While it is true that the obstacles to development must be reduced, Ed Miliband’s proposals that Councils should be given powers to penalise firms that are not developing their land miss the key issue surrounding the delivery of new housing in the current climate, which is the problem of viability.
Labour's proposals will exacerbate north/south divide
Some developers bought land at the height of the market, paying well in excess of its current value. They may have invested hundreds of thousands of pounds on planning consents, which are no longer viable, either because of the limited end sale values they can achieve or because they had planned to build a product that is no longer popular, such as high density apartments.
Mr Miliband’s proposals would only further exacerbate the North/South divide. The South East is doing well, property values are rising and it’s almost as if there hasn’t been a recession. However, in the North, values and incomes are still depressed, and the ability to access mortgage finance is far lower, giving developers less incentive to build.
Question mark over housing delivery
If Labour’s proposed measures are implemented and Councils force landowners and developers to sell sites to them, we will still be left with the question of who is actually going to deliver the much-needed housing. Councils are already cash strapped and don’t have the financial means nor the experience to develop these sites themselves. They will have to pass them on to other parties, probably with a public subsidy in order to make the development viable. All this does is require greater public sector intervention and funding, which would be better targeted elsewhere.
The current policies around driving forward the delivery of public sector land for housing developments, such as Get Britain Building finance for developers and HomeBuy for owner occupiers, are a much better way of trying to stimulate the market. Penalising developers and landowners is only likely to create resentment from the very people who can deliver the housing required.
Major planning overhaul required
However, in order to make developing more appealing, the Government should also look at how they can make planning simpler, less expensive, more flexible and quicker to obtain. Measures such as the reduction in the length of time that someone can bring a judicial review claim against a planning decision from 90 days to six weeks, effective from 1 July 2013, are a good example of how this problem can be addressed.