Savills – Written evidence (UKH0080)
On behalf of Savills UK Ltd (‘Savills’), please find below our response to the Built Environment Committee’s Inquiry into ‘Meeting the UK’s Housing Demand’.
The questions are answered as set out in the Inquiry document. A summary is included at the end.
Savills is a FTSE 250 leading real estate company, providing a range of agency, property management, investment management and consultancy services. Savills turnover in 2019 was £1.9bn over 650 offices worldwide. The company employs over 39,000 staff.
Savills is the UK’s largest planning consultancy, with over 200 chartered town planners covering every sector and area of the country from a network of 24 locations in the UK. The company is involved in all aspects of the planning process for clients who operate across all sectors and all land use types and the views expressed in this response are therefore informed by this direct experience of operating within the current system. The views expressed in this response are those of chartered town planners at Savills, and are not submitted on behalf of our clients.
We welcome the opportunity to respond to the House of Lords Built Environment Committee Inquiry, which follows our representations made to previous consultations, including those on ‘Changes to the Current Planning System’ and the ‘Planning for the Future’ in October 2020[1] and on the proposed revisions to the National Planning Policy Framework (‘NPPF’) in February 2021[2].
Information on the amount of housing stock of different tenures in England is provided by the English Housing Survey. In 2019/20 there were 15.4m owner occupiers, 4.4m private renters and 4.0m social renters, of whom 2.4m rent from housing associations and 1.6m rent from local authorities.[3]
Most private rented homes are owned by private individuals, each of whom owns small numbers of homes; 45% of landlords own just one property.[4] Institutional ownership of private rented housing is growing quickly, but from a very low base and is focussed on the development of new homes.
In terms of housebuilding in England, it is possible to estimate the amount of housing delivery by tenure based on analysis of several MHCLG live tables. Data on Build to Rent development is available from the British Property Federation (‘BPF’) Build to Rent database, which is maintained by Savills.
Our analysis of this data suggests that average annual new housing completions over the five years to March 2021 in England[5] has consisted of:
The last three of these are commonly referred to as ‘affordable housing’ or ‘social housing’.
The actual building of homes is dominated by the volume housebuilders. The largest four housebuilders complete around 60,000 homes annually, approximately one third of the total.
What is meant by the word ‘demand’ is fundamental to answering this question. Realisable demand can be observed in the market, but is constrained by the availability of existing housing stock and constrained still further by the stock that actually transacts in either the sales or letting market.
Demand could alternatively be understood as ‘what people want’; i.e. if housing availability and price were not a barrier, what sort of home (e.g. type, location, size, tenure) would they aspire to live in.
The reality is that people live where they can, given the availability and pricing of housing, and the usual desire to be close to employment, schools and/or family, and that availability in turn influences what households aspire to. The economic factors are at least as important as the social and demographic factors.
Survey data suggests that most people want to own a home, but the economic reality is that many households will not achieve that aspiration. Part of what drives people to want to own their home is a lack of satisfaction with the alternatives, or in some cases simply poor availability of alternatives:
The need for additional housing, going beyond current delivery, of particular types includes:
The 300,000 home target for England is intended to reflect housing need, rather than demand. It is a figure that aims to house the projected numbers of new households and improve housing affordability.
The most recent academic work on national housing need was carried out by Professor Glen Bramley for Crisis and concludes that housing need is 380,000 homes per year across Great Britain (340,000 in England), if this is being established at a level where it will have a real impact on affordability.[12]
Bringing this work up to date is not straightforward. The dual impact of Brexit and the Covid-19 pandemic has disrupted both domestic and international migration, which are crucial for both national and sub-national household projections. Until a period of greater stability is reached and statistics are compiled on how many people there are in the country and where they are living, it will be extremely difficult to update this analysis.
The Government consulted on proposed revisions to the Standard Method for calculating Local Housing Need in October 2020. As noted in introduction, Savills submitted a response to this consultation. The Standard Method, which calculates the total housing need across the country, provides the starting point for determining the housing requirement for inclusion in a Local Plan. With the Standard Method being just that – a standard national method, it is impossible for it to take into account local factors such as growth strategies or strategic infrastructure improvements. Instead, such matters remain for consideration at the local level when the plan-making authority is translating the Standard Method need figure into the Local Plan housing requirement figure.
