The UK lockdown meant that projects were paused, and new plans were put on hold; while restrictions have eased, there is a lot of catching up to be done and a long way to go until we will see housebuilding activity anywhere near pre-Covid levels.
Government intervention will play a key role in long-term recovery and we can see that this is already taking shape. In June 2020, Boris announced some of the most radical reforms in the property sector with his mantra of ‘build, build, build’; these changes addressed an area that has been notoriously difficult to navigate — planning.
Prior to the Covid crisis, we knew from developer and service provider feedback that projects were often at the mercy of the planning system; it is an area that has been desperate for an overhaul to increase housebuilding activity. Naturally, developers have been keen to get a response as quickly as possible but planning authorities traditionally take a much more methodical (and therefore slower) approach to granting approval. Nevertheless, there have been some signs of evolution in the system with the introduction of PDR in 2013 to include office-to-resi conversions. This provided a major injection to housebuilding activity and demonstrated the positive impact of change. A report by Levitt Bernstein stated that in 2006, 900 normal applications for office-to-resi conversions were lodged (the highest year in the 10-year period) and, in 2014, a year after the introduction, 6,500 PD schemes were notified. The first year of PD legislation generated 2,274% more office-to-resi conversions than the yearly average prior to that. After the scheme’s success, it makes sense that more would follow to boost housebuilding activity.
- Why are project monitors so important now and post Covid-19?
- Understanding the new market landscape
- How can innovative lending support developers in a changing climate?
Following periods of adversity, there can be long-term positive consequences; for the housing market, all unimplemented planning applications which were due to lapse between 23rd March 2020 and 19th August have automatically been extended to 1st May 2021. More drastically, the Covid-crisis has sped up reform in planning which was highlighted in Boris’ Q2 2020 update. On 30th June 2020, it was confirmed that builders would no longer need a normal planning application to demolish and rebuild vacant and redundant residential and commercial buildings if they are rebuilt as homes. In addition, the government confirmed that property owners will be able to build additional space above their properties via a fast track approval process, subject to neighbour consultation. These are significant changes for the housebuilding sector which, depending on their success, could open up the floodgates for a whole lot more.
Prior to the Covid-19 outbreak, there was also talk around the decline of physical retail, but the crisis has been the nail in the coffin for many high streets. The switch to online shopping was already underway and lockdown just sped up that transition. Even I felt this after moving to a new house and ordering everything from cutlery to furniture, online. While stores have reopened, health and safety measures have taken away from the experience of physical shopping. Recent planning reforms have incorporated a relaxation of retail-to-residential conversions.
For developers, changes like this will provide further opportunity in the residential market however, local authorities are likely to keep a close eye on how these reforms impact the landscape; total removal of retail in favour of residential units can lead to a loss in the sense of space and community which can have different long-term impacts.
Recent changes were described as the most radical reforms to our planning system since the Second World War. As the government resolves to get the economy moving again, the housebuilding sector seems like a natural choice for providing an activity stimulus. Depending on the success of these initial changes, it would make sense to also reinvigorate other underused areas and add further flexibility to the market. Before the crisis, some local authorities may have been resistant to change in a bid to protect their stock, but even those departments are likely to be feeling the squeeze of Covid and looking for change.
While planning evolution is likely to relieve departments from the volume of applications, the next challenge may be around maintaining quality and safety as red tape is removed.