Costs are taking their toll

We are in the worst market conditions for a generation, housing starts have plummeted and residential planning applications are falling fast, too. Even local authority planners are being laid off. And yet the tools and standards being applied to planning applications are still those that were devised in the boom times when the system was used increasingly to get developers to pay for an array of items.

If the housing industry, at least in the short term, cannot realistically continue to take on these growing costs, we must reappraise the burdens being imposed by the planning system.

Here are the main costs:

• Direct costs It has always been the case that the developer pays for costs such as creating or improving site access, remediating contamination, stabilising historic structures and so on. In many cases there are also related measures, such as flood risk defences, which are also the direct result of development and need to be paid for. Fair enough.
• Infrastructure costs We have seen the growth of tariffs, where costs are charged on a per-unit basis. These include funding for highways, public transport, libraries, education, health and community facilities that has often been costed in a way that is related to the scale and rate of development in far better times. Some items, such as health and education, are not always well substantiated and the need can vary enormously, even within a district.

The challenge for local authorities is to plan for infrastructure in a more sophisticated way that maintains viability. As the community infrastructure levy looms, they will need to prepare robust charging schedules.

• Regulatory and policy costs The timetable for applying the Code for Sustainable Homes was also set in better times. The added costs for each level rises almost exponentially. These could be deferred, given the highly marginal contribution of new housing to our national carbon targets.

Local authorities are adding to the list of policies that result in a cost: on-site renewable energy, open space, public art – the list goes on. These charges tend to discriminate against medium-sized developments (anything over 10 units is still categorised as “major” by the planners), that do not have the critical mass of truly large-scale developments.

This compliance culture is also affecting the scale of application documentation – and thus the cost and time it takes to prepare it.

• Affordable housing Developers are rarely able to fund the full list demanded in a section 106 agreement as well as the full amount of affordable housing. Toolkits can help planners appraise the viability of any scheme, but the assumptions on building costs, values and profit need to be kept up to date. They are only a tool and sadly, too few planners know how to use them.

Local authorities are increasingly having to choose between levels of affordable housing and the costs associated with their section 106 demands. The government can help by allowing flexibility in the negotiations – for example, by accepting trade-offs between section 106 and affordable housing costs – and by properly funding the housing associations, which are also struggling.

• Other section 106 costs The list of demands is still growing. In some areas it is common to be asked to fund employment and construction training, culture, vague “community facilities” and such like.

Without a clear evidence base, such demands can usually be negotiated away. However, the time taken to resolve these issues is causing a seizure that traditional development control methods cannot solve. Too many section 106 negotiations are stuck.

The government-commissioned Killian Pretty Review, published in November, focused on speeding up a system regarded as one of the slowest approvals regimes in Europe. No doubt more tinkering will make some improvements, but the holy grail of a fast yet consultative system will never to be attained, as the two aims of speed and involvement are always held in tension.

What is needed is a way of bringing parties together and resolving their differences: mediation. Mediation brings an independent third party into a “dispute” to help reach a mutually acceptable solution. Often wholly new solutions emerge. And the parties retain control over the process, which can be quickly and cheaply organised.

Mediation has a high success rate. If we are to make residential development viable once more, we need to use it.