When Kate Barker announced the findings of her review into housing undersupply last week, housebuilders were smug that the finger was pointed at planners – until they realised they weren't getting off scot-free. So did the industry need to hear a few home truths? We found out
Housebuilders and planners are generally at loggerheads, but last week they found that they had something in common: both received a sharp rap on the knuckles from Kate Barker in her interim report to the Treasury into the UK's undersupply of housing.

Those punchbags of the housebuilding industry, the planners, endured their latest beating for their slow and inconsistent approvals, and for the intractability of the planning system itself. Barker voiced particular concern at the increase in refusals of planning applications – up 10% over the past four years – and attributed the rise to policy changes, specifically PPG3.

This was all music to the ears of housebuilders, who have long blamed an outmoded planning system for the shortfall in new homes. But their celebration was short-lived. Barker goes on in her review to lambast housebuilders for "low levels of responsiveness to demand", for being more interested in buying land than building on it, for being unwilling to take on brownfield land and reluctant to invest in alternative build techniques.

Barker claims housebuilders in the South-east are sitting on land that, because planning permission has already been granted, could quickly be used to build up to 40,000 homes.

That figure more than matches the 39,000 extra houses Barker says need to be built each year just to keep up with the UK's population growth – though it is still a long, long way off the additional 145,000 new homes the UK will have to build each year if it wishes to have as many as on the Continent.

The Treasury's long-held concern that housebuilders are deliberately constraining housing delivery to keep sales prices high appears to bear heavily on Barker's deliberations. She devotes an entire chapter of the report to competition within the industry, focusing on local market dominance, and writes of housing output on large sites being "trickled out onto the market over extended time periods."

This tidy distribution of blame leaves Barker plenty of room for manoeuvre in her final recommendations, which are due to be published next spring. Exactly what those recommendations might be is now the subject of some conjecture by the industry.

Reform of the planning system is already in hand, but Barker's interim report tosses in a few googlies that might set people thinking. What if, for example, housebuilding totals were increased not by upping an inconsistent and problematic land supply but by raising density levels beyond the present minimum of 30 units to the hectare? An average density level of 69 units per hectare would suffice, and is feasible within urban and suburban areas, Barker says.

On housing delivery, Barker talks of the need for an approach that includes: a system capable of adjusting to market signals; decision-making procedures that take account of the costs and benefits of housing development; incentives for development at local level; a clear mechanism to provide infrastructure and services; and sufficient resources to enable effective decision-making.

But in an ominous warning for housebuilders, Barker says that her review will continue to look at land dealing, concentrating attention on the potential for reform of the way land is assembled and made available.

Like others before her, Barker sees taxes as the prime instrument for bringing housebuilders into line. The long-debated idea of charging VAT on new homes is raised yet again, floated alongside that other old chestnut, development land tax. Barker raises the prospect of development tax being levied to discourage housebuilders from holding on to land that could be built on. She cites the Danish model, which charges a rate of 0.6% to 2.4% of a land's estimated market value.

Needless to say, that would not be a popular move. "Any new tax, such as a levy on landbanks with planning permission, would outrage an industry that already stumps up £5bn a year in development costs imposed by local government," says David Bexon, chief executive of SmartNewHomes.com.

But housebuilders placed a lot of faith in Barker, praising her eagerness to learn about their business and giving her unprecedented access to their operations. They are not prepared to give up on her yet, so for the time being they are concentrating on what they see as the positive – recognition of the failures of the planning system.

"Reforms are urgently needed to allow Barratt and others to increase housing provision," says David Pretty, Barratt Group chief executive.

"The planning system in particular needs to be simplified and speeded up, and we're pleased that Kate Barker has highlighted its shortcomings."

Researcher’s view: ‘More must be done’

The Barker review has delivered an independent report that highlights the key constraints on housing supply.

The housebuilding industry is exonerated from sitting on large landbanks but the potential for them to significantly increase output is limited. The final report needs to look hard at the contribution that can be realistically made by housing associations and other developers.

A move to see the greater role of housing associations in the delivery of mixed-tenure schemes is already well under way. The final report is also likely to recommend that the tax system flexes its muscles, most likely in the area of VAT.

However, the major area of focus for the next stage is going to be on the operation of planning system. Lower house price volatility in the UK hinges on whether the Barker team can come up with realistic and workable solutions to reform the way the planning system treats the delivery of housing.

Housebuilder’s view: ‘Encouraging’

It is encouraging that Kate Barker has identified the planning system, among other matters, as being a major factor that leads to land not coming forward for housing development in the first instance and, of course, delay in the actual delivery of housing on land that has been released for development. The report makes the point that delays in securing planning consent are sometimes due to a poor standard of design in new housing. It is true that there are opportunities to improve the design of some housing schemes, but I believe that

the major problem is the inconsistent manner in which policies are interpreted and applied by local authorities together with a serious lack of discipline in the decision-making process.

The government’s present proposed reform of the planning system, and any further reforms that might flow from Kate Barker’s report, may well change the structure of the system, but I fear that it will have little effect on the fundamental problem. We seem to have got to the stage in planning where development, including housing, is seen as being a bad thing and that there is an assumption that the community needs to be compensated. In my view, well-designed housing brings with it social, physical and economic benefits.