Housing crisis fuelled by slow planning decisions and opposition

Alasdair Gardner, Bank of Scotland Commercial
Scotland’s slow planning system and public opposition to development have been revealed as the top contributors to Scotland’s ‘housing crisis’.
These and a number of other contributing factors, including an industry-wide skills shortage, have been cited as preventing a solution to the country’s affordable housing deficit in a new report by Lloyds Bank.
The report, which analyses the UK house building industry and the opportunities and challenges it faces in the future, suggests that the current planning system, public opposition and a severe shortage of skilled workers are hindering efforts to tackle the growing crisis and create thousands of new jobs.
Lloyds surveyed key members of the housing supply chain, from SME contractors to major international developers, and found that they have real concerns about the effect of the sector’s skills shortage on individual firms, national housebuilding rates and on the UK economy as a whole.
However, the research did find some approval for measures designed to tackle the current housing shortage announced in the Summer Budget – plans to grant automatic planning permission for building projects on disused industrial sites, for example.
According to Lloyds, while the pace of house building is generally acknowledged to be improving, there’s still much discussion about how it can be accelerated to match demand.
Its  report says there are a number of key issues preventing a solution to the housing shortage, including slow planning decisions (46 per cent), public opposition to development (42 per cent) and a lack of skilled workers (25 per cent).
A quarter (24 per cent) said the skills shortage is the biggest broader challenge currently facing their business. More than a third (35 per cent) believe there is a lack of suitable candidates to fill existing and new jobs.
Housebuilders claim the skills shortage is most acute among electricians and site managers (both 34 per cent), with project managers (33 per cent), quantity surveyors (31 per cent) and architects (31 per cent) following closely behind – reflecting the supply chain-wide nature of the problem.
According to Lloyds, they appear to be taking steps to redress the balance, however, with 31 per cent prioritising investment in recruiting apprentices in an effort to increase the pipeline of talent coming into the industry.
When asked what one change house builders would advocate for the alleviation of the housing shortage, 23 per cent said greater local authority support to promote and fund building projects, while the same figure sought additional government support.
Existing government schemes; Stamp Duty reform and the Help to Buy equity scheme; were flagged by 73 per cent and 63 per cent respectively as having a positive impact on the housing crisis.
Despite the challenges cited in the report, house builders appear optimistic about the future, with respondents giving an average score of seven out of 10 when asked to rate their confidence in the success of the UK housebuilding industry in the future.
87 per cent of respondents want to create new jobs in the next 12 months, and if replicated across the industry, this could mean the creation of more than 100,000 new house building roles*.
Alasdair Gardner, regional managing director, Bank of Scotland Commercial, said: “This report sheds light on the key areas of support that firms in the sector need to ensure the long-term success and sustainability of the industry. Clearly, housebuilders are very concerned about the barriers preventing them from playing a role in alleviating the housing shortage.
“Bank of Scotland is committed to helping housebuilders achieve their ambitions for growth, and meet the needs of the nation in terms of building new, affordable housing. Indeed, in January, the Lloyds Banking Group Commission on Housing launched an independent report that set out a roadmap towards the sustained supply of good quality new homes.
“Housebuilders told us that slow planning decisions are a challenge, something the commission reflected in its call for clearer targets for local authorities on planning process timeframe.
“Clearly, skills is also a huge concern for industry operators too. Our £100 million Government-Lloyds Banking Group Housing Growth Partnership will be used to help SME builders invest in new projects and develop their businesses, allowing them to recruit and train the skilled workers so vital to the prosperity of the housebuilding sector, and the nation.”
More key report findings:
  • 42% said they can meet their affordable housing obligations but have concerns about the effect on their profit margins
  • 90% of respondents claimed that they are equally or more environmentally friendly now than they were five years ago
  • Expansion in existing regions is seen as the number one way of achieving growth for housebuilders, with more than a third of respondents (36%) rating this as an opportunity
Stewart Baseley, executive chairman, Home Builders Federation, added: “The outlook for housebuilders is more positive than it has been for some time, and the findings of this report reflect that. Output has increased significantly in response to the higher effective demand generated by a general improvement in the economy, and the Help to Buy equity loan scheme.
“A shortage of skilled people has become the biggest concern and the industry is investing massively in training.
“If a positive policy environment and a stable economy can be maintained, the industry will continue to grow to deliver the Government’s ambition to build more homes and tackle our entrenched housing crisis.”
The publication of Building for Growth comes just months after January’s launch of a report by the Lloyds Banking Group Commission on Housing, which sets out a roadmap towards the sustained supply of good quality new homes.
The aim of the commission is to generate cross-party agreement on key policy areas that could make a significant difference in providing greater levels of new homes, and it calls for a progressively rising target for national housebuilding that will deliver two million to 2.5 million homes by 2025.
The Lloyds Bank survey conducted by Coleman Parkes Research polled 106 Scottish, English and Welsh businesses from across the housebuilding supply chain in June and July 2015.
*Job creation calculation:
  • Annual turnover between £1m and £25m £5m: 5,135 companies, mean average 11.2 jobs = 57,508
  • Turnover between £25m and £750m: 1,368 companies, mean average 27.1 jobs = 37,066
  • Turnover above £750m: 180 companies, mean average 31.6 jobs = 5,694
  • Total: 100,268
Lloyds Banking Group says it’s been addressing housing demand in a number of ways:
  • Through its pledge to support 80,000 first-time buyers in 2014 as part of its Helping Britain Prosper Plan
  • Through the Help to Buy equity scheme. More than a third of those who have bought a house through the scheme have done so with Halifax
  • Through new-build. One third of all lending on UK new-build properties is funded by Lloyds Banking Group
The Housing Growth Partnership Fund
Housing Growth Partnership looks to invest alongside the following:
  • Small and medium sized house builders that have evidence of a solid track record in delivering residential development schemes
  • House builders that, on average, have 10-100 single unit completions annually over the past three years, and have a proven track record in land buying, design, construction, marketing and sales of new homes
The Housing Growth Partnership will support residential development projects with a gross development value of between £0.75 million and £12 million and will offer investments in the range of £0.5 million – £5 million for each project.
The Lloyds Banking Group Commission on Housing
The Lloyds Banking Group Commission on Housing has been established to identify and address a range of issues that could potentially impact supply. It is Chaired by Mark Prisk and Nick Raynsford, two former housing ministers, and involves several expert commissioners: Sir John Banham (Chair of the RIBA Future Homes Commission); Prof Tony Crook (Emeritus Professor of Town and regional Planning, Univ of Sheffield) Stephen Stone (CEO, Crest Nicholson), David Montague (CEO, L & Q Group), Ben Bolgar (The Prince’s Foundation), Paul Raynes (Local Government Association) and Stephen Noakes (Chairman, Council of Mortgage Lenders).
Headline recommendations:
The Report calls for a progressively rising target for national house-building which will deliver 2 million to 2.5 million homes by 2025.
To achieve this, the focus needs to be on the delivery of more high quality yet affordable homes, with large private sector builders supported by:
  • A revitalised SME home-builders sector and custom/self-build sector.
  • A new professional rental sector backed by institutional investors, with more secure, longer-term tenancy agreements.
  • A duty placed on all public sector bodies to review land holdings and assess the case for the disposal of surplus for the purpose of new homes.
  • Strategic Plans introduced to provide clarity to Local Planning Authorities (LPAs) on the number of new homes needed and the infrastructure around them at ‘first-tier’ council level
  • Meaningful public engagement which informs local communities of both the need and benefits of more high quality homes.
  • A review of the balance between public expenditure on new homes and housing benefits that help to pay rents.

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