SME sites for SME builders

Land availability is consistently cited by SME builders as a being a major issue. 52% of respondents to a HBF survey identified it as a barrier to growth, which was up from 47% in 2021 and 32% in 2020.

The downward trend in the number of active SMEs (HBF estimate that SMEs comprised an annual average of 39% of new build delivery before 1990, falling to just 12% in 2017) is surely driven at least in part by the paucity of opportunities for development being provided by the planning system.

Savills has identified that in 2011, so before the NPPF, the average size of a local plan allocation was 35 hectares. Between 2012 and 2016 though the average allocation had risen to 60 hectares. Between 2017 and 2021 it was 69 hectares.

 

Savills identified a similar pattern in the number of sites gaining full consent.

In 2012, sites with capacity for over 1000 homes comprised less than 2% of all consents granted. That proportion had risen to 10% by 2020. In contrast, the number of homes being delivered on smaller sites has fallen every year since 2017. In 2022, the number of homes consented on sites with capacity for under 100 homes was lower than it was in 2013, even though the total number of homes consented had increased by 32%. 

 

This image from Richard Bacon MP’s review of scaling up self and custom build housing shows that sites for 1 to 49 homes comprised 41% of planning consents in 2010/11, but 23% in 2020/21.

It is clear, therefore, that housing land supply becoming increasingly concentrated in a smaller number of larger sites.

In a letter sent to all Council Leaders and Chief Executives in September Michael Gove set out an expectation that “better use be made of small pockets of brownfield land by being more permissive, so more homes can be built more quickly, where and how it makes sense, giving more confidence and certainty to SME builders.”

That is obviously welcome recognition of the issue but begs the question as to how. Well…

First and foremost is perhaps the scrutiny afforded to paragraph 69 of the NPPF when local plans are examined.

Paragraph 69 states that LPAs should identify land to accommodate at least 10% of their housing requirement on sites no larger than one hectare.

Again though, according to Savills, between 2012 and 2021 just 3% homes allocated in local plans were on sites of 1 hectare or less, which is worse than the 6% in 2011.

Between 2012 and 2022 only 27% of LPAs allocated sufficient sites of 1 hectare or less to be able to meet the 10% requirement. This is because, by and large, the remaining LPAs are accommodating it in the windfall component of future supply, predicting forward historic windfall rates, rather than specifically identifying sites of this size.

Paragraph 69 could be strengthened to set out an expectation that LPAs be able demonstrate where specifically and explicitly the land is that will accommodate at least 10% of a housing requirement on small and, importantly, medium-sized sites (of up to 100 homes).

Secondly, a greater use of brownfield registers could and should make a huge difference because at the minute, as Savills identified, “the data held by many LPAs is not currently fit for purpose, with many registers containing duplicates, sites already under construction, and sites that the local authority has already assessed as not suitable for housing.”

One reason that brownfield registers are not being used as intended is thought to be because the fee arrangements for such permissions in principle actually act as a disincentive to LPAs to prepare them because the fee paid does not recover the time involved.

Consider, for example, a site of one hectare proposed for 30 homes.

Under a conventional outline application (£4620) and reserved matters submission (£13,860) the LPA receives £18,480 towards the cost of the development management function.

For a LPA to confer permission in principle by way of Part 2 of the register the LPA would only, having displayed the relevant notices and taken representations received in response into account, the LPA receives a fee of £4020.

That imbalance surely needs to be addressed and LPAs rewarded, or at least compensated appropriately, for proactively identifying the small and medium sized sites that officers would like to see come forward for development.

Thirdly, SPDs  (like this one adopted by Lewisham in 2021) offer the potential to create a more supportive policy environment and here the recent experience in Croydon is instructive.

This graph is from the GLA’s recent Housing in London report.

The net completion of homes on small sites in Croydon rose from 770 between 2012/13 and 2016/17 to 1,965 between 2017/18 to 2021/22, which was almost three times as much as second-placed Barnet.

This was widely attributed to a 2019 suburban design guide SPD that won an award that year for increasing housing delivery.

However, in his campaign to become Croydon's first elected mayor, the Conservative candidate Jason Perry singled out the ‘destruction of Croydon’s character’ as a focus for his campaign and, once elected, scrapped the ‘developers charter’ in July 2022.

A salutary tale that perhaps helps to make the case for National Development Management Policies…

When talking about measures to help bring land forward for development I have taken to using the example of a Land Manager out and about looking for land that drives past a petrol station or a builders yard or that kind of business that has closed down. It is easy enough to track down the owner of the site via Land Registry title searches and to write a letter enquiring as the owner’s openness to talk about disposing of it.

To go further though, and to work up a good offer that is based upon an indicative scheme that Land Manager has to put some time in and has to spend some money. They will be asking themselves whether the likelihood of securing planning permission is worth the initial speculative work to prepare an offer and then the cost of the planning application if it is accepted.

If that Land Manager can go online and see, ideally, that the site has been allocated for development already, or, if not, that it does feature on a brownfield register or, if not, that its redevelopment would at least be consistent with some kind of local urban infill policy, then they can start making some calls...

Given that the Land Manager is probably bonused on doing deals and getting planning permissions they will be wanting to put that time and money into the deals and the planning applications that have the greatest prospect of success, which is why establishing the principle of development, and in effect de-risking the principle of development from the outset of a project, is so important.

Those three policy levers, small and medium-sized site allocations, brownfield registers and SPDs, can all be pulled without a requiring a ‘blitz’ of reform and have the potential to make an impact exponentially larger than the effort required to do so.