Political uncertainty’s chokehold on SME Property Developers

30th October 2023

new homes in London

Fruition Properties, COO, Parul Scampion, writes in this month's Property Week on the need for stable housing policies and how unity is crucial.

In the modern landscape, political uncertainty has become an ever-present shadow on businesses of all sizes. However, it is the small and medium-sized enterprises (SMEs), like Fruition Properties, that bear the brunt of this instability; it undermines our ability to plan, invest, and contribute to the critical task of providing much needed new homes in London and across the UK. As an industry, we are now faced with navigating a labyrinth of policy evolution and reversals, competing agendas, decreasing planning department budgets and wavering decisions.

The past few years have seen the UK economy buffeted by an array of shocks, from the seismic shifts of Brexit to the devastating disruptions brought about by the COVID-19 pandemic. Alongside these challenges, the political landscape has further muddied the waters with the Russian invasion of Ukraine, and the subsequent cost-of-living crisis. These events have collectively intensified economic uncertainty and undermined the stability needed for businesses to flourish.

The property industry has also been grappling with significant changes in the regulatory environment, with the ongoing changes to Building Regulations as well as additional regulation in relation to fire safety and net zero. Although there is no question that these issues need to be addressed, the ongoing regulatory uncertainty surrounding these areas and their application means that there is more risk when considering whether new projects can be delivered.

new homes in London

An example of how policy changes breed uncertainty is the two-staircase rule for buildings over 18m as a result of Grenfell. The safety of buildings is of course paramount, but this impending change has meant many proposed developments are no longer viable.  No matter how far down the road in planning or preconstruction they are, developers have had to go back to the drawing board, redesigning the building and resubmitting plans.

Such uncertainty makes developers pause development, or the purchase of a site altogether, and many developers are now leaving the industry. This is particularly relevant to Fruition Properties when building on top of existing buildings given that fire safety enhancements are constrained by the existing infrastructure. You can have the situation where development improves the fire safety of an existing building but is still deemed non-compliant as it cannot meet ALL the fire safety requirements for new development due to the constraints of the existing building.  The overall impact of this is delay to the delivery of new housing, at a time when many projects are already being mothballed due to viability concerns.

The challenges faced by property developers are not isolated incidents but rather symptoms of a deeper malaise in the system. For example, the post-COVID mismatch between the need for office spaces and housing supply is emblematic of the prevailing lack of synchronisation between policy and reality as many London boroughs still enforce Use Classes for employment or office use when the demand is simply not there, offices lie empty despite the desperate need for new housing.

The issue goes beyond specific policy changes and reversals and extends to the broader politicisation of housing. Housing targets have recently been watered down, and now prioritise the interests of local communities against the overarching need for new housing and infrastructure. This policy vacillation not only frustrates property developers but leaves local plans in disarray and new schemes on hold.

Moreover, the revolving door of housing ministers in the UK government -11 since 2010- underlines a glaring inconsistency in prioritising housing as a national issue. The lack of consensus and national debate on housing need, location and trade-offs only adds to the confusion. The result is a dearth of coherent housing policies that reflect the true needs of the UK.

The impact of political uncertainty is amplified during local elections, when developers refrain from submitting planning applications that could be deemed even remotely contentious. Experience shows that a scheme will be refused as councillors play it safe. Politicians are rarely criticised for not approving a permission and a refusal comes with the bonus of less paperwork!  With a looming General Election in 2024, businesses are currently in limbo. Political change breeds even greater uncertainty, stifling investment decisions and economic growth. However, it does not need to continue in this way.

We believe the solution lies in adopting a nonpartisan approach to housing policy. Establishing a Royal Commission dedicated to long-term housing planning—with mechanisms built in to adapt to our ever-changing world —could provide the necessary stability. This commission would be more insulated from the short-term political pressures that often drive hasty policy shifts, enabling the formulation of housing strategies that cater to the true long term needs of the country.

One of their first tasks should be a comprehensive overhaul of the current planning system.  Swift reforms are essential to streamline the process and ensure that policies remain relevant in the face of a changing economy and working habits.  Professionalisation, consistent targets and coherent policies that balance conflicting aims would be a step in the right direction.

If we are to confront the housing crisis head-on, property developers need unity in housing policy-making, a stable foundation around which we can plan and deliver and an end to this current uncertainty.

This article first appeared in Property Week.