The target of 300,000 new homes per year reflects not only household projections, but also affordability. Household projections themselves are only projections – a rolling forward of what has happened in the past; if there has been constrained growth in the past, for whatever reason, the household projections will project these forward, suggesting a lower level of ‘need’ than would they would have otherwise. Exactly how the household projections and affordability are combined to result in a need figure was the subject of the October 2020 consultation.
The target is achievable, although not by the mid-2020s under current policies. Consultation documents published in 2020, including the Planning White Paper and the Changes to the Planning System, noted that adopted Local Plans only provide for 187,000 homes per year, a figure that is much lower than both the 300,000 figure and the 241,000 new homes delivered in 2018/19.
From 2012/13 to 2019/20, the construction sector built more homes every year, with an annual growth rate of 10%. This was supported by Help to Buy and investment in affordable housing, alongside a strengthening in the underlying residential sales market after the Global Financial Crisis.
The number of new homes delivered has reduced during the Covid-19 pandemic. But delivery levels were already at risk due to falling new homes starts dating back to early 2019. This reflects anticipation of the reduction in scope and then withdrawal of Help to Buy in 2021 and 2023. Savills expects the larger Affordable Homes Programme from 2021-26 and increased volumes of new homes through Build to Rent to allow housing delivery to recover to pre-Covid levels by 2025/6, but the end of Help to Buy is likely to leave a substantial gap in realisable demand for homes for sale.
Savills expects overall residential transaction numbers to stabilise at around 1.2m per annum across the UK and 1.0m in England over the medium term. New homes sales unsupported by Help to Buy have been at around 10% of all home sales for at least the last three decades. We do not expect that relationship to break under current policy or anticipated housing market conditions over the next five years.
Consideration also needs to be given to other types of residential accommodation such as retirement living and sheltered accommodation. Savills anticipates an ongoing increase in demand for these types of homes, which will help to meet a proportion of overall housing need, although quantifying the impact that their supply will have is currently impossible until there is a wider uptick in actual delivery.
There is a broad consensus that around one third of housing need is for sub-market rented housing, either affordable or social rent. This varies significantly by region, depending on local affordability and the parameters used to establish who is need of sub-market housing; the need for this type of housing is greatest in London.[13]
The split between demand for owner-occupied housing and private rented housing is harder to assess due to lack of data on the level of savings that households have available to pay the deposit required to access owner-occupation. Recent delivery (see Question 1) suggests a minimum demand for private rented occupation equivalent to approximately 7% of open market sales of new homes, but as noted demand is likely to be heavily influenced by a constrained supply, and a number of other factors as discussed. Savills anticipates Build to Rend delivery increasing significantly in coming years, potentially to two or three times recent levels.
Fundamental to the discussion regarding housing delivery is the differentiation (or lack thereof) between housing need and housing demand (see our responses to Questions 2 and 3 above). Focussing delivery of new homes in areas of high and emerging demand requires an understanding of both need and demand. Existing demand can be measured in a number of ways, including by the use of the published Affordability Ratio – generally, the higher the Ratio, the greater the demand for new homes. In contrast, an area of emerging demand might have a relatively low Affordability Ratio, but this might be increasing faster than the Ratio in an area of already high demand, so the rate of increase is also important.
It should also be remembered that housing is only part of a sustainable growth agenda and its delivery should be considered alongside other matters including economic growth and infrastructure delivery. While the Standard Method calculations (in each iteration) project the anticipated number of new homes required through a combination of demographic projections and market signals (with policy-on factors being left for plan-makers), they only project forward what has happened in the past as noted.
Both local authorities and the development industry need to have the ability to properly plan for a reasonable period into the future if new homes are to be delivered where they are ‘needed’. Already we have seen Local Plans being paused until the outcome of the current review of the Planning process is better known, with others being rushed so that Plans can be submitted for Examination before they had to take into account (potentially) emerging proposals. Introducing and then retaining a version of the Standard Method for a period of time to would generate some degree of certainty for authorities, developers and the general public.
