Is 9% of Developed Land In the UK Enough?

What makes development on 9 percent of UK land a set point?

Advocates for greenbelts and open lands find Government proposals to build outward unsettling. But the housing shortage for a growing population may require it.

Members of a national organization that campaigns for the protection of countryside, the Campaign to Protect Rural England (CPRE), heckled UK Planning Minister Nick Boles when he spoke at their annual meeting in June 2013. He proposed that the 9 per cent of England that has been built upon should be increased to 12 percent. This proposition proved to be a lightning rod, bringing about strong opposition from the CPRE and other aligned organizations.

But is it such a terrible idea? Can open lands be forever protected as sacrosanct? The UK population grew by 7 percent in the decade measured by Census 2011, a trend that shows no sign of abating. Homebuilders cite a plethora of reasons why they build only about half as much as is needed, but land investment funds eagerly seek places to invest and build. It is the economics of scarce land that constitutes a large part of the equation.

Toward those interrupting him as he spoke, Minister Boles lashed out by saying that rural villages would “become fossilized” if land development were blocked in certain areas. Indeed he makes an important point, as the number of individuals engaged in agricultural work has diminished in recent decades, due largely to increased efficiencies in how farming is done. If new (non-agricultural) employers cannot find a population of workers, they simply will not locate their operations where the population is scarce.

To be clear, the housing shortage in the UK is so critical that the following are now points of deep concern:

• The laws of supply and demand seem to be hard at work – much to the disadvantage of the homebuyer. The Institute of Economic Affairs (IEA) reports that, in nominal terms, “house prices in the UK have increased by a factor of nearly forty over the last forty years. Rent levels have followed suit.”

• Social housing, which once numbered 5.5 million units in 1981, now is reduced to 3.8 million. On the waiting list are 1.75 million households. People without dependent children are excluded from this list altogether. This further adds to the price pressure in market-rate housing.

Such discussions almost always prove to be contentious. And data from one study to the next sometimes provide widely different opinions on such matters.

One misperception is that the National Planning Policy Framework (NPPF) tilts land use toward development over greenbelts and the official Areas of Outstanding Natural Beauty (officially designated countryside lands deemed to have significant aesthetic and environmental value, so determined by the UK Government by way of Natural England). To the contrary, the Institute of Economic Affairs (IEA) observes that the NPPF advocates for residential development on open (raw) lands outside of the greenbelt and Areas of Outstanding Natural Beauty.

The CPRE counters that more than 400,000 brownfield sites already have planning permission and should be built upon first before green lands are developed (buried in that statistic is how many of those sites have industrial waste residue that needs remediation, an additional cost added to an already expensive housing equation).

The IEA singles out the blame for the housing crisis. According to its report, “Abundance of Land, Shortage of Housing” (IEA, April 2012), “Planning restrictions are a key determinant of housing costs.” The report advocates for a liberalisation of the land use planning system as a means to address the housing affordability crisis, citing a number of studies conducted in the UK, elsewhere in Europe and in the United States.

The battle will undoubtedly wage on for some time to come. But to be clear, institutional and private investors (often, those interested in a joint investment land opportunity do so through alternative investment funds) are increasingly interested in raw land as an investment, seeking planning changes that enable them to add to the housing stock on otherwise non-productive acreage. When those planning changes are achieved, the process is effective. But before an investor elects to participate in a land-to-houses scheme, they should consult with a qualified financial advisor who can help weigh the nature of the investment against other savings strategies.

Is New Housing Construction Encouraged in the National Planning Policy Framework?

It’s a myth that sustainability goals of the NPPF will get in the way of development. Quite the contrary – newer housing and development only needs to be smarter.

Much has been written in recent years about the restrictions on growth created by the UK’s land-use regulations, such as those that limit development on greenbelt lands. While incorrectly blamed as the cause of the housing shortage that is acute and building – the issues are multifactorial and complex – the complexity of those regulations has been discouraging to developers and would-be land investors.

That said, several bright spots have emerged in just the past two years. One was the passage of the Localism Act, which essentially streamlines regulations as it cedes authority to local planning authorities (away from regional authorities, which were widely blamed for stymying economic growth). Part and parcel with the Localism Act is the National Planning Policy Framework (NPPF), which sets out government planning policies for England. The NPPF works under the auspices of the Department for Communities and Local Government, which issued an extensive overview of its policies in March 2012.

To what extent does the NPPF encourage the construction of new homes? In general, the localism theme allows for a variety of approaches – much broader than was previously the case. Without question, the environmental sustainability ethos engendered by the NPPF strives to encourage reuse of structures, such as the conversion of abandoned industrial, commercial and educational structures to housing, where feasible. But following are several points from the Framework where new building on raw land might on the whole achieve a positive outcome within sustainability objectives:

• Growth is a goal. “The Government is committed to ensuring that the planning system does everything it can to support sustainable economic growth. Planning should operate to encourage and not act as an impediment to sustainable growth. Therefore significant weight should be placed on the need to support economic growth through the planning system.”

• Build it for modern, green transport. “Encouragement should be given to solutions which support reductions in greenhouse gas emissions and reduce congestion. In preparing Local Plans, local planning authorities should therefore support a pattern of development, which, where reasonable to do so, facilitates the use of sustainable modes of transport.”

• Build holistically. “Planning policies should aim for a balance of land uses within their area so that people can be encouraged to minimise journey lengths for employment, shopping, leisure, education and other activities.”

• Working, productive relationships between developers and planning authorities. “Local planning authorities have a key role to play in encouraging other parties to take maximum advantage of the pre-application stage. They cannot require that a developer engages with them before submitting a planning application, but they should encourage take-up of any pre-application services they do offer. They should also, where they think this would be beneficial, encourage any applicants who are not already required to do so by law to engage with the local community before submitting their applications.”

• Flesh out problems and objections in early phases. “The participation of other consenting bodies in pre-application discussions should enable early consideration of all the fundamental issues relating to whether a particular development will be acceptable in principle, even where other consents relating to how a development is built or operated are needed at a later stage. Wherever possible, parallel processing of other consents should be encouraged to help speed up the process and resolve any issues as early as possible.”

In other words, planning has made some significant steps forward in ways that are friendly to development. If this attracts more investors to land and real estate, all the better. A growing UK population needs homes to make ownership and renting more affordable, so a cooperative working environment with clearly articulated goals is certainly a good foundation on which to build it.

Would-be investors in land need to consider all the variables: market needs, available sites and the objectives of local planning authorities. Before embarking on a land investment, the investor needs to consider whether to “go it alone” or participate in a joint venture partnership with professional land development specialists among its advisors. An independent financial advisor can help that investor identify also the degree to which land should occupy one’s full portfolio.

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