Who’s to blame for the Housing Crisis? Planning

The UK has a housing crisis, consistently failing to build enough new stock in line with government targets over the last 20+ years. Over that time, the failure to match the growing need for new homes has seen house prices and rental rates spiral upwards.

In this post, we look at the planning approval process in England and Wales which has come in for heavy criticism. The finger of blame is often pointed at the ‘Nimby’ (‘Not-In-My-Back-Yard’) culture, particularly in areas where the housing need is highest.

There is no doubt that the number of housing project applications being granted permission has struggled to keep pace with the New Homes target, especially given the 4 to 6 years timeframe from application to building completion [1].  

More recently, the majority of housing projects receiving permission are smaller in scale. Of the 10,500 projects granted planning permission in England in 2023, 79% (8,300) were projects of 9 units or less. There were no projects given permission for 500+ units in that year. 

The declining trend in permissions being granted is seen across most regions, with all bar three seeing a drop in 2023 vs the previous year [2]…

Failing to achieve planning targets for delivering new homes looks to have developed into a systemic problem. 317 Local Planning Authorities (LPAs) in England are subject to the government’s Housing Delivery Test (HDT) calculation. These are LPAs with ‘plan-making and decision-making powers’ to determine how many new homes are needed, and where [3].

The chart below shows how all these 317 LPAs fared in reaching their 3-year targets (from 2019 to 2022) for building new homes in their area…

Reading from the left, we can see 115 LPAs failed to reach 100% of their target - and 60 of those only managed between 30-75% of their required total.

But the overall picture is worse than that, because here comes the kicker… much of the new housing being built in England is being built where it isn’t needed.

Many of those LPAs that exceed their target don’t need the homes, and the worst culprits of failure are often the LPAs with the biggest housing need - specifically, those in urban areas and in the South East of England.

London needs to deliver 33% of ALL new housing in England each year to keep pace with demand. However, research by planning consultants, Lichfields, calculates that London only managed an annual average of 12% over the last 3 years [5].

If we view the same target chart as before, but only include the 111 LPAs from London and the South East, then we can see they make up the majority of the failures (62 out of 115 nationally)…

The reasons for failure are numerous - restrictive planning guidance around building on the Greenbelt; a lack of joined-up delivery between neighbouring LPAs in and around large urban areas [7]; a scarcity of town planning officers working within the public sector [8], are to name but three - and they aren’t directly the fault of a Nimby-culture.

The new Labour Government is promising 1.5m new homes over the next 5-year Parliament, but here’s the reality check. It’s been estimated that at least 1.8m dwellings need to have been granted planning permission at any one time (to account for regional demand and the rate of permissions subsequently lapsing) to keep pace with the required rate of build. Based on permissions granted in Q1 2024, the implied delivery rate of completed homes over the next 5 years is well short of that, at just 944,000 [9].

In August 2024, the government gave a detailed outline of its solution to fix the problems, but first, why hasn’t the private sector stepped into solve this problem?

notes & sources

1. The planning and build time to complete <100 units is typically 3.8 years, and upto 6.6 years for 1000+ units, according to estimates by planning consultants, Lichfields. Meanwhile, the effect of the Conservative Government announcing in December 2022 that council targets on building new homes would become “advisory”, not mandatory, can clearly be seen in the drop in permissions granted. It was a proposal widely condemned at the time by those in the housing sector.

2. Across the whole of England & Wales there was -9% decrease yoy (2023 vs 2022). This trend continues. In the year ending June 2024, 44,500 decisions were made on applications for residential developments, of which 31,600 (71%) were granted. The number of residential decisions made was down 6% from the previous year, with the number granted down 8%. 3,800 ‘major’ residential decisions were granted, down 9% from the previous year and 27,800 minor residential decisions were granted, down 7% from the previous year. DLUHC, Sept. 2024

3. Housing Delivery Test: 2022 measurement. It should be noted that all councils are under a statutory obligation to have a 10-year ‘Local Plan’ which identifies where housing expansion could/should take place - many still do not have one, and those that do are rapidly becoming out of date.

4. Housing Delivery Test: 2022 measurement. Based on the Government’s current ‘Standard Method’ for calculating the number of dwellings required.

5. ‘A New Dawn has broken has it not’, Lichfields Planning Consultancy, July 2024.  

6. Housing Delivery Test: 2022 measurement.

7. The 20 largest cities and urban centres in England had a 35% increase in their targets imposed in 2020 because they have existing infrastructure to match demand (the so-called Urban Uplift strategy). However, issues of land availability, local opposition, and no regional strategy for delivery meant it has largely come to nothing. Not even a centrally-imposed presumption of sustainable development on some councils managed to increase the rate of building.

8. Royal Town Planning Institute, June 2024.

9. Lichfields Planning Consultancy, July 2024.