Across the country, better resourced planning departments to effectively assess and respond to planning applications and prepare sustainable Local Plans would also assist with maintaining and increasing housing delivery. A more effective duty to cooperate, with cross-boundary working and / or planning at the regional scale would also ensure a more joined-up approach. Whilst housing delivery is often in the UK news, investment has been below that of other countries – in 2019 the UK invested approximately 4% of GDP in housing delivery, whilst many comparable EU countries invested significantly more (Germany 6.6% and France 6.4%).[14]
Overall, the type of housing delivered should be responsive to local need, providing a diversity of sizes, types and tenures as set out in the Letwin Report.[15] This is already required by the NPPF but the importance of it in both meeting local needs, increasing delivery, and facilitating social mobility, is too often overshadowed by the debate about the overall quantum. The requirement to properly understand and address all needs, integral with other social, economic and environmental factors should instead be the focus of discussion, but rarely is.
Effective public engagement is also required throughout the planning process, ensuring residents engage throughout the process to influence the location and type of development and feel empowered by the decision-making process. This should ensure better understanding the rationale behind allocations, applications and housing delivery. Government support in elevating the role of the planning system in delivering sustainable growth, and addressing climate change, rather than simply accommodating mis-understood and unwanted quanta of new housing would be welcomed by local authorities, developers and the general public.
(See our response to Question 3.)
Generally, the construction sector is not a barrier to the supply of housing. The availability of labour and/or materials can result in localised and short-lived delays but the usual result of these is an increase in build costs; the sector is relatively adaptable to meeting ‘demand’, however this might not address all ‘need’ (see our response to other Question 5). Notwithstanding, ongoing innovation in construction methods and resource supply will likely assist with improved delivery, energy and resource efficiency, and mitigate restrictions in materials and labour supply.
As noted in introduction, Savills has submitted comprehensive responses to the consultations on the proposed Changes to the Current Planning System and the Planning White Paper, and revisions to the NPPF.
It should not be forgotten that housing is not the only form of development, and while housing of course is a priority, similar urgency exists in relation to the delivery of other forms of development to ensure a strong economic recovery and the transfer to a greener / low carbon economy.
A challenge with radical reform to the planning system is ensuring that it is introduced in a way that minimises the risk of consequential delays in decision-making; both on major proposals and on the progress of emerging local plans. In addition, these measures need to be supported by the necessary resources; both in terms of planning professionals deployed at local authority level and the necessary supporting investment in technology.
What role should permitted development rights play in this?
Permitted development (‘PD’) by its nature means the location of development cannot be controlled through the planning application system. This therefore means many newly-introduced PD rights often play only a limited role in housing delivery and the quantum and location of the housing that new forms of PD might deliver is often regionally variable and difficult to predict. Notwithstanding, some forms of PD rights (e.g. office to residential and the post-Covid retail to residential) do have the potential to add a significant number of new homes, however this should be balanced with the need to ensure good design and provision in sustainable locations.
How might changes to Section 106 agreements shape the provision of social housing?
A holistic approach to infrastructure delivery needed, including appropriate social / affordable housing contributions and provision of these homes in the right places. It should be noted that S106 agreements do not just mitigate the effects of development, they also compensate (e.g. re-providing green space or sports provision). To provide clarity and inform the provision of social housing, a national standard template could help streamline the Section 106 process and make for the simpler, faster system.
How should communities be engaged in the planning process?
Effective community engagement is integral to a robust planning system which delivers sustainable development. The Covid-19 pandemic accelerated methods of digital engagement and these should be continued, for example virtual planning committees can encourage wider participation as attendance is not limited by room size or location.
