At a time when UK homeownership is under severe pressure it may surprise many to learn that there are 420,000 properties with planning permission which have yet to be built. This is a 16% increase from the previous year and begs the question, if demand is there, why are property developers not building homes?
UK home ownership
A report by the Institute for Fiscal Studies has found an alarming fall in the number of young middle income adults who owned their home in 2016. Overall it is fallen from two thirds in the 1990s down to just 25% in 2016. We also know that house prices over the last 20 years have increased seven times faster than the average income of the middle 20% of households in the UK (with after-tax income of between £22,200 and £30,600).
In a perfect example of the problems facing the UK housing market we also know that just 25% of those born in the late 80s owned their own home by the age of 27. This compares to 33% for those born five years earlier and 43% for those born in the 1970s. We have seen falls of more than 10% in home ownership in every area/nation of the UK, since the 1990s, with the south-east hit particularly hard, falling from 64% homeownership down to just 32%. The simple fact is that relative incomes are much lower relative to house prices and this situation is unlikely to change in the short to medium term.
Why are there so many undeveloped homes?
A report by the Local Government Association has cast a very disturbing light on the property market and especially those homes which have been granted planning permission. As we touched on above, there are now 420,000 properties in the UK which have planning permission but have yet to be built. This is a 16% increase from last year and when you bear in mind the UK is falling short each year to the tune of around 50,000 newbuilds, surely this is a problem which can be addressed fairly quickly?
There is some debate as to why homes with planning permission have yet to be built and while the official statistics show that it takes on average 40 months from planning permission to completion, 8 months longer than 2013/14 this is not the whole picture. We know for a fact that building regulations have tightened over the years, developers may have outline planning permission for certain properties but when it comes to the detail it can prove excruciatingly slow where the local authorities are involved. However, it would seem that ministers have something of a radical proposal in mind!
Use it or lose it
There is some debate as to whether the introduction of a “use it or lose it” rule for property development might focus the minds of developers. The idea is that property with planning permission would need to be completed within a predetermined time scale otherwise planning permission would be withdrawn. It is unclear at this moment in time but there may also be some kind of penalty under the proposed regulations when reapplying for planning permission which had lapsed.
Over the years we know that property developers up and down the country have land banked sites as a means of securing their long-term future projects. The idea that they should be forced to build properties on these land banks within a predetermined period of time is controversial. Where will this all end? Would it attack the integrity of the free market? There are many questions to be answered but forcing developers to build properties may curry favour with the public but could decimate the UK investment market.