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What does the data say about which schemes win planning?

Words:
Brian Green

While many believe a broken and inconsistent planning system is holding back development, the data shows a more complex reality

The effects of land values may be one factor that leads to far higher failure rates with residential planning applications than in other sectors.
The effects of land values may be one factor that leads to far higher failure rates with residential planning applications than in other sectors. Credit: iStock

Planning has become a popular whipping boy, beaten when frustration and impatience among the development community boils over. It is commonly cast as a key blockage to progress in delivering new homes and depicted by some as a tool exploited by nimby neighbourhoods to scupper development.

Planning has absorbed a huge amount of government time over the years as various administrations have tried to make improvements. Yet, it remains, in the eyes of many, broken and not fit for purpose. So, what does the data say?

Let’s start with a fun stat to set the tone. Over the past 20 years, on average, applicants for planning permission were more likely to get residential planning approvals from the national park planning authorities than from local authorities.

 

Chart 1 Approvals share of planning decisions for various broad sectors 2011 to 2020
Chart 1 Approvals share of planning decisions for various broad sectors 2011 to 2020

That statistic comes from analysing Barbour ABI’s comprehensive planning database for Great Britain; comparing approvals, rejections, and withdrawals between 2002 and 2021 for more than 750,000 planning decisions of which 420,000 were for residential schemes. The figures may surprise. For some they might be taken as further confirmation of a broken and inconsistent planning system.

However, if we look at those national park figures again, taking just the past 10 years rather than 20, we find the opposite outcome – with national parks seeming to be less rather than more accommodating, though admittedly in both cases the gap is quite small.

This may encourage cynics to cry 'lies, damned lies, and statistics'. But more importantly it reveals that you need to be careful in the way you interrogate numbers and that you understand the context. So it is well worth noting that: a) national parks account for very few residential planning applications, less than 1%; b) the number of applications in each park will fluctuate differently over time; c) the approval rate differs from park to park. And closer inspection would reveal other factors at play, such as that those applying for permission in national parks are likely to have different aspirations from applicants elsewhere.

The central point is that the planning process is complicated, not least because no two locations are the same and each project is individual. The ever-changing aspirations of applicants and the tinkering and wholesale change to the rules and incentives for planning authorities create further complexity.

Planning is not simply about decisions to approve or not approve a given scheme. While development is primarily in the private sector, there is a planning environment where both national and local governments seek to direct development. This planning environment inevitably varies from place to place. For a start, planning legislation is largely devolved. Policy changes also have a big impact on how planning is delivered and how long it takes planning authorities to respond to these changes. In England, for instance, there has been significant concern over the time taken for planning authorities to adopt local plans.

Chart 2 Approvals as a share of decisions for residential and non-residential planning applications
Chart 2 Approvals as a share of decisions for residential and non-residential planning applications

This all plays out in the statistics, so in trying to understand them and assign meaning, it is easy to fall into one of the many traps they present. But for all the caution needed, the data can reveal patterns that help us understand what is going on with planning, some of the influences, and how things are changing.

One obvious observation can be drawn from Chart 1. It shows how tension within the planning system is much higher within the residential sector than for other sectors of the built environment.

Looking at applications in the residential sector over the past 10 years, 67 per cent were approved, 19 per cent rejected and 14 per cent withdrawn. This compares with what might be seen as more community-based applications for residential care, healthcare, education, leisure, or other civic facilities, where 89 per cent of applications were approved.

All the figures used in this analysis relate to projects worth more than £100,000, so the residential applications do not include most home improvement schemes but will include such applications as change of use. For the most part, the residential sector applications are for new homes. However, we can compare the approval rates of these larger residential schemes with applications for smaller home improvement works using Barbour ABI home improvement data over the past three years.

This reveals a significant difference. Over the years 2018 to 2020, the approval rate for home improvement applications was 85 per cent, compared with around 65 per cent for residential schemes valued at more than £100,000, which are dominated by new homes.

 

Chart 3 Approval rate for residential planning applications and house prices regionally
Chart 3 Approval rate for residential planning applications and house prices regionally

Meanwhile, Chart 2 illustrates how approval rates can change. It shows the rate of approval for housing schemes has been broadly consistent over the years, but for a dip in the early-to-mid 2000s. This was apparent also in non-residential planning approvals. But why?

