The UK’s largest house builder, Barratt Developments, completed just 14,000 homes in the year to June compared to 17,000 in the previous twelve months. The developer reported a three quarters drop in pre-tax profits for the year and says it will build even fewer homes next year, which will number a maximum of 13,500.
Despite the government’s pledge to reform the planning process to “get Britain building”, planning permission was not cited as one of the reasons for the change in Barratt’s fortunes. The company says it is “well-positioned” to meet the demand for new homes, but that high interest rates are putting people off buying a home while inflation has increased costs.
Reforming the planning process, releasing green belt land for building and reintroducing mandatory housing targets for local authorities are all being considered by the government to increase the supply of housing to deliver the pledged 1.5 million more homes in England in the next five years. However, data shows that delays within the planning system are not the sole reason for the low number of properties being built and not the main cause of the housing shortage.
In June 2024, the company behind Planning Portal, TerraQuest, introduced a new Planning Portal Application Index. The Index is the first in a series of quarterly reports based on data received through the planning process.
According to the data, only around 1.5 million of the 2.7 million homes granted planning permission since 2015 have actually been built. If all the homes granted planning permission had materialised, at least the target 300,000 homes would have been built in all but two of the last ten years.
If planning permission is the not the problem … what is?
In many cases, housing developers that secure planning permission on larger sites may go on to find the scheme nonviable, indeed a number of developers have gone out of business or left development projects unfinished in recent years.
In November 2023, it was reported that the 4,263 construction firms became insolvent across the UK in the year to August 2023 – an increase of 8.3% on the 3,938 insolvencies recorded in the 12 months to August 2022, and a 32.5% increase on the 3,218 in 2019.
Among the problems housing developers currently face are:
- High interest rates which can affect housebuilders by slowing down the housing market in the short term, as well as increasing development costs.
- Increased costs due to the costs of materials, biodiversity targets, affordable housing and other policy expectations.
- Political uncertainty which can put developments on hold due to a lack of clarity.
- Skills shortages within the construction sector which mean that a reported 250,000 more skilled workers are needed within the sector.
- Supply issues with a reduction in the supply of construction materials including blocks and bricks.
The number of homes completed is at the lowest level since 2016, while only 1.5% of the government’s annual target of 300,000 homes are built by local authorities.
Are you lucky enough to have secured the purchase of your next new property? Ask an independent Chartered Surveyor for a building survey to avoid any unnecessary delays.