Sir Oliver Letwin was asked by Government to attempt to understand why there is a gap between the number of homes for which planning permission is granted, and the number which are actually built. In his final report, published at the end of October, he set out how that could be done.
Although the rate of build on large sites is typically blamed on “land banking” developers, unsurprisingly, Letwin concluded that this was not an issue but was, instead, a matter of “absorption rates.” In effect, there are only so many people that want to buy a house of a particular type in a particular location at a particular time.
The way to close the gap between permissions and construction, he reasoned, was therefore to increase the diversity of the homes available. That could, in part, be achieved by providing a wider range of designs of property for sale. Diversity could also be introduced through social rents, discounted sales to public workers and private rents, for example. Further diversification could be provided by catering for different market segments, like older people, students or self-builders.
Each of those markets is different, with separate absorption rates, allowing the total number of homes built in a year to be increased. This analysis was largely welcomed by the housebuilding industry as one of the few reviews that had actually taken the time to understand how they operate rather than jumping to knee-jerk conclusions.
Letwin’s final report sets out how that diversity could be delivered. His proposal is for a new planning regime for large sites (which he suggests should be defined as those of 1,500 homes or more), consisting of three main elements.