Spending watchdog criticises government over “underperforming” planning system

February 8, 2019

The government's planning system is underperforming and cannot demonstrate that it is meeting housing demand effectively, the National Audit Office has warned.

Amyas Morse, the head of the NAO, said: “For many years, the supply of new homes has failed to meet demand. From the flawed method for assessing the number of homes required, to the failure to ensure developers contribute fairly for infrastructure, it is clear the planning system is not working well. The government needs to take this much more seriously and ensure its new planning policies bring about the change that is needed.”

In its report, Planning for new homes, the NAO said:

Between 2005-06 and 2017-18, 177,000 new homes per year had been built on average and the number has never exceeded 224,000. To meet its ambition, the Department will need to oversee a 69% increase in the average number of new homes built since 2005-06. The number of new homes had increased every year since 2012-13, with 222,000 new homes built in 2017-18.
In 2017, the Department for Housing, Communities and Local Government developed a standard method for local authorities to assess the number of new homes needed in their area. “The method has weaknesses and the Department intends to revise it to be consistent with ensuring that 300,000 homes are delivered each year by the mid-2020. Compared with the need assessed previously by local authorities, the standard method reduces the need for new homes in five out of nine regions, which could hamper local authorities’ plans to regenerate. The standard method sharply increases the need in London – 31,723 homes were built in 2017-18 but this will need to more than double to meet what the Department thinks is necessary.”
As of December 2018, only 44% of local authorities had an up-to-date local plan setting out their strategies for meeting the need for new homes, despite it being a legislative requirement. “If a local authority can’t show it has a five-year supply of land for housing, developers have greater freedoms to build where they want, risking ill-suited developments. As of November 2018, the Department had only challenged 15 local authorities that do not have an up-to-date plan.”
To create new homes and places for people to live, infrastructure such as transport, healthcare, schools and utilities must be in place, “but this is difficult as government departments are not required to tie their investment strategies with local authorities’ infrastructure plans, creating uncertainty about how some infrastructure will be funded. The Department has only done a rough estimate of the infrastructure funding required for new homes, so future costs are uncertain.”
The systems to get developers to contribute to infrastructure costs were not working effectively, “with developers successfully renegotiating initially agreed contributions on the basis they will be unable to maintain profit margins”. Contributions agreed with developers slightly decreased between 2011-12 and 2016-17, despite house prices in England increasing by 31% and profit margins of top developers increasing. “If developers do not contribute, either less infrastructure is built or local authorities or central government must pay more. The Department is introducing reforms in this area, but some will not take effect for several years.”
The Department had reported that local authorities were increasingly processing planning applications within target timescales, “but this might reflect a greater use of time extensions rather than increased efficiency”.
The Planning Inspectorate is “slow to determine appeals from developers whose applications have been refused and acknowledges its performance is unacceptable”. The time it took to determine an appeal increased from 30 weeks to 38 weeks between 2013-14 and 2017-18.
Total spending by local authorities on planning functions, such as processing planning applications, fell 15% in real terms between 2010-11 and 2017-18. “The Department has attempted to deal with a shortage of planning staff in local authorities, for example by funding a bursary scheme, but it does not know the extent of the skills gap as it lacks comprehensive data.” The Planning Inspectorate had struggled to recruit, experiencing a 13% fall in staff between 2010 and 2018.

The report said the Department’s revised National Planning Policy Framework, published in July 2018, was an important step in planning policy but it was too early to tell whether the changes it introduced would be effective.

“Alongside this framework, the Department needs to regularly monitor the gap between its ambition for 300,000 new homes and what is being planned. It needs to work with local authorities and other government departments to ensure that infrastructure is delivered more effectively, and work with industry bodies to conduct research into the skills gaps in local authorities’ planning teams,” the NAO said.

Responding to the report, Cllr Martin Tett, the Local Government Association’s Housing spokesman, said: “Planning is not a barrier to housebuilding. Council planning departments are doing an incredible job with extremely limited resources, approving nine out of ten applications, with the majority processed quickly.

“Councils are committed to ensuring homes are built where they are needed, are affordable, of high-quality and supported by adequate infrastructure and services, but it is vital that they have an oversight of local developments.”

Cllr Tett added: “We remain clear that the Government’s housing needs formula does not take into account the complexity and unique needs of local housing markets, which vary significantly from place to place, and imposes unfair and undeliverable targets on communities. This risks leading to a housebuilding free-for-all which will bypass the needs of local communities and could damage public trust in the planning system.

“By lifting the housing borrowing cap the Government has accepted our argument that councils must play a leading role in solving our national housing shortage. With hundreds of thousands of homes in England with planning permission but yet to be built, it also needs to give councils powers to make sure developers build out approved homes in a timely fashion, and use the Spending Review to adequately fund planning departments and allow them to set planning fees locally so they can cover the cost of processing applications.”