The number of planning permissions granted for new build houses in England has seen a significant decline during the second quarter of 2023, continuing a downward trend that has persisted over the past two years. This alarming data comes from the latest HBF Housing Pipeline report, which relies on information supplied by Glenigan. The report serves as a confirmation of industry warnings that the future supply of homes may reach record lows due to a hostile policy environment and worsening economic conditions.
A Steep Decline in Planning Permissions
During Q2 of 2023, only 2,456 projects were granted planning permission, making it the lowest number recorded since the Housing Pipeline Report began tracking data in 2006. This figure represents a 10% decrease compared to the previous quarter and a 20% decrease compared to the same period last year. These continuous declines follow a 9% decrease in Q1 and a 9% decrease throughout 2022. These figures clearly indicate a reduced enthusiasm for investment among house builders due to a riskier planning environment, hostile political actions from ministers, and wider economic circumstances.
Furthermore, the number of homes approved for construction during the second quarter also experienced a decline. A total of 62,681 homes received approval, marking a 16% drop from the previous quarter and a 13% drop compared to the same period in the previous year. Excluding the quarter affected by the Covid-19 pandemic (Q2 2020), this is the lowest number of homes granted permission in a quarter since 2015.
The first half of 2023 witnessed a 19% decrease in the permission of new homes and new sites compared to the same period in 2022. If this decline translates directly into completed constructions, it would result in a reduction of housing delivery by 44,000 homes per year. This decrease would bring net housing supply for England to levels that have not been seen in a decade.
Government’s Anti-Development Approach
Earlier this year, the Home Builders Federation (HBF) warned that the government’s anti-development approach to planning and its focus on nutrient neutrality could potentially halve housing supply to around 120,000 homes annually. The latest figures from the Housing Pipeline report confirm that this scenario is becoming increasingly likely.
The HBF highlights the government’s surrender to the NIMBY (Not-In-My-Backyard) faction of the Conservative party and the weakening of requirements for local authorities to plan for the housing needs of their communities. As a result, 60 local authorities have paused or withdrawn their housing plan preparation. Although the government has proposed measures to address the EU Court of Justice’s “Dutch N” case regarding river pollution and unblock 150,000 homes that were put on hold, a moratorium on development still remains in place across 74 local authority areas.
Challenges for First-time Buyers
In addition to the decline in planning permissions, first-time buyers are also facing challenges in accessing the mortgage market. This situation is exacerbated by the absence of a government support scheme for new build first-time buyers, which has not occurred in decades.
Stewart Baseley, the executive chairman of the HBF, expressed concern about the current policy environment, claiming that it has become increasingly anti-development and anti-business. He believes that this unfavorable climate will lead to a sharp decline in housing construction, which will have social implications, particularly for young people, and negatively impact economic activity and job opportunities.
Regional Variances in Planning Approvals
The decline in planning permissions for new homes is not uniform across all regions. Yorkshire and the Humber experienced the sharpest decline, with approvals dropping by 54% compared to the previous quarter. The East Midlands, London, and the South West followed with declines of 38%, 25%, and 20% respectively.
However, four areas of the country bucked the overall downward trend in planning approvals during the second quarter. The North East, East of England, West Midlands, and Wales all witnessed a double-digit increase in approvals compared to the previous quarter, with rises of 26%, 31%, 19%, and 26% respectively.
The State of Housing Supply
England witnessed its lowest peacetime level of housing supply in 2012/13. The Coalition Government at that time introduced several policies aimed at increasing home construction to address decades of undersupply and stimulate the economy. These measures, including the introduction of the National Planning Policy Framework (NPPF) in 2012 and the Help to Buy Equity Loan Scheme, contributed to a rapid increase in output. By 2019, net supply in England had doubled, surpassing the highs seen during the housing booms of the 1950s and 1960s.
Positive attitudes towards development and the favorable investment environment positioned the UK as an attractive location for future supply. However, recent political hostility towards construction has led to a policy agenda that, on the whole, aims to restrict housing delivery.
Proposed changes to the planning system and the freedom given to Natural England to impose new requirements on developments are jeopardizing the progress made in addressing the housing crisis over the past decade. If these factors persist, net housing supply could potentially drop to as low as 111,000 homes per year, around 10% lower than the previous lowest recorded level during peacetime.
In conclusion, the declining number of planning permissions for new homes in England serves as a warning of potential decreased housing supply in the coming years. A hostile policy environment, coupled with weakening support for development from the government, poses challenges to the homebuilding industry. Additionally, first-time buyers are facing difficulties in accessing the mortgage market, which further compounds the crisis. Regional variations in planning approvals highlight disparities across the country, with some areas showing growth in contrast to the overall downward trend. Ultimately, the government’s current approach to planning and development may result in significant s