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09 Jun 2016

#10ThingsSH you need to know: planning and the London housing market


Q  |  What do: (a) the Queen's Speech, (b) Sadiq Khan, (c) the Housing and Planning Act, (d) Brexit, and (e) the Neighbourhood Planning and Infrastructure Bill have in common?

A  |  London's housing market!

The drought of residential property in London means big steps are being taken to increase the supply of homes.  Below we summarise the changes being made to increase housing supply in London.

The first step to boost the number of residential units was taken in the form of the Housing and Planning Act 2016, which received Royal Assent recently and will introduce three key mechanisms:

1. Developers of Nationally Significant Infrastructure Projects are now able to include housing development as part of infrastructure projects, as long as the housing is functionally linked to the infrastructure project (e.g. homes for workers), or where there is no functional link but there is a close geographical link between the housing and infrastructure project.

2. A new "Permission in Principle" concept has been created to facilitate more housing developments.  If an area is identified by the local planning authority as being allocated for development (e.g. in a brownfield register, a development plan or a neighbourhood plan), then the Government or the local planning authority may grant a permission in principle.  This removes the requirement to apply for outline permission.  An "Application for Technical Details" (which looks a lot like reserved matters permission to us) must then be sought.  This new mechanism will come into force on 12 July 2016.  The jury is still out as to whether obtaining a Permission in Principle will be commercially more advantageous (or even bankable) than obtaining outline planning permission.

3. A local planning authority will only be able to grant planning permission for certain residential developments if specified requirements relating to Starter Homes are met.  Starter Homes are new dwellings only available for purchase by qualifying first-time buyers and which are priced at least 20% below market value.  This is likely to take the form of a requirement that a proportion of dwellings in a development are Starter Homes, or payment of a commuted sum is made to the local planning authority.  This is likely to come into force later this year or in 2017.

The Queen's Speech delivered on 18 May 2016 proposed several further steps towards a more streamlined planning process.  From a planning perspective, it focussed on the Neighbourhood Planning and Infrastructure Bill, which the Government has promised will:

4. Ensure that pre-commencement planning conditions are only imposed by local planning authorities when "absolutely necessary"; and

5. Tackle the overuse and misuse of certain planning conditions.

We are certain that developers will welcome a reduction in pre-commencement conditions, and that project managers can look forward to their compliance tracker schedules becoming correspondingly shorter.

May 2016 saw a changing of the guard as Sadiq Khan replaced Boris Johnson as Mayor of London. Sadiq Khan's campaign relied on London's oft-cited problems – transport, air quality, safety and crime, and of course housing – his promises include:

6. A "Mayoral Housing Agency" to build homes on public land for which Londoners would have first refusal;

7. "Use it or lose it" powers to prevent land banking on undeveloped sites in London with extant planning permission for development; and

8. Ensuring that 50% of all new homes built across London are genuinely affordable to rent and buy –   we think that this is the most ambitious target, and is something that could concern developers because it may affect the viability of some developments. 

In addition to all those factors above that will affect the supply and demand of housing in London, in a matter of days the UK will vote whether to leave the EU.  What would Brexit mean for London's housing market?

9. In London, 49% of properties worth more than £1 million are bought by foreign nationals. As foreign investment is expected to decrease significantly in the event of Brexit, could this reduce demand in London's housing market and trigger a downturn in returns from residential investments and developments? 

10. The rental market will also be impacted.  A change in the immigration status of foreign nationals may lead to an "exodus" and dramatically reduce demand for rental properties (foreign-born nationals are three times more likely to be renters than British-born nationals). 

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To keep track of further news and insights into environmental and planning law issues in the EU, keep watch for our "Top Ten" series #10ThingsSH

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