Written evidence submitted by the Federation of Master Builders [FPS 125]
About the FMB:
The Federation of Master Builders (FMB) is the largest trade association in the UK construction industry, resenting more than 7,000 firms in England, Scotland, Wales and Northern Ireland. Established in 1941 to protect the interests of small and medium-sized (SME) construction firms, the FMB is an independent, non-profit organisation, lobbying for members' interests at both the national and local level.
We are grateful to the Committee for holding this inquiry and have provided answers to all the questions raised that are of relevance to our membership. We are also extremely grateful for the Committee’s offer to accept oral evidence from the FMB’s Chief Executive, Brian Berry, on this inquiry and look forward to providing further information through this opportunity.
Is the current planning system working as it should do? What changes might need to be made? Are the Government’s proposals the right approach?
- The FMB welcomes the opportunity to respond to the Committee’s inquiry into the proposed changes to the planning system. SMEs face disproportionate barriers when engaging with the planning system compared to the volume house builders. This is hampering the ability of the SME sector to grow and build more homes. According to the FMB’s House Builders’ Survey 2020, 48% of respondents said that ‘the planning system’ is a constraint on their output. 64% also said that the number of small sites opportunities was decreasing, and 37% said that the process of obtaining planning for small sites seemed to be getting worse.
- The FMB welcomes the White Paper’s premise that there is a need for more transparency and speed in the planning process. While reforms are welcome to achieve these aims, the most important condition that SMEs seek is certainty and policy consistency to help them plan and cost their projects.
- The FMB strongly welcomes the Planning for the Future White Paper’s ambition to grow SME house building and the self and custom-build sectors. In the 1980s, SMEs built 40% of new homes, but now that figure stands at just 12%.
- According to the FMB’s House Builders’ Survey, members predict that they will build 12,000 new homes in 2021. However, if we reverse the decline in SMEs, they have the potential to build 65,000 new homes by 2025. They can only do so with greater support from government, and reforms to the planning system which disproportionately limits their output in its current form. 50% of FMB house builders operate in the self and custom-build sectors meaning that increasing the number of SMEs would also grow this sector.
- A ‘quick win’ in terms of boosting the current system and improving its performance would be to introduce an ‘Ofsted-style’ rating system that celebrates highly-performing local authority planning departments, and that sends in external support to those that are struggling. An Ofsted-style system would help to increase emphasis on customer service. This is particularly important to SMEs as we know that respondents to the House Builders’ Survey rated ‘inadequate communication by planning officers’ as a significant cause of delay to projects. We know that some local authorities perform very highly in terms of their customer service, however builders’ experience is that this is a postcode lottery and far too inconsistent across the country.
- It is right that the proposals within the White Paper note that expenditure per person on planning has dropped by 60%. Local authority planning departments need greater investment as a matter of urgency to help speed-up determinations on applications from SMEs. They also need greater resources to adapt to changes and a strategy to upskill in the longer-term.
- The FMB House Builders’ Survey 2020 found that 55% of respondents reported that there are sites that they are interested in, but which are unviable due to likely Section 106, Community Infrastructure Levy (CIL) or other obligations. Respondents noted that CIL is arbitrary and unpredictable between different authorities.
- The FMB welcomes the proposal to create a single ‘Infrastructure Levy’ that is calculated in a clear and transparent way, and which is calculated in a consistent way across the country. This will help address the concerns raised above. It is also welcome that this Levy would be payable upon completion of the site, specifically after the first home is occupied. The FMB welcomes the reference in the proposals to the need for developer contributions to deliver on-site affordable housing at least at present levels.
- The FMB welcomes the proposal to maintain a minimum threshold to developer contributions that will prevent smaller developments becoming unviable. While the White Paper proposes that this would be value-based, the FMB believes a simpler and clearer policy would be for this to be unit-based, as is consistent with the current situation. This would avoid any downward pressure on the quality of the build that would serve to reduce the value of the plot. A threshold of 10 units would help support SMEs.
