which introduced the mechanism of permission in principle (PiP) for the development of land.
- PiP is a form of partial planning permission in advance for specific sites, irrespective of ownership and before any development proposal is put forward. Local authorities can give PiP to a site on a new brownfield register.
- At the time of the conclusion of the RTPI-commissioned research, no PiP has been given to any site in England.
It is still quite early days but it’s not ideal from the government’s perspective that it hasn’t been picked up more broadly and quickly. I wouldn’t say that means that it won’t have an impact in the future but the research found that the industry didn’t think it would have much impact.
Why don’t they think it will have much impact?
It just kicks the can down the road. If you’re giving permission in principle that doesn’t mean you’re giving permission. You’re still going to have to deal with public opposition and any other issue that emerges during the process of deciding whether a development is suitable. You’ll also still identify things about a site that weren’t immediately obvious. I think the general point is that deciding what should be built where is incredibly complicated.
It’s not always clear what a community will be happy with, for instance, or what the environmental impact might be. The actual planning decision is just the end of a very long process. Things that are presented as silver bullets, as simple solutions, rarely turn out to be so.
Who stands to benefit most from PiP, assuming it takes off?
The researchers felt that small and medium-sized builders could benefit most but they will need targeted support in order to take it up. The point is that you can’t just say that SMEs need more certainty and this will do the trick. You need to think about how you can directly support them. If you’re just releasing sites on to the market then SMEs might not be best placed to snap them up.
What impact might it have on the cost of land?
It could drive prices up. The PiP could have a negative impact in that sense. Some industry figures interviewed felt that if you introduce PiP for a site and you publish a register, immediately, that will lead to speculation on the sites contained in the register. That is very much the experience in countries that have zoning.
Are there other measures that can help increase certainty?
The planning system already has other mechanisms designed to provide certainty. For instance, there is outline planning permission rather than full planning permission.
You can have application consultations, which is recommended by everyone and is a good way of resolving some of the issues around certainty. It’s not that the discretionary planning system we have is designed to make things uncertain. There are already measures in place to make things more certain but there is no one single solution because it’s a very complicated issue.
Does the research have any implications for the draft revisions for the National Planning Policy Framework (NPPF)?
Unfortunately, the research for the report was completed before draft revisions to the NPPF were published last month, so we couldn’t include the implications in the report itself. However, it’s now clear that the government is changing the rules surrounding viability and the research found that developers build planning risk into their profit margins.
So if they’re saying they need 20% profit, that takes account of planning risk. If local authorities are going to start benchmarking things that go into viability calculations then that needs to include planning risk. The research also gives an interesting account of how developers calculate planning risk and it’s useful for local authorities to understand that.