All stages of the planning process, from local plan production to planning application consultation, should be well-advertised and information easily available and readable. A digital-first planning system, as set out in the Planning White Paper, will help facilitate this. Technology provides the opportunity to further democratise the planning system, with visual tools such as VU.CITY used to present complex data in engaging ways, allowing developers, local authorities and members of the public to view proposed development in its context and overlay and understand constraints and plan appropriately. Introducing data-rich planning application registers, with data being available to products such as VU.CITY, will improve the models available which offers greater opportunity for stakeholder engagement and assessment of effects of development. Standardised notices, report templates and planning conditions would also simplify the planning process and further public understanding.
New homes should be attractive, and also safe and sustainable. Beauty and aesthetics are by their very nature subjective. We agree that ‘we should ask for beauty, and refuse ugliness’ (Living with Beauty, 2020), but these are difficult elements to define. However, there are criteria against which design quality and aesthetics can be assessed.
The Planning White Paper set out a vision to encourage development of beautiful new places, including through the use of Design Briefs and Codes. These can play a role in providing more certainty and informing the form of development that takes place in different locations, but they need the skills and resources available to deliver them (see our answer to Question 9). The national design guide and model design code are welcome tools in assisting with the delivery of better quality design. This needs to be accompanied by a raised awareness of design issues, and more emphasis on design during decision making. Good quality design is not just about delivering beauty, but has huge impacts on physical and mental health. The Office for Place will assist in delivering this agenda.
Design codes need to allow for modern design and reflect modern methods of construction to deliver sustainable development in an efficient manner. They also need to ensure that development remains deliverable. Engagement on the production of design briefs and codes should involve the relevant development stakeholders and not just the local community. This is in order to avoid the potential for design codes to become a ‘shopping list’ of architectural and design requirements that is not reasonable, deliverable or cost effective, as unduly high build costs may prevent SME housebuilders from being able to compete in the marketplace.
There is no simple answer to the resourcing needs of the development industry. There are many skilled professionals in the sector working to deliver sustainable development. However, it is recognised there is a skills shortage in the planning and design industry in particular.
The recent Place Alliance Report on The Design Deficit[16] identifies that design skills are far from where they need to be: this includes a shortage of design expertise in local authorities with officers and decision makers lacking the necessary skills to ensure good design. ‘The Design Deficit’ makes some key recommendations on skills and resourcing, many of which echo those proposed by the Building Better, Building Beautiful commission that would do much to address the skills shortage. In order to implement the reforms proposed in the White Paper for example, there will be the need for greater town planning / urban design resource, and re-training. Elevating the role of the planning system in delivering sustainable growth, and addressing climate change, as discussed in relation to Question 5, would encourage both the recruitment and retention of staff within the industry.
The Covid-19 pandemic increased digital awareness and progress, and initiatives such as increased support for apprenticeships and other innovative recruitment methods have increased awareness of the profession and widened the range of applicants. Improved education and funding at higher and further education stages would go further to address this and attract the best and brightest to the professions.
Savills analysis shows that there is a need for a more positive and proactive approach to the working relationships between Government and local authorities. Better engagement between parties, with clear communication between ministers, Government departments and Councillors will improve these relationships. Setting out a clear methodology for housing targets and national policy approaches which can be communicated to members of the public in local authority areas during the plan-making and application process will improve education and delivery.
The Government can facilitate cross-boundary working through devolution and sub-regional working, which would address development distribution at an appropriate geography and encourage delivery – as in the case of the Strategic Partnerships formed by the GLA with London Boroughs to deliver affordable housing.
The property industry provides many opportunities for innovation in meeting the UK’s housing demand. In addition to those set out in our response to other Questions, the current review of and proposed amendments to the existing planning system offers the opportunity to increase housing supply and proactively meet housing needs across the UK.
For example, the duty to cooperate, as it currently exists, has not been effective in the delivery of housing or other development. Planning at the sub-regional level provides the opportunity to determine housing distribution and allocate other types of development between local authority areas and would ensure a visionary, joined-up approach earlier in the process. Savills analysis shows that encouraging local authorities to prepare joint plans, such as in Cambridge and South Cambridgeshire, can be an efficient use of resources, avoiding repetition of policies and encourages positive planning outcomes. Moreover, it can result in a properly-planned, integrated and sustainable approach to a functional social and economic area. There may be an opportunity through a reform to devolution to link Local Government reform and local plan preparation, resulting in fewer but comprehensive local plans which set out land for housing delivery, but careful consideration needs to be given to ensuring such areas and plans do not become too large or onerous to prepare.
