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Housing Land Supply in the time of coronavirus

06.05.2020

ByJosef Cannon

We are all trying to deal with new anxieties at the moment: can I function working from home with just one computer screen? Does the aesthetically pleasing but orthopaedically-harmful chair in the study need replacing? Can you make a passable flat white with a Moka pot and a milk frother? I can give you answers to all of those questions, but not in this article: this must be dedicated to that other pressing anxiety, which is the effect that this crisis is having on the calculation of housing land supply.

Much of the answer lies on the supply side of the equation but it is worth noting one little point about need. As is well known, unless an authority has an up-to-date housing target, its housing need will be calculated using the Standard Method (unless it isn't – see the recent decision of Inspector Diane Lewis in Central Beds (APP/P0240/W/16/3164961), and that, in turn, relies in part on the relationship between median house prices and median workplace incomes.

There is a good chance that both will be affected by the COVID-19 crisis – particularly if the more pessimistic predictions of what the crisis will cause come true. That said, it is probably the case that both measures will go down – a fierce recession would be likely to depress house prices and incomes – which might mean little change to the ratio used in the Standard Method – but still – one extra thing to keep an eye on.

As for the supply side, a number of issues arise. Being a natural optimist, I am working on the basis that this crisis won't mean seven years of locusts and pestilence, but might mean, for the housebuilding industry (say) 3-6 months of reduced activity for 'lockdown-related' (i.e. social distancing requirements, staff being off self-isolating or unwell, etc.) reasons, and some delay getting back to somewhere near a 'normal' state of affairs thereafter.

What seems pretty clear is that not many houses are being built at the moment, and not much site inspection work to monitor delivery is happening either. But the wheels of the housing land supply pantechnicon trundle on, unaffected by some pesky micro-organism. Local authorities will be thinking about publishing results following the end of the counting year on 31 March, and making predictions as to likely delivery in the next few years in order to set their own trajectory and housing land supply position. Some appeals are still progressing, and those assumptions will be being closely scrutinised.

What seems clear is that whatever assumptions might have been made about likely delivery in the year to March 2021 will have to reflect the current situation – and in all likelihood previous assessments will have to be revised downwards. It must be unlikely that delivery will continue at the pre-COVID19 rate for the next few months at least. That observation was essentially made by an Inspector in a recent decision in Wokingham (APP/X0360/W/19/3238048):

109. The Covid-19 pandemic is likely to have implications for the housebuilding industry as with other sectors of the economy. The evidence indicates that a number of developers are temporarily closing their construction sites to protect employee and customer welfare. For those remaining open, the lock- down will impact on the availability of support services. Customer confidence is also likely to be reduced with a consequent effect on the buying and selling of property.

110. The Appellant has concluded that the effects would be felt for a 3 to 6 month period, which does not seem unreasonable. On that basis the conclusion is that a further 168 dwellings should be removed from the trajectory to take these factors into account. Whilst it is contended that this is an optimistic assessment, it is equally possible that a bounce back will occur once the crisis ends. Indeed, it is reasonable to surmise that housebuilders and their suppliers will be keen to rectify losses if it is possible to do so.

That issue will be compounded by the present difficulty (if not impossibility) of actively monitoring completions on site – so it will not have been possible to get out onto sites and get an accurate position as at the year end. What is more, the next set of Housing Delivery Test results are due in November and may add further to the tricky picture (although they won't really reflect the current crisis as they will deal with delivery records up to 31 March 2020, leaving the main effect to the November 2021 HDT results).

Overall, COVID19's main contribution to the question of assessing supply will be to add uncertainty. By what measure should future assumptions be revised downwards? When might officers get back on to sites and check assumptions for themselves? I don't have the answers: go and make one of those substandard flat whites, and keep your eyes peeled for news.

Two more little nuggets of uncertainty to nibble on with that flat white: if there is a material slowdown in the housebuilding industry some permissions might be in danger of lapsing, which might also have an effect on supply: in Scotland that has been addressed by legislation temporarily extending the life of permissions but there is no sign of that down south, yet.

Secondly, if there is a slowdown in completions, that could mean an effective increase in supply to offset any revision downwards of the projected future completions, at least in the very short-term, because every unit on a deliverable site which is completed and delivered is one fewer unit in the supply (and vice versa).

What does this all mean? Well, if future supply has to be revised downwards (and if permissions lapse) then it is likely that more local authorities will be subject to the 'tilted balance', meaning (in theory) more permissions being granted.

This raises a hoary old question: in circumstances like these, would granting more permissions actually help the situation? Would constrained supply really be the issue? It might be said that people buy and live in homes, not planning permissions; and it may be that an equally important intervention would be to assist those holding planning permissions for housing to get on and build them out, rather than increase the supply of permissions.

By the way, the answers are yes, just; yes, but I can't afford it; and yes, as long as you use decent beans and grind them at home.