Sector responds to government plans for developer penalties and smaller site exemptions

Using powers introduced in the Levelling-up and Regeneration Act 2023, developers of 50 or more homes will have to provide an annual progress report tracking build out progress, and allow councils to remove planning permission after a specified timeframe if development is unlikely to be completed.

Shortly after this working paper was published, the government announced changes to small and medium-sized sites that could include an exemption from the Building Safety Levy and eased Biodiversity Net Gain (BNG) requirements.

These plans include smaller sites of up to nine homes benefitting from streamlined planning and eased BNG requirements, with faster decisions being taken by expert planning officers, not planning committees.

A new medium site category of between 10 to 49 homes will also face simpler rules and fewer costs. These changes include a proposed exemption from the Building Safety Levy and simplified BNG rules.

On the changes to planning permissions, Neil Jefferson, chief executive at the Home Builders Federation, denied that homebuilders delay completion rates at all.

Instead, he said, the government should “focus on the actual reasons as to why home building levels are flatlining, which have largely been ignored – the lack of government support for first-time buyers that is suppressing demand, and the dearth of housing associations in the market for affordable homes.”

Kate Henderson, chief executive of the National Housing Federation, said the proposed planning reforms will not be enough to reach the government’s target of 1.5 million new homes.

She called for more grant funding for social housing, saying she hopes for an announcement in the Spending Review on 11 June: “It is vital the upcoming Spending Review includes a significant boost in funding for social rented homes, including a long-term rent settlement, convergence, access to building safety funding for social housing, and ambitious grant funding to enable housing associations to invest in existing and new homes.”

Ms Henderson also welcomed the government’s proposal that large housing developments should be mixed tenure by default, to speed up build out rates. The paper says that where more than 40 per cent of homes are affordable, build out is twice as fast. 

Rachael Williamson, director of policy, communication and external affairs at the Chartered Institute of Housing, said she especially welcomed “the emphasis on mixed tenure developments, which evidence shows can accelerate build out rates,” but that “stronger accountability measures for developers must go hand in hand with continued investment in affordable and social housing.”

“At a time when millions are struggling with housing costs, it’s vital that plans to deliver 1.5 million homes are underpinned by a genuine commitment to build the right homes in the right places – and that means homes people can afford,” she added.

Adam Hug, housing spokesperson for the Local Government Association (LGA), welcomed the proposals, which he said the LGA had called for. “While intervention of this sort is a last resort, this move is crucial to help ensure meaningful build out of sites,” he said.

Mr Hug warned that the penalties must be set at the right level. “The ability to apply a ‘Delayed Homes Penalty’ is a power that councils have been asking for and means that local taxpayers are not missing out on lost income due to slow developers, but it must be set at a level that incentivises build out."

On the smaller site exemptions, Melanie Leech, chief executive at the British Property Federation, said: “To get anywhere near 1.5m new homes by 2029, reversing the decline of SME builders must be a key objective for the government and ministers should be commended for acting.

"But solving the housing delivery challenge is bigger than SMEs alone, which is why we also need the volume builders, housing associations and build to rent developers to play their part, as well as a pragmatic approach to tacking the viability challenge.

"Therefore, we are pleased to see Government considering targeted exemptions from the Building Safety Levy and Biodiversity Net Gain requirements. We recognise the importance of funding for building safety and biodiversity standards – but know that the cumulative impact of the various charges imposed on new developments is creating a viability crisis."

Paul Rickard, chief executive of Pocket Living, said the government is sending clear signals that it understands the importance of SME builders.

He added: "SMEs can be disproportionately affected by policy and support targeted specifically at SMEs will help to reverse the decline of our sector, help level the playing field, and once again make SMEs the backbone for high quality local housing delivery across the nation.”