Hiten Ganatra: Thoughts on the Government's Housing White Paper

Planning permission for developers

An excellent measure which has been announced to reduce the validity of planning permission from 3 years down to 2 years along with plans to make it easier to revoke planning permission where the sites have no prospect of completing.

In Milton Keynes, there are 11,000 active planning permission for residential homes which simply aren’t being built quick enough. The measure proposed to set timescales on the delivery of homes rather than simply effecting planning permission is a huge step to speeding up housebuilding across the country. This, I believe, will strongly address the issue of land banking by large developers and will allow for smaller developers to enter the fore creating good competition.

The challenge with this proposal will be the effectiveness of local authorities who may not wish to disturb the balance with large developers particularly given S106 monies they could benefit from. For this to be effective, rules will need to be set by Central Government rather than leaving at the discretion of councils on whether or not they revoke ownership.

 

Encouraging small developers

Again an excellent proposal however the challenge here will be ensure that capital funding is available for small developers at reasonable interest rates to ensure that the development is economically viable. Currently development funding is available to smaller developers at rates between 6%-12% per annum with prohibitive arranging and exit fees which can be as high as 2% each way. The second consideration for smaller developers is the capital they are required to inject which could be as much as 40% of the land cost and 40% of development cost. Hence on a scheme which has a GDV of £3m where the developer has purchase the land for £1.2 and anticipates a build cost of £1m a cash amount of approx. £880k would be required which would price many small developers out of the getting involved with small schemes.

Therefore in order for this proposal to be effective consideration will need to be given to cost of funding to smaller developers.

 

High density development

This proposal is again one that will achieve an increase the housing supply. In order to ensure that this idea is a success there has to be work done with banks and buildings societies to ensure that their lending policies align in with planning and development policies. There are numerous lenders who place restrictions on the number of storeys within a building and gross internal size of flats and apartments which make it challenging for first time buyers to be eligible for mortgages from the whole of the mortgage market. Lending policies across the mortgage market must be looked at to ensure it accommodates high density housing.

 

Empty Homes - Compulsory Purchase Order (CPO) This isn’t within the proposals however should be considered as part of the measures proposed.

With approximately 600,000 empty properties in the UK I believe there is an opportunity for the government to introduced new rules around the CPO of homes which have been empty and occupied for over 3 years. The councils would be able to issue a notice to the registered owner of the property which states that they have 8 weeks to provide details of how they will be bringing the property back into use. If no details are provided the council has the right to apply for a CPO and sell the property at auction. The money received by the previous registered owner will be the equivalent of what the property was worth 3 years ago with the remaining balance going to, for example s106.

This is an idea has merit particularly given the number of homes which aren’t being utilised.