SMEs warn planning fee increases will ‘hammer’ them

Smaller homebuilders have warned the government against increasing planning application fees after it proposed hiking them by up to a third.

A current consultation by the Department for Levelling Up, Housing and Communities is proposing to increase fees for major planning applications by 35 per cent, and for other applications by 25 per cent, with the amounts adjusted annually in line with inflation.

But Rico Wojtulewicz, head of housing and planning policy at the National Federation of Builders (NFB), said the organisation was “pretty sceptical that these higher fees will achieve an improvement under the current broken planning process”.

He added that “we really don’t think it’s the time” to impose what he said was a 13th regulatory cost on the sector in a two-year period.

The NFB predominantly represents small and medium enterprise (SME) homebuilders and regional contractors.

Arguing that a previous 20 per cent fee increase in 2018 had not led to better outcomes, Wojtulewicz said that the planning system “becomes a bit of a revenue-generator for local authorities rather than delivering better outcomes”.

The Federation of Master Builders (FMB), meanwhile, told Construction News that the government, rather than smaller developers, should fund more resources for local planning services.

FMB chief executive Brian Berry said: “Planning departments are in desperate need of extra funding and as it stands the planning system is too slow and complex for the small, local builders to navigate. The required funding should not, however, be extracted from small developers. Instead, it should be funded directly by government so that the country can deliver the homes that are so desperately needed.”

He added: “SME housebuilders have faced a decades-long decline in output and are facing a deluge of new costs from biodiversity net gain mitigation to the proposed building safety levy – they simply can’t keep absorbing more expense.”

He said that the new housing minister Rachel Maclean “needs to think carefully about the increasingly hostile landscape for small housebuilders and realise that they are the ones best placed to deliver the government’s stated ambition of building more beautiful, diverse, and locally focused housing”.

The government’s technical consultation also includes measures aimed at improving local planning authority performance, including shortening the planning guarantee period to 16 weeks for non-major applications. The guarantee currently entitles applicants to a refund of the fee if a planning decision has not been made within 26 weeks of an application.

Wojtulewicz said the proposal to shorten the guarantee period should be extended to cover major sites with up to 50 homes, “because SMEs are being hammered the most”.

“If we can contribute to something, we’ll absolutely do so,” said Wojtulewicz. “But if the government isn’t willing to tackle the really complicated elements in the broken planning process, then really it’s just another unfair tax.”

He said the current proposals “don’t hold local authorities to account to actually deliver a better service”.

“Industry will always pay more if they get a better service,” he said. “But that’s simply not happening.”

In contrast, the Home Builders Federation (HBF) welcomed the consultation. HBF planning director Sam Stafford said: “The planning profession, and indeed the wider development industry, has been united for some time in calling for more resources for local planning authorities in order to help build capacity and capability and so this consultation is very much welcomed.”

Stafford said the consultation was also an opportunity to think about self-sustaining funding for planning teams.

“The application itself is only one part of the process,” he said. “LPAs have responsibilities beyond applications, such as local plan-making, that do not generate fees, but are equally important.”

The consulation, which is open until 25 April, is seeking views on whether income from the fee increases should be ringfenced to planning departments – an idea supported by the Royal Institute of Town PIanners (RITP).

RITP chief executive Victoria Hills said: “We believe it is necessary to raise fees in line with inflation and ringfence their use… We’ve heard time and again that developers see the lack of planning resources as the biggest barrier to building new homes, and are willing to pay more for the services they receive.

“However, while increased fees is an important first step, we do not see them as a silver bullet to meeting the capacity requirements.”

The RITP says that less than half of planning applications were decided within statutory time limits in 2021.

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