- Streamlining development management is welcome, however, the FMB does not believe that scaling-up Permission in Principle (PiP) to major development is the solution. The first reason is that the PiP pathway was specifically designed to streamline planning for the benefit of SMEs and removing this advantage would further weight the system in favour of the volume house builders. The second reason is that there is insufficient evidence to suggest that PiP has been a successful policy so far, with publicly available data on the number of permissions granted through PiP only being released in September. This dataset showed that in the period January to June 2020, just six PIP applications had gone through to the technical details stage. We would argue that this is an insufficient evidence base to extend the policy.
- The FMB strongly welcomes the White Paper’s ambitions to utilise the disposal of publicly owned land to support the SME, self and custom-build sectors. To lay the foundations for this policy, Homes England should start building connections with SMEs now so that they can easily scale-up public land disposals in the future. This can be achieved by requiring Homes England to dispose of small parcels of land that can be developed under PiP to SMEs. It can also be achieved by requiring Homes England to deliver 10% of the homes they facilitate on sites of one hectare or less. This should increase SME usage of the Land Hub service, as just 5% of respondents to the FMB House Builders’ Survey currently make use of this.
In seeking to build 300,000 homes a year, is the greatest obstacle the planning system or the subsequent build-out of properties with permission?
- The efficacy of SME housebuilders in the sector will be crucial in achieving the target of building 300,000 homes a year. A timely and consistent planning system is key to enhancing their operational and financial outlook; and would enable them to better support the national housebuilding effort.
- Importantly, SMEs within the sector do not landbank. They work from site to site and are heavily reliant on revenue from past builds to begin future projects. Unlike many larger developers, they do not have pipelines of land that they plan to utilise years in advance. Where they can access the land, and secure the planning permission, SME developers build out quickly.
How can the planning system ensure that buildings are beautiful and fit for purpose?
- The FMB welcomes the proposed principle to improve the beauty and design quality of our housing stock. We are drivers of quality build, and we know that SMEs compete on quality, not price, so they are well placed to help improve the aesthetic value of our homes., An FMB survey found that consumers are twice as likely to be ‘very satisfied’ with the quality of their home if it was built by an SME compared to if it were built by one of the top 20 volume house builders.
- Requirements around beauty should not be prescriptive, however, given its subjectivity. This is especially important as the reforms are looking to grow the self and custom-build sectors which by their nature lead to original and unique houses.
- We must ensure that the homes we build today are fit for the future. We know that building low-carbon or zero-carbon homes is a fundamental component in tackling climate change. SMEs are typically innovators in this space, with the FMB House Builders’ Survey 2020 demonstrating that many smaller developers are already using air source heat pumps or low carbon building methods to deliver new homes. The survey also found that SMEs would welcome incentives that reward the early adoption of more radical low carbon measures.
- The FMB welcomed the proposals set out in the Future Homes Standard to strengthen Building Regulations but would welcome greater incentives for early adopters rather than stricter regulations in a shorter timeframe. Incentives would help contribute to growing the low carbon energy source market and making it more cost effective. The implementation of the proposals in the White Paper should be considered holistically with forthcoming changes to the Building Regulations.
- The FMB welcomes the proposal to provide clearer planning conditions, and to simplify the technical details requirements attached to planning permission, including the environmental impact assessments. SMEs do not tend to have in-house consultants who can write these reports, and the information can therefore be costly and cause delays. FMB members rated ‘overall complexity and the cost of consultants required to deal with this’ as the biggest source of additional cost to them in the planning system, with members rating this 3.77 out of 5 in terms of significance.
- While it is outside the scope of the Government’s current proposals, Building Regulations should also be reviewed and reformed to make it as easy as possible for builders to calculate the energy performance of a new home, and they should be incentivised to install the latest and most efficient technology at all times. For example, one FMB member reported that their Systems Applications and Products (SAP) calculation was completed a year before completion on the new build, but in the meantime a new heat pump model had been brought out. They were not able to fit the newest model without re-doing the SAP calculation. This acted as a disincentive to improving the energy efficiency of the home.
