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Doubts remain over the real impact of planning reforms

Loosening building regulations may not guarantee a boost to the economy, says Giles Ferin, principal at EMW law firm.

The number of planning permissions granted during the second quarter dropped to the lowest level since 2009, and has been seen by some as supportive of last week’s announcement made by the government to remedy the perceived problems in the planning system in order to stimulate the economy to recover from recession.

However, it is questionable whether the low number of planning permissions being granted is truly indicative of systemic problems within the planning system.

Instead, the low number could reflect a lack of enthusiasm among developers for submitting schemes caused by two quite different factors:

  • An understandable concern over the availability of development finance, on acceptable terms, to the housebuilding industry;
  • The willingness to commit to the purchase of a new home in the gloomy economic outlook, including fears regarding future job security.

Evidence suggests that contrary to the government’s agenda, granting more permissions is no guarantee of stimulating a recovery in the property development market.

One initiative is to give developers the right to seek to renegotiate planning obligations secured under Section 106 of the Planning Act, and is anticipated to be available from early 2013. This applies when a development project has stalled because the project has become unviable in current market conditions.

While no such formal right to renegotiate currently exists, in practice many local planning authorities have been pragmatic in being prepared to enter into such renegotiations.

It is debateable whether this initiative alone will result in any significant number of stalled schemes recommencing, because the cost of S106 obligations is only one element of the ability to implement a consent.

Access to development finance on acceptable terms for many developers remains the major obstacle in the way of a recovery in the development and construction industries.

The second point of contention is in the initiative to include certain large residential schemes within the definition of major infrastructure projects.

Details as to what will constitute a “large residential scheme” will no doubt become clearer in due course but this provision is to enable such projects to be submitted to, and determined by, the Planning Inspectorate rather than by the relevant LPA.  

The thinking behind this is to address the perceived “poor performance” of LPAs in delaying the process. There is also mention of developers being able to opt for determination of their applications by the Inspectorate in future in circumstances where they perceive the relevant LPA is performing “poorly”, but this will require the passing of specific legislation.

It remains to be seen who will determine what constitutes “poor performance” and from whose viewpoint – such as the viewpoint of the developer or of the local community – and whether this will be judged on the speed of the decision-making process or the number of schemes that receive consent, or perhaps the number of complaints made against a particular LPA.

However, one casualty of this process would seem to be the government’s localism agenda. Through its Localism Act the government sought to devolve decision-making to local levels, where possible empowering local communities.

But now decisions affecting the local area could be made by the Inspectorate based many miles away, making decision-makers less accountable to residents and local businesses.

Two more initiatives are being implemented with a view to boost investment in residential property, as well as the high street.

The first is a temporary (two-year) relaxation on residential extensions. The second initiative is to permit up to two residential units to be created within upper floors above retail or finance and professional premises, and also provides for the ability to revert back to the previous use without the need for express consent.

While these measures may well provide some welcome additional work for the small builder, it is not clear why the latter provision will necessarily provide additional affordable housing. There does not appear to be any requirement that the units so created must be let at “affordable rents” and therefore the likelihood is that any units created will be let at the standard market rate.

As usual, the devil will be in the detail, which in most cases has yet to emerge. But it is clear that the government has every intention of removing any impediment it perceives within the planning system that might stand in the way of a recovery of the overall economy.

Parts of this article appeared in the Property Law Journal

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