Property Alert – Opportunities for developers?
Many of our clients involved in development commented to us in 2018 how difficult it was to acquire sites at a price that made development economic. At the end of the year the government released two announcements which, if implemented sympathetically, could generate opportunities for private developers in 2019. We would be interested to know if you agree with our thoughts.
Planning reform of the High Street
The problems in our High Streets have continued to hit the headlines, and the loss of more shops is forecast for 2019. The government published their consultation on “planning reform” in the last quarter of 2018 in response to this crisis. The consultation ends 14 January 2019 and focuses on changes to permitted developments, as it is acknowledged that imaginative solutions are required to bring life back to many High Streets. The proposals include:
- New permitted development rights to allow existing premises in High Streets to be used for a wider range of activities;
- A new permitted development right to extend certain existing buildings upwards – aimed at providing new homes;
- An extension of Local Authorities’ rights to dispose of land at less than “best consideration”; and
- Compulsory purchase powers for New Town Development Corporations.
Kingston Smith view
Any increased flexibility to permitted development rights should benefit small and medium-sized developers looking for sites. Investors will also welcome the opportunity to generate income from retail units where there is no, or limited, demand from retailers.
Land-banking – Sir Oliver Letwin’s report
Sir Oliver reported on the perceived significant gap between housing completions and the land allocated (or permissioned) for development. His final report concluded that land-banking is not an issue. The limiting factor on delivery of new homes is that developers only build what they can sell at an economic price.
Sir Oliver’s solution was to impose new planning rules on sites where there will be more than 1,500 units which will require developers to provide a greater ‘diversity of choice’, thus increasing demand from the public. He also highlighted that councils in areas of high housing demand should ringfence areas so that large sites are not broken up to avoid these rules.
Diversity is defined in the report as “housing of differing type, size and style, design and tenure mix. It includes housing sold or let to specific groups, such as older people’s housing and student accommodation, and plots sold for custom or self-build”.
If these proposals are adopted, he suggests developers with existing ‘large’ sites should have government funding or other subsidies withheld unless a new 106 agreement (incorporating these diversity requirements) is entered into.
The government is due to issue a response to the report in February 2019.
Kingston Smith view
The call for larger developments to include contrasting elements may result in opportunities for developers to form partnerships with the national house builders.
Here to help
If any of this raises concern or you would like to speak to a property industry expert, please contact your partner at Kingston Smith or a member of our property team who will be happy to help.