What approach should be used to determine the housing need and requirement of a local authority?
- The FMB recognises that there is a shortage of housing in England and that higher house building targets will help to achieve the Government’s goal of building 300,000 new homes a year. The FMB also supports greater stability in forecasting, as this will provide a more predictable landscape for house builders. We agree that affordability should be calculated in terms of average salaries relative to average house prices in each local authority. However, the formulae should be sufficiently flexible to incorporate changes in the lending market which may impact on affordability to a greater degree.
- We further believe that contributory factors to poor affordability, such as land value, need to also be taken into account when determining local requirements. Declining small sites opportunities result in more expensive plots, a higher build cost and ultimately more expensive homes. The FMB House Builders’ Survey 2020 found that 64% of SME house builders report small sites opportunities as decreasing. Furthermore, 46% of SMEs say that a ‘lack of available and viable land’ is hampering their ability to build more homes. By allocating more small sites in their local plans, local authorities can help to improve affordability in their local area.
- The potential impact on availability of these windfall sites, explains part of our concern about the proposed zonal planning concept. While welcome in its ambition to streamline development management and get more homes built, we are concerned that builders looking to bring forward windfall sites outside of designated areas of ‘Growth’ or ‘Renewal’ would face the same delays as they do currently, and these would become even more disproportionately onerous when compared to major development. This risks further pricing SMEs out of the market.
- We believe that greater use of developer forums in each local authority could help determine and agree local need. These forums bring together planning officers and SME developers to discuss demand and opportunities for housing growth in the local area. This would also help planning officers to better understand the SME developer and help new builders into the housing market through best practice sharing. Growing the number of SMEs will also help improve engagement and public perceptions about development. The Government should review case studies such as the developer forums in North East Lincolnshire which have proved to be a successful model.
What is the best approach to ensure public engagement in the planning system? What role should modern technology and data play in this?
- Increasing the accessibility of local plans through digitisation will help ensure that SMEs can more easily identify suitable plots to bring forward. Reducing the lifetime of a local plan will also help ensure that allocated sites are updated regularly, as more are built out, and this will help local authorities to be more reactive to demand in the local area.
- While it is important that digitisation also helps communities and local interest groups to become more engaged in place-making, the FMB believes that there is a need to manage anti-development sentiment. Reversing the decline in SMEs will help address anti-development concerns, as SMEs foster slow and organic growth by building out small sites on the edge of existing settlements, or infill sites. That SMEs compete on reputation instead of price also means that they build high-quality homes. SME developers are also more likely to live in the communities where they build and maintain an open dialogue with the local area throughout the building process. For example, the Secretary of State for Housing, Communities and Local Government extended the permitted hours for development during the lockdown, but anecdotally we know FMB members did not take advantage of this in order to pacify the local community at a difficult time.
- The FMB welcomes the White Paper’s objective to grow the self and custom-build sectors, as more people building their own home will also help to ease anti-development sentiment. Any future planning system should require local authorities and Homes England to ringfence land for the purposes of self and custom-build. Anecdotally, we know that FMB members often receive calls from people looking to build their own home but are unable to find the land to accommodate the number of requests. Indeed, 46% of SMEs say that a ‘lack of available and viable land’ is a constraint on their output.
What changes, if any, are needed to the green belt?
- The FMB are supportive of a review of the greenbelt, so that future regeneration projects on underused commercial space located within the greenbelt are not prevented. This would support the Government’s ambition to increase the supply and availability of affordable homes, as the build and preparation costs involved for developments in these areas are generally far lower in comparison to their brownfield counterparts.
 https://www.fmb.org.uk/media/56838/fmb_house_builders_survey_2020_final.pdf (Page 16)