Changes to the planning process

Wholesale changes to the planning environment may soon be on their way, with the aim of speeding up the planning process so more homes are built sooner. While time will tell if what is introduced works, there are some significant changes on the horizon which should be considered in business planning now. David Armstrong, Chief Financial Officer at Flagship Group and Steven Brook, Chief Executive at Harrogate Housing Association, assess the detail.

A summary of the main proposals:

Short-term changes could see many fewer sites contributing affordable homes via Section 106, and First Homes - for sale at a 30% discount - accounting for 25% of those which are secured.
Planning white paper proposals would see all land zoned, with automatic outline planning approval in ‘growth’ zones.
Section 106 and the Community Infrastructure Levy would be replaced by a new levy.

Section 106 observations

Putting aside the elephant in the room that it might be abolished in a couple of years, if you currently rely on Section 106 for growth then you need to be prepared for:

Sites with fewer than 50 units having no S106 affordable homes (threshold is currently 10). The government may permit such applications for at least 18 months, with the change – if confirmed – introduced very swiftly.
First Homes taking up 25% of any affordable allocation on a site at the expense of more affordable tenures.

In summary, fewer affordable homes would be available to meet your development commitments. There is the knock-on risk that this drives up prices as we compete for a smaller pool of available homes.

Mixed tenure development

We may be looking at a bigger market exposure on our own sites – and therefore increased risk. Depending on how First Homes policy is applied, and how shared ownership is affected, we could see almost all the homes on some of our sites being market facing. This could lead to:

Increased competition for land as providers chase committed affordable volumes.
Fewer homes for rent.
Higher land valuations due to competition and reduced affordable tenure volumes?
First homes to sell at a loss?
Higher credit risk and increased borrowing costs.
Fewer homes on balance sheets to leverage future borrowing.

Summary

When combined with the proposed changes to shared ownership and the new Affordable Homes Programme, financial planning and development just got a whole lot trickier…

For more on the details and potential impact of recent planning reform proposals, the NHF has published its response to both the consultation on changes to the current planning system, and the white paper, Planning for the Future.