It’ll take more than planning reform to get London building again
London isn’t just facing a housing delivery downturn. It’s facing a double development whammy of falling housing starts combined with a deep decline in the pipeline of new commercial development coming forward, says Melanie Leech
Down, down, deeper and down go the lyrics from a track by Status Quo from the early 1970s. A decade that despite all of its difficulties with economic stagnation, we might welcome with open arms right now from a housing delivery perspective.
In this case down, down, deeper and down relates as much to overall development activity across the capital as to the poll ratings of the UK’s two most established political parties. A point that will undoubtedly be tested to the limit come the 7 May when Londoners take to the ballot box for the first time since the general election.
Quite rightly the majority of the focus recently has been on London’s poor record of housing delivery over the last couple of years, with starts-on-site plunging to lows not seen since the depths of the global financial crisis of nearly 20 years ago. Even the previously fast-growing professionalisation of the private rented sector through Build to Rent, which are residential buildings created exclusively for the rental market, has not been immune, with construction starts in London declining by an eye-watering 80 per cent compared to 12 months ago.
This matters for an industry with significant capital waiting to deploy – into delivering new homes, transforming places through regeneration, providing significant employment space for Londoners and attracting billions of pounds of investment into the UK.
For Londoners this matters because for every new home not started, that’s one less home to buy or rent, especially within the age group most impacted by the capital’s housing crisis – those aged 25-45 years old. That’s also one more economic barrier to growing London’s economy, with high housing costs feeding through to recruitment and retention challenges for business.
But London isn’t just facing a housing delivery downturn. It’s facing a double development whammy of falling housing starts combined with a deep decline in the pipeline of new commercial development coming forward.
Demand for office space exceeds supply
Demand for new premium office space in London far exceeds supply – just at the time when the major firms that make London a pre-eminent global business centre are rediscovering the importance of bringing people together in the office for personal enrichment and company health and profitability.
Don’t be fooled by stories of surplus office accommodation and how it should be turned into housing. This space is often either inappropriate to change into homes or unviable to modernise as offices.
Evidence for this combined development decline can be seen most starkly in the uncharacteristic lack of cranes on the London skyline and construction activity on the streets. It can also be seen in the number of high-profile sites across the capital which don’t seem to be progressing very fast.
Evidence for this combined development decline can be seen most starkly in the uncharacteristic lack of cranes on the London skyline and construction activity on the streets
The reasons for this development decline are multiple, but some common factors apply, not least the steep rises in construction costs and ongoing labour shortages making it increasingly less economically viable to transform planning consents into new residential development and a lack of available sites for new commercial provision.
Although moving in the right direction, significant delays in approvals by the Building Safety Regulator for new higher rise residential buildings still exist. Add in soft future sales pipelines, and continued weak business confidence, and you have all the ingredients for a perfect storm in development activity.
Without action, all indications are that this demand/supply imbalance could continue for the rest of the decade.
The current government has rightly taken bold action to reform the planning system to remove barriers to development. But these changes will take time to feed through and in any case if the planning system is a brake on development, once released the development engine is grossly underpowered and deeply asthmatic.
On top of all this we have a government in choppy waters and with a growing track record of not being able to take hard decisions and stick to them. Added onto a struggling economy this political instability certainly isn’t helpful for investor confidence, and feels like a self-inflicted national wound in the context of a governing party securing the biggest majority so far this century.
Back to the crux of it: London just isn’t building. That’s why we need to see a package of measures coming forward that address some of the challenges facing commercial development, such as greater planning flexibility to improve viability, and redoubled effort to unblock the Building Safety Regulator, and a clear political consensus to stick to them.
Economically the consequences of not doing so are serious. Erosion of London’s global competitiveness including a reduction in the provision of highly sustainable new workplaces – something businesses are still demanding even if politically decarbonisation seems to have fallen down the political agenda. And no-one wants to contemplate a future in which London’s housing delivery crisis continues to spiral downwards and increasing numbers of Londoners are forced out.
None of this is good for London, Londoners, or the UK as a whole. The government and the Mayor have recognised the scale of the challenge on housing. Now they need to remain politically resolute to tackle it and get London building again.
Melanie Leech CBE is chief executive of the British Property Federation