Britain’s gummed-up planning system

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There are countless reasons why Britain cannot build enough homes. It doesn’t have enough skilled tradespeople. Raw material costs, from concrete to steel, are elevated. Developers are blamed for “land banking” — buying land and holding on to it until its value rises. Yet after a study into practices in the sector, the Competition and Markets Authority concluded on Monday that the UK’s chronic undersupply of housing was more deeply rooted in its “complex and unpredictable planning system”.

This will not be a surprise for anyone who has tried to navigate the byzantine set of rules and procedures needed to obtain permission to build anything in Britain. Its highly discretionary system places an unreasonably high burden of proof on projects to satisfy a mass of stakeholders and regulations before they can proceed. The reasons for developments being delayed or cancelled can be comical: one housing development was refused permission thanks to the “moderate potential” for it to harm bats — despite no evidence of the mammal even being present.

The CMA’s report noted that some housebuilders did hold land for long periods — which can mean local housing needs go unmet — but said this was incentivised by the uncertain planning system. Having a buffer of sites that already have planning permission is, for builders, a rational way to prevent staff and equipment from being idle when there is limited clarity on whether or when other permits will be granted.

The UK is not the only country with planning problems. Similar issues hold back construction in the US, parts of Europe, and Australia, and contribute to elevated house prices and poor affordability. But Britain’s problems are particularly stark. It has fewer homes per person than many advanced economies. Analysis by the Financial Times last week found England may need half a million new homes a year to keep up with population growth and immigration. Only about 250,000 homes were built across the UK last year.

The planning system also makes broader infrastructure costs and delays far worse. New road lanes, motorway bridges, and the electrification of existing railways tend to cost more than in comparable nations. One wind farm development off Britain’s eastern coastline involved an environmental impact assessment with more pages than the complete works of Tolstoy, according to Britain Remade. The planning and consultation process alone for the Lower Thames Crossing, a proposed new road crossing from Kent to Essex, cost some £800mn. If key infrastructure cannot be built, this often makes housing projects less viable.

Addressing skills shortages, supply chain challenges, and competition in the construction sector is crucial. Indeed, the CMA is right to launch further investigations into the alleged sharing of commercially sensitive information among housebuilders. But unless the UK’s planning system is fixed, those efforts risk being fruitless.

The first step is to streamline impact assessments and consultation requirements. A clearer direction from government on what is sufficient at this stage is crucial, otherwise the system provides an open door to judicial reviews and delaying tactics from Nimbys and environmentalists. Westminster could also play a greater role in permitting areas for development. For instance, the use of zones marking permissible sites would slash the time spent on feasibility studies. The CMA’s recommendation to ensure local plans, which allocate land to meet housing targets, are updated and enforced is also sensible.

Britain rapidly needs to build more homes and better infrastructure if it is to make housing more affordable and overturn its languid productivity growth. But it will first have to slash the wads of red tape blocking the way.

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