The number of developers submitting plans for residential development crashed by 31% in the third quarter, year-on-year, EG’s first UK Planning Update shows, as the government gears up to announce ambitious housing targets in the 2017 Budget.

Some 7,133 residential applications were filed in Q3 2017, down from 10,338 a year ago, according to figures released days after chancellor Philip Hammond said he would pledge 300,000 new homes per year in tomorrow’s Budget.

The residential figures stand in stark contrast to the rest of the market, where the number of planning applications soared 30.6% in the same period.

Last week, the Deparment for Communities and Local Governernment released statistics showing that the number of new homes in England alone had risen to a 10-year high of 217,350. However, the slowdown in planning applications suggests that momentum might wane in  future, putting further pressure on the government’s targets.

Andrew Whitaker, director of planning at the House Builders Federation, said that part of the problem was local councils relying on a few large-scale planning permissions, which has made it harder for small housebuilders to contribute to the supply pipeline.

He said: “We need to be seeing a mix of site types and sizes being allocated in local plans. This will enable SME builders to bid for sites and start building again and play their part in delivering further increases in supply.”

Earlier this year, the HBF showed that the number of small builders has fallen 80% in the past three decades, as the time and cost of planning increases and periods of uncertainty hit small housebuilders’ ability to finance their developments more severely than larger companies with scale.

Whitaker said: “If we are to get to the 300,000 number Philip Hammond specified this week, we need to reverse the decline in SME builders and incentivise specialist providers such as retirement house builders. The planning system will play an integral part in this by allocating the right sites in the right places,” said Whitaker.

He did, however, highlight that the number of residential planning permissions had been considerably above average at the start of the year.

There were 16,434 approved residential applications in the year to June 2017 – up 18.7% on the year to June 2016.

Noting increased commercial activity, Will Bushby, senior policy officer at the British Property Federation, said: “It’s encouraging to see that commercial property planning applications are on the rise. Despite ongoing uncertainty, this increase is a clear indicator of confidence in the market and the role new development plays in creating great places for business to thrive.

“For successful communities, however, a balanced approach to regeneration is required, including how business and residential infrastructure support one another.”

He said that if the government wants to reach its housing targets, the UK needs a “housing market firing on all cylinders” with a mix of tenures, including rent. That means a formal response to the Housing White Paper with details on how local authorities and developers will work together to reach their target.

The government, Bushby added, needs to “ensure the ambitious target of 300,000 new homes every year is not simply a pipe dream”.
On a quarter-on-quarter basis, the recent split between commercial and residential is less pronounced. Residential applications fell 26% and the rest of the market fell 4% in Q3 following the most active three months in the past two years.

The bigger picture

According to EG’s first quarterly planning update, the total number of planning applications was down 13.9% year-on-year and 18% down, quarter-on-quarter, in Q3. This was partly as a result of a slower quarter, which followed an unusually active one.

Every UK region saw a fall in applications in Q3 on a quarterly basis, with Scotland was the only one with a rise on an annual basis.

However, the numbers also showed that the average decision time has been on a consistent downward trend over the past two years, falling 50.9% in the past year alone among successful applications.

The government has continued to put pressure on local authorities to process planning applications faster and develop local plans to alleviate housing shortages. Last week, communities secretary Sajid Javid said he was willing to formally intervene in 15 local authorities that had not put together a local development plan.