The government has admitted that the planning system is broken, and it has been accepted that we aren’t building enough houses since the Barker report in 2003.
There is a significant shortfall in housing completion each year, with about 150,000 being completed annually when we would ideally be seeing more like 250,000. This shortfall has resulted in a perpetual rise in prices, and many people unable to afford properties across certain areas. While some might feel that ever-rising rents are a positive thing for HMO landlords, the situation is not sustainable and can only continue for so long.
After learning that the government plans to shake up the planning process this year, the HMO landlords and those interested in developing commercial property to rent have been eagerly, perhaps nervously, awaiting the Housing White Paper 2017.
Now that the proposals of the white paper have been outlined, are you aware of what has been announced?
1. More updates to local plans
Every local council should have a local plan, and new regulations proposed in the White Paper are set to force local councils to update their local plan at least once every 5 years.
Without a local plan in place – and there are some councils at present that do not have an up-to-date plan – it generally becomes much easier for a commercial property investor to get planning permission. When there is a local plan present the council will already be aware of the areas that need development and the details of what kind of commercial property developments need to be build, and where.
While we have the headlines for points such as this, most of the details have either not been released or have not yet been decided. It will always be the details that dictate whether such updates are likely to be beneficial or detrimental to the HMO landlord’s business and the whole property investment community.
2. More funding for planning departments
The government intends to provide more funding for local council planning departments, which in my experience can be inefficient, sometimes failing to give commercial property planning decisions during the 8 weeks’ allotted time frame. The effect of such a situation is that councils are more likely to deny any planning application that shows the slightest risk or a breaks away from the status quo.
More money being injected into council planning suggests a possible uplift in the efficiency of these departments, but once again, the devil will be in the details.
3. Local plans to be standardised
Without a standardised approach to local plans, different councils currently create and organise their plans in different ways – which can make applications more complicated. With a single standard framework put in place, it is likely to be more straightforward when commercial property investors try to ascertain the specifics of a planning proposal, and may even streamline the process of evaluating the worth of making an application.
4. Track records considered
While councils may unofficially favour applications submitted by commercial property developers who are likely to do a good job, until now there has never been a piece of legislation necessitating such considerations. The Housing White Paper 2017 has proposed that councils look at a commercial property developer’s track record when considering their application, making it more likely that applications from those with proven results will be put through.
This will potentially be great news for veteran commercial property developers, but perhaps not so positive for investors just starting out.
5. More rentals built
There are no specific details on this point yet, but the white paper states that the government plans to encourage the building of more rental properties, including institutional investments (i.e. blocks of flats). This could include a covenant in the agreement stating beforehand that the properties will be rented out, as well as perhaps introducing longer term tenancies for them.
This point may have the benefit of reducing the affordable housing totals required per development, which can sometimes be quite large.
6. Small windfall sites easier to develop
This is still a little woolly, but it seems that obtaining planning could be easier on brownfield sites, helping with the affordable housing requirements and other such costs.
A lot of these changes could follow a similar route to the permitted development rights on offices, which meant that if you converted one to a residential property there was no community infrastructure levy, no affordable homes contribution, and no minimum space standards. These were major changes in planning law when they emerged which made offices far more affordable, so this could be another positive thing.
It looks like there are not going to be major changes made to the green belt, despite media speculation claiming otherwise.
7. Imposed “density” requirements
New developments are going to have to reach a certain density level, so if you are building a large development like a block of flats, you may find that you will have to fit a certain number within a certain area. I feel that this is part of the solution to the housing shortfall, as building fewer properties over large areas would surely mean that fewer properties were built overall. Higher densities will see more properties being built.
There will also be a move towards the building of smaller properties – which is already happening – and local housing developments will be obligated to have units in smaller sizes. Commercial property developers will be forced to think more creatively to make more space within the same sized development, which is something I consider to be extremely important for the future of the commercial property industry.
8. More building on public sector land
The “Accelerated Construction Programme” will be a mechanism for encouraging small- and medium-sized builders to build on public sector land, i.e. that owned by the council.
Partnerships will grow between developers and public bodies to build units and deliver schemes, and the government clearly wants to force local council to not just favour going with applications from the “big boys”, but also to allow smaller developers similar opportunities.
What HASN’T been mentioned?
It’s important to remember that the details are still being amended, consultations still taking place, and nothing is yet finalised, but as yet, a number of expected changes have not appeared.
- Nothing has been said about longer tenancies being introduced for single let and HMO properties within the private rented sector.
- Conservatives are ruling out enforced rents.
- Nothing specifically about amendments to permitted development rights.
Despite these currently being absent, the white paper appears to be quite promising for us smaller HMO landlords – however, the details are yet to emerge. Let’s just wait and see, and for now remain hopeful.
As developments occur, I’ll be sure to update you.