London is a world leading city where businesses thrive and more and more people want to live. So why isn’t getting planning permission in London easy? In our view, there are four main reasons: (1) an ever-changing policy framework; (2) affordable housing and viability; (3) under-resourced local authorities and (4) judicial review.
Each of these are enough to give developers a sleepless night on their own, but put them all together in a Brexit-looming market and it’s the stuff that nightmares are made of.
So why are we in this mess? Is it all bad? And what can be done about it?
We have one of the most complex planning systems in the world. UK and European legislation; national policy; local policy and case law all form part of the sophisticated planning puzzle. The constant raft of changes that are made – often with the promise of clarification and certainty – keep us lawyers busy, but rarely bring simplicity and speed to the process.
In London, there’s an extra layer of complexity in that the London Plan forms part of the local policy framework. Its job is to set out the strategic policies for the Capital and this means setting the vision for London so that the boroughs can make planning decisions that all work towards the same goals.
A new draft of the London Plan was published in November 2017 and is due to be adopted in late 2019/early 2020. Its main aim is to ramp-up house building – a major win for the industry. However, conflicting polices such as density versus daylight and sunlight requirements and social infrastructure versus heritage preservation mean that the road to planning is pretty bumpy. With section 106 obligations and the community infrastructure levy (CIL), it’s not paved with gold either. There is also an inconsistency in the application of this draft policy, with some boroughs applying it now, as if it is already adopted.
It seems that whilst each incoming government promises the deregulation of the planning system, yet more red tape ties the hands of the decision-makers. Take the recent Developer Contributions Consultation, for example. Instead of scrapping CIL, it proposes further changes in an attempt to bring land value uplift issues into the CIL remit.
The good news is that the government really wants to deliver development. It is engaged on this topic and has recruited innovation experts to see what can be done to improve things. Whether it will have the confidence to remove some of the bureaucracy that slows the system down remains to be seen, but we live in hope.
Affordable housing and viability
London has got tough on affordable housing. We have a Mayor who is serious about delivery and the amount of affordable housing required to secure planning is rising. The draft London Plan includes the Mayor’s 35 per cent affordable housing threshold and Sadiq Khan has been clear that he wants half of all new homes in London to be “genuinely affordable“.
But with some of the highest land prices in the world; a skills shortage and cumbersome brownfield construction sites, developing in London is not cheap – and that’s before you add your planning gain requirements. So with lots of risk and tighter margins, where are the incentives for developers to build more and more quickly?
Under the current system, developers who can build out quickly are effectively penalised compared to those who are slower. This is because longer build programmes increase cost and lower viability and therefore councils sometimes reduce and/or stagger affordable housing obligations to compensate. There is a clear conflict here which needs to be addressed. Technology has the potential to ease some of the pain, but government must incentivise developers to challenge existing working practices and invest in new solutions.
Under-resourced local authorities
Time is money. Viability concerns are often exasperated by the length of time it takes to get planning permission. Local authority funding cuts combined with an increase in the number of planning applications and all that red tape, means that applications are taking longer to process and don’t even get us started on protracted section 106 negotiations…
So, what can be done? More funding, yes, and we hope to see improvements from the recent 20% hike in planning fees, but putting effective systems in place can also go a long way to making things better. Why should it take longer to get permission in one borough compared to another? It shouldn’t. Local authorities need to learn from each other and the GLA has a role to play in championing role models, innovation and the better use of technology.
There is a culture of judicial review in London. Land values are high and competition for sites is rife, meaning that it is not just local objectors, but also competitors that developers need to worry about.
The government has tried to tackle judicial review risk by shortening the challenge period for planning permissions and commissioning a dedicated Planning Court. We have seen a slight shift in some cases where a harder stance has been taken on whether a challenge should be dismissed at the first stage of proceedings. However, the risk of judicial review is still very real and in extreme cases it’s enough to stop a scheme in its tracks, even before the court’s decision has been made. This is often due to funding and viability problems which are caused by the delay to the development whilst the case is heard in the courts.
The threat of judicial review affects every element of the planning process. Application documents are scrutinised; officer’s reports to committee picked over and section 106 agreements redrafted with agonising precision. All of which takes time, but with such catastrophic potential, who can blame the developer for minimising the risk of the planning permission being quashed?
A look to the future
So what’s on the planning horizon for London? We don’t want to harp on about the B-word, but it would be amiss to ignore Brexit in the context of building in London. It affects every one of the four factors above, but particularly viability and regulation.
Workforce availability; the cost of materials; and overseas investment concerns are just some of the issues that increase risk and threaten deliverability.
But it’s not all doom and gloom. In terms of regulation, it will be interesting to see how the sovereignty situation pans out post-Brexit. Hopefully it will be an opportunity to tackle some of these issues head-on, so that London continues to develop as a leading global city.
London is home to some of the most iconic buildings in the world and attracts millions of visitors each year. It is also an ambitious capital and a place that embraces change, diversity and growth. Despite a complex planning system, for these reasons it is still a hot bed for development and that is showing no signs of stopping.
This article appears in the EG London Investor Guide Summer 2018.