There may have been many possible reasons suggested, such as a growing pressure to build as the economy and the housing market roared towards the global financial crisis. However, there is a more likely explanation: the introduction of an incentive scheme that had perverse consequences.

Under pressure from the industry over the time taken to assess planning applications, the government of the day set authorities national targets for the speed in making planning decisions. Between 2003-04 and 2007-08, it allocated, £68 million a year in Planning Delivery Grant as a reward for meeting those targets.

The number of major residential applications decided within 13 weeks almost doubled. However, rejections and withdrawals also rose as local authorities sought to meet the key target of deciding an application within the 13-week target. Developers that saw their applications rejected were expected to resubmit rather than leave them open and negotiate changes. A National Audit Office report found that 98 per cent of rejections were decided within 13 weeks, compared with 49 per cent of approvals. The unintended consequences are clearly visible in the chart.

It is widely understood that approval rates, especially for residential schemes, vary greatly by planning authority. Over the past 10 years, for instance, the figures suggest that in outer London boroughs, around 50 per cent of schemes are approved while in some boroughs in the Midlands, North East, and North West, approval rates might be as high as 90 per cent.

There is certainly a regional pattern, with a smaller share of approvals in southern England than elsewhere. This is illustrated in Chart 3, which also shows a strong negative relationship between house prices and approval rate.

Credit: Chart 4 Local authority residential planning applications not approved and land value

This poses a question over the cause. Is it nimbyism and the political pressure it creates? Or is it that the developers have more financial incentive in the areas of high house prices to push the envelope and try to squeeze in as much as possible?

Clearly land value comes into play. Chart 4 shows the share of planning applications rejected or withdrawn in relation to the estimated value of development land. The data used here covers only English local authorities with residential development valued at up to £5 million per ha. The estimates, which are inevitably crude, come from the Valuation Office Agency.

The correlation is nevertheless evident. And it seems reasonable to assume that when money is at stake, the developer or landowner would look to maximise the value of land. Where land is cheap, the incentive to push for an ambitious plan is less than where the land value is more expensive. What tends to drive up land values are amenities, good schools, nice restaurants, good views, nice neighbours and the like. These all tend to relate to higher levels of wealth and house prices.

The effects of land values may be one factor that leads to far higher failure rates with residential planning applications than in other sectors. Industrial land generally trades lower than residential. Also, outside commercial hotspots, such as central business districts, land for housing tends to be more expensive than land for offices. Take the outer London boroughs of Bexley and Redbridge as examples. The Valuation Office Agency puts 2019 land values for commercial use at £2.5 million per ha. Residential land per ha was estimated at £7.6 million in Bexley and £11.8 million in Redbridge.

However, the popular narrative over planning rigidity remains that it is illiberal planning laws, sluggish planners, and nimbies that are holding back development. There is no reason to dismiss these as potential factors in the equation, political pressure is often exerted on local councils to restrain developments. Paradoxically though, public opinion surveys suggest that London, for example, has among the strongest support for new housing yet has the lowest planning approval rates for housing schemes. Perhaps though, equal attention should be paid in research and policy debates to the commercial incentives that might lead developers to push as hard as they can to maximise the gross development value in areas of high land value.

Simply framed, planning is politics, mostly with a small 'p'. On one side there is a lot of money and profit at stake for developers and landowners. On the other, there is potential heartache for those who feel their neighbourhood is being trashed by unsympathetic development. And there is a wider public interest in terms of sustainability and aesthetics of the built environment.

Planning is in large part a balancing act over what economists might call 'externalities' – a cost or benefit to a third party who is not a participant in the original market, with an aim to act in the public interest. These externalities can be positive, enhancing life in a neighbourhood. They can be negative, creating aesthetic, social or environmental harm. The role of balancing interests is clearly particularly important where the system is heavily weighted towards private development rather than the public sector.

So, in many ways it is reassuring that the planning process does not have a reputation of being quick and simple, nodding through applications without careful consideration. It seems reasonable to assume that even the most liberal of souls might baulk at having a prison built at the bottom of their garden with little consultation and effort made to weigh up the costs and benefits.

That said, the case for improving planning is strong, as is the case for investing more resources into both speeding up decision-making and improving the quality of planning. Rather this than endlessly seeking out demons either side of the debate to pillory.

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