How the Letwin Review proposes to increase build rates on the largest development sites

Sir Oliver Letwin has been tasked by the government with understanding why there is a gap between the number of homes for which planning permission is granted, and the number which are actually built. In his final report, published in October, he has set out how that could be done.

The nature of the problem

The final report buildings on the analysis of the causes of the gap set out in Letwin’s interim report, published in June 2018 (which we’ve commented on previously). Although the rate of build on large sites is typically blamed on “land banking” developers, unsurprisingly, Letwin concluded that this was not an issue – for reasons that we’ve considered before – but was, instead, a matter of “absorption rates.” In effect, there are only so many people that want to buy a house of a particular type in a particular location at a particular time.

The way to close the gap between permissions and construction, he reasoned, was therefore to increase the diversity of the homes available. That could, in part, be achieved by providing a wider range of designs of property for sale. Diversity could also be introduced by catering for more tenures – social rent, discounted sale and private rent, for example. Further diversification could be provided by catering for different market segments, like older people, students or self-builders.

Each of those markets is slightly different, with separate absorption rates, allowing the total number of homes built in a year to be increased.

This analysis was largely welcomed by the house building industry as one of the few reviews that had actually taken the time to understand how they operate rather than jumping to politically expedient, knee-jerk conclusions.

Letwin’s final report, published in October 2018, sets out how that diversity could be delivered. His proposal is for a new planning regime for large sites (which he suggests should be defined as those of 1,500 homes or more), consisting of three main elements.

Changes to national planning policy

Firstly, national planning policy should be changed to make product diversity a requirement of planning permission on large sites. This would include an obligation for each phase of development to deliver housing from each of three categories (differing tenures; house type and size; and housing for specific groups), as well as considering whether land should be sold to a third party to allow that development to take place.

A new National Expert Committee would be established to provide guidance to councils and developers on how those diversity requirements could be met, as well as adjudicating on those matters in the event of an appeal.

Allocating large sites in Local Plans

Secondly, councils would be able to designate large sites in their Local Plans, obliging them to be brought forward as a single entity under the new planning regime. The level of diversification imposed on such sites would be high, with Letwin suggesting that land values should be capped at just ten-times existing values – so perhaps as little as £100,000 per acre for farm land.

As these large site allocations might cover multiple ownerships but could only be delivered as a single project, councils would be able to use their compulsory purchase powers to help assemble the site if required.

A new breed of Development Corporations

The third proposal is to enable councils to take a more proactive role in delivering very large sites through the establishment of Development Corporations. Essentially these new bodies would assemble sites, produce masterplans, deliver infrastructure and then sell the sites to developers in parcels. Two different potential structures for that process – both of which rely on private sector funding – are suggested by Letwin.

Different problems need different solutions

The planning system is currently suffering from the consequences of excessive tinkering, and Letwin has proposed even more of it. Yet the principles here seem sound, so they are amendments worth pursuing.

Large sites are very different to smaller ones. They cost more to bring forward, require more upfront infrastructure and take longer to deliver. At the same time, they provide the opportunity to create brand new communities with their own unique character – rather than simply “bolting on” to existing ones – and can often be of a much higher design quality. Given large and small sites are so different, it is no surprise that they might require different policies to ensure their delivery.

The pressures to deliver more new homes quickly means the emphasis of national planning policy is on delivering in the short term. The requirement to show a five-year housing land supply and the new Housing Delivery Test are testament to that. An unintended consequence of those changes is that large sites are often overlooked. Councils frequently opt to meet need through a large number of smaller sites – where delivery will take place more quickly – instead of focussing on the more difficult but potentially more beneficial larger sites.

Establishing a separate set of rules to allow deliver on those largest sites to be speeded up – and to give councils more control over their form – is likely to encourage councils to support them. This will complement that existing focus on smaller sites, and enable more new homes to be delivered in total.

There are some elements of Letwin’s proposals that would need careful consideration. The cap on land values is very low, for example, which is likely to slow the process as land owners object to the allocation of their sites in this way. The National Expert Committee could also be quite cumbersome in practice and may duplicate work that could more easily be done through the local plan process.

Those are concerns with the detail though; Letwin’s principles seem sound.

How land promoters can help

The Strategic Land Group is a specialist land promoter with over ten years experience. We partner with land owners to deliver planning permission on their sites at our cost and risk. Our return is a share of the value of the site once it is sold so if we don’t succeed, it doesn’t cost anything. This aligns our interests with those of land owners – to maximise the value of the site in the shortest practical time period. On very large sites, that might mean parcelling them up in a way that attracts interest from a wide variety of different developers – including large PLC house builders, smaller local developers, and providers of specialist accommodation.

If you think our approach might work for you, get in touch for a free, no obligation consultation.

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