Flexibility in the approach to the Green Belt would provide further opportunity for meeting housing need. The Green Belt is a unique designation, where land is protected only for the purposes of planning. It therefore needs to be recognised differently to environmental designations such as Special Protection Areas (‘SPAs’) and a Green Belt designation should continually be subject to the same tests of sustainability as other planning policies. Savills Research shows that local authorities with less than 40% of their land area assigned to Green Belt have, on average, delivered homes in the last three years equating to 1% of their pre-existing housing stock. In comparison, local authorities with over 40% Green Belt delivered only 0.78% of pre-existing stock. The controlled release of Green Belt land in specific circumstances can unlock sustainable development sites, for example adjacent to train stations and employment locations, and the Green Belt should not be considered an outright constraint to development. If local authorities were obliged to review their Green Belt designations every time a local plan is prepared, and the NPPF amended to give reduced weight to the Green Belt in areas where either the local plan is out of date or where areas are allocated for a sustainable ‘garden town/community/village’, there is an opportunity for substantial additional housing delivery in sustainable locations. To sensibly address the growth agenda, a strategic level Green Belt review is required, and a criterion based national policy provided to unlock shorter term growth.
Engagement with development can often become adversarial through the planning process, sometimes due to a lack of understanding of the benefits growth can bring or narrow engagement with only parts of the community meaning whole demographics are often under-represented (as recognised in the Planning White Paper). Greater education, through engagement and formal schooling which increases awareness of development need, reasons and benefits will make the planning process more positive and encourage housing supply as opposition is reduced on grounds of principle with conversation then being focussed on improving what is proposed.
Greater capital investment from the Government in ‘social housing’ to increase delivery, house low income households and cut the housing benefit bill also provides an significant opportunity to support sustainable housing growth and deliver housing need.
Summary
Question 1
Question 2
Question 3
Question 4
Question 5
Question 6
Question 7
Question 8
Question 9
Question 10
Question 11
September 2021
13
[1] https://news.euro.savills.co.uk/uk/changes-to-the-planning-system-savills-consultation-response.pdf
[2] https://news.euro.savills.co.uk/uk/nppf-consultation-savills-response.pdf
[3] English Housing Survey, Headline Report, 2019-20, MHCLG
[4] English Private Landlord Survey 2018, Main report, MHCLG, January 2019
[5] We have not carried out the same analysis for Wales, Scotland or Northern Ireland.
[6] https://www.savills.co.uk/research_articles/229130/300615-0
[7] https://www.southampton.ac.uk/news/2021/08/family-homes.page
[8] https://www.savills.co.uk/research_articles/229130/217396-0
[9] https://static1.squarespace.com/static/5b9675fc1137a618f278542d/t/5e784f7e087a892473a3ff8a/1584942982786/ Making+Housing+Affordable+Again+-+Full+report.pdf
[10] https://www.savills.co.uk/research_articles/229130/283758-0
[11] https://pdf.euro.savills.co.uk/uk/spotlight-on/spotlight-investing-to-solve-the-housing-crisis.pdf
[12] https://www.crisis.org.uk/media/239700/crisis_housing_supply_requirements_across_great_britain_2018.pdf
[13] https://www.crisis.org.uk/media/239700/crisis_housing_supply_requirements_across_great_britain_2018.pdf and https://www.savills.co.uk/research_articles/229130/224869-0
[14] https://ec.europa.eu/eurostat/cache/digpub/housing/images/pdf/Housing-DigitalPublication-2020_en.pdf?lang=en
[15] https://www.gov.uk/government/publications/independent-review-of-build-out-final-report
[16] http://placealliance.org.uk/wp-content/uploads/2021/07/Design-Skills-in-Local-Authorities-2021_Final.pdf