One third of all homes with planning permission never get built

At least twice as much land is provided every year for housing than homes started on site and more than 30 per cent of homes with planning permission never get built at all. 

The number of homes approved for development has been much greater than the number of houses actually started on site every year for the past decade. The gap has been growing rapidly since 2011 generating an accumulated backlog of over 800,000 permissioned homes that have yet to be built.

At least 30 per cent of these permissions will never be turned into houses, with this figure rising to around 50 per cent in London, according to research by the development consultant Lichfield.

Accusations of land-banking have been vehemently denied by the house-building industry and have not been upheld in any formal inquiry. However, the industry admits that a significant number of homes with planning permission ‘lapse’ each year. 

One of the reasons why housing sites ‘lapse’ is because landowners and site promoters take their profits from the uplift in land value without building the promised housing. Getting planning permission for housing can increase the value of land by 100-fold. Government figures suggest that agricultural land worth £21,000 a hectare rises in value to £2,000,000 once it is given residential planning permission. 

The top housebuilding companies operate across both land and housing markets and may trade sites once they have planning permission or use the profit from land to support their borrowing. 

The lack of responsiveness of the housebuilding industry has been cited as the biggest obstacle to increasing the number of homes built and tackling the increasingly severe crisis of affordability. The recent Letwin report confirmed that housebuilders average a build-out rate of only 50 homes a year per site, deliberately rationing the supply of homes in order to keep house prices buoyant.

While planning authorities have increased the number of permissions for new homes, the industry has failed to respond with any significant boost in production. Yet government continues to regard a lack of planning permission as the obstacle to housing supply. 

Planning permissions for 300,000 homes were granted by local authorities last year, continuing a long upward trend in the amount of land allocated for new housing. Meanwhile housebuilding remained steady at around 164,000 completions suggesting construction has plateaued. 

According to research by housing charity Shelter, 324,000 homes with planning permission were still unbuilt five years later.  Think tank Civitas found that 529,000 homes were still not built ten years after getting planning permission. 

National planning policies forces local planning authorities to provide more land than housebuilders require for their current rate of construction. This surplus of permissions enables developers to pick and choose sites with the highest values and to prioritise their profit margins rather than boost supply.  It provides compelling evidence that the dominance of landowners and developers in the planning system is fuelling a speculative market in land and increasing the affordability crisis in housing. 

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