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PLANNING: An Introduction

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The Brexit effect 

At the time of writing we are just over two years on from the Brexit vote and at a macro level the UK appears to be no closer to providing the certainty of outcome sought by those within the UK real estate sector. Whilst the real estate market staged a recovery in 2017, with significant overseas investment, record rental and capital growth across the logistics and industrial sector, and sectors such as Build to Rent, hotels and healthcare performing well, it is unclear what the outlook holds for 2018/19.

As always, there are different stories to tell both across the different asset classes and at a regional level. Even within asset classes there are variations, with SMEs generally continuing as they were pre-Brexit as the lower overall cost of developing is seen as a lower risk, with such developments continuing to attract funding. Industrial land particularly in the South East region is demanding an increasing premium with demand outstripping supply as more industrial sites are converted to higher-value uses. Despite this overall impression of a fluctuating and unpredictable market, everyone you speak to within the planning industry seems to be busy. Applications are being submitted and determined, local planning authorities (LPAs) are by and large still struggling for resource indicating that the volume of applications has not significantly diminished, applications for development consent orders (DCOs) are still being prepared and submitted, and those working in the compulsory purchase compensation sphere are busy with HS2 claims amongst others. So, is this current busyness the start of some green shoots for the wider real estate sector?

NPPF 

Brexit uncertainty aside, there are things to be positive about. Whilst policy changes have not been transformational they at least have a clear focus and direction that should give some confidence. The new NPPF published in July 2018 is very firmly focused on housing delivery. There is now a standardised methodology for assessing housing need. Moreover, the government’s response document states that it will consider adjusting the methodology to meet its 300,000-homes-a-year target in light of the anticipated publication of new household growth projections that are likely to be lower than previous estimates. It will "consult on the specific details" when the new projection figures are published. Viability is intended now for the plan-making stage alone so that applicants for residential development should not then have to submit a viability assessment at application stage. Unfortunately this is likely to be wishful thinking.

There is also a new Housing Delivery Test. The government intends to apply the presumption in favour of sustainable development where delivery is below 75% of the housing requirement from 2020. Transitional arrangements for 2018 and 2019 are in place.

The response document also notes that local authorities would like more powers to drive build out of permitted schemes. The government has said that it will consider the point following the outcome of the Letwin Review (on land banking). Sir Oliver Letwin has committed to seeking “practical, non-partisan recommendations” to accelerate housebuilding. The review is examining the discrepancy between the number of housing planning permissions being granted against the number of houses actually being built in areas of high demand. However, given that the Letwin Review is focusing on large housing sites only, how useful his recommendations will be to the industry as a whole is as yet uncertain. A large proportion of housing is not delivered on large housing sites by volume housebuilders but by SMEs delivering much smaller numbers of units. It is unlikely that the reasons for non-delivery of smaller sites are identical to the reasons for non-delivery of larger sites. It is rumoured that the government’s principal message to the industry will be: “Can you build a house on it? Then do it!” Generally, therefore, there should be some good news for housebuilders provided LPAs hear the message.

But what of the retail sector? It continues to morph. Traditional shopping patterns are almost a thing of the past. A large proportion of the UK population do not want to go to the high street to purchase a product; rather, the questions from consumers are: “Can I buy it online?” and “Will it be delivered asap?” High streets are being forced to change; they will need to reinvent themselves to stay alive. The NPPF acknowledges that. We can probably expect high streets to become more of a leisure destination, with food and beverage offerings continuing to dominate as well as “click and collect” outposts. LPAs will need to health-check their high streets before refusing permission on principle for non-retail uses in a town centre location.

Transport 

The Airports NPS was designated in June 2018, giving a green light to start the DCO process for the expansion of Heathrow Airport. Of course the NPS is not the end of the journey for Heathrow and, as with other major infrastructure projects, it is likely to keep many professionals in the planning industry engaged for some time. There are of course a plethora of other major transport projects potentially in the offing including the likes of Crossrail 3, HS2A and HS2B, and not forgetting HS3, or the 30 new DCOs being targeted by Highways England for 2020.

Energy 

Energy security remains a priority with diversification away from over-reliance on coal and natural gas. The extraction of shale gas has yet to take off in a significant way, but despite the local intrigue created by its planning applications it is probably just a matter of time before extraction commences so long as the viability is there. A new breed of nuclear power is probably likely, as well as supplementary green energy project proposals. We might also see more micro-generation projects, as well as district heating proposals.

So what are the challenges? 

The challenges for those working in the planning sphere over the next twelve months can probably be readily anticipated. At a macro level not much in fact is likely to change dramatically in that timeframe. There will always be a pressure to obtain planning permission as quickly as possible to minimise costs, and obtaining funding for larger projects might still prove challenging. Working with LPAs to structure permissions and planning obligations commercially and pragmatically to make a development more viable, and to reduce funding risk, will be important. Brexit nervousness is still likely to be present over the next twelve months, so a permission that is packaged to be deliverable and fundable will be vital. Early engagement with stakeholders and the LPA will continue to be key, as probably will be the payment of a PPA fee to secure the speed of service sought by developers.

Planning lawyers will inevitably continue to have a role to play in all of this.