The long road to housing

by Edoardo Badii, Johannes Brinkmann, Nikhil Datta and Amrita Kulka

Despite a lack of affordable housing in the UK, local councils receive millions of planning applications every year. But developers can face significant hurdles getting new projects off the ground.

Housing affordability in the UK is top of the policy agenda. Over the past 25 years house prices have more than quadrupled, wages have barely doubled, and the past year has seen borrowing costs at a 16- year high. Lack of new housing is the main culprit in this crisis and housing supply has been consistently under the government’s own target by a large margin. Existing research using data on aggregate planning refusal rates, or direct supply restrictions such as greenbelts, shows that the planning system is key to inhibiting housing supply in the UK (Hilber and Vermeulen 2016; Ahlfeldt et al 2017; Koster 2024).

Our new research shows that since the early 2000s refusal rates for new housing units have actually improved, dropping from a high of 25% to a stable 12.5% since 2010. Yet, the actual supply of new housing has varied over this time considerably and always lagged behind demand. By using novel data we have shown that a focus on simple metrics such as refusal rates hides important information on hurdles to construction that persist even if applications are permitted, and how these hurdles vary by project size.

Using data from a vast number of planning applications filed in the UK between 2000 and 2023 (18 Despite a lack of affordable housing in the UK, local councils receive millions of planning applications every year. But developers can face significant hurdles getting new projects off the ground. million in total), we identified which applications related to new housing, the number of new units proposed in an application, and groups of applications all belonging to the same house building project. The latter is key when looking at large development building projects, which make up the bulk of new housing supply in the UK.

The new evidence revealed a significant shift in the source of housing supply, with an increasing share of permitted housing units coming from large developments. The graphs that follow show the number of permitted units by size of development. In figure 1, the blue line represents projects of up to 50 residential units, while the red line shows projects of more than 50 residential units. Twenty-five years ago the share of permitted dwellings were split roughly equally between these two groups, but by 2010 the proportion coming from 50+ developments represented 70% of potential housing supply (we say potential as it’s not certain all permitted units get built). Figure 2 shows an even more striking compositional shift. Projects with more than 500 units, essentially very large developments, now represent 38% of permitted housing units, up from single digits at the turn of the century.

These very large projects only make up 0.2% of applications over the 25 years, but make up a disproportionately large chunk of new housing supply.

Despite larger developments comprising a greater portion of housing supply, they face more hurdles than smaller projects. The number of applications filed and the project’s duration from the first to last application are good measures of the planning system’s paperwork or red tape, and developers’ response times to such hurdles. The barriers graphs (figures 3 and 4) present statistics on the counts of individual applications (full applications, discharge of conditions, outlines etc) and the total duration, comparing these metrics by development size.

There are four main takeaways from these graphs. First, projects which are ultimately permitted (figure 3) face more paperwork as represented by filings with the planning system. Projects which are not permitted, are not required to file a lot of paperwork in terms of applications with an average of 1.1 applications per project. This finding holds across the distribution of project sizes. Second, the amount of paperwork required for permitted projects increases dramatically with the size of the project, going from one application for projects involving one unit, to over eight applications for projects involving 500+ units on average. Third, time duration (figure 4) rises exponentially from projects involving one unit, to projects involving two to nine units and keeps rising for larger projects. The average number of days from the submission of the first to last application is just over four years and four months for projects with over 500 units, but even projects involving one unit can expect to wait nearly a year. The averages are driven by a large range for bigger projects, with durations of over 11 years for the most delayed 10%. Fourth, even not-permitted projects face significant delays, again increasingly so the larger the project.

The source of these delays can be mixed, and we leave more systematic evidence for future research. Case study evidence from two large developments (Eastern Green in Coventry and Wembley Park) indicate that local opposition played a significant role in the case of the Eastern Green Development, with over 300 pages of local objections and 173 letters in opposition. The first outline application was made in 2018, and the land remains undeveloped as of 2024, suggesting that opposition may have had an impact in this case. In the case of Wembley Park, a revised outline of the original plan was submitted after seven months, the first set of units were completed after 5 years, and building work is still ongoing. However, during this period over 500 planning applications have been filed in order to seek approval of conditions set by the council, many of which are related to mitigating impact on local transit, noise and environmental quality, as well site security. Potentially, the long gaps between different construction phases might also be optimal from the developer’s point of view and unrelated to the planning system.

Variation across space suggests that while wait times for smaller projects are highest in the London area, high wait times for large projects are common in various regions, including the Southeast, but also the Midlands, Yorkshire, and Scotland. The opposite is true for the number of applications within a project - developers in London and the South East face the most red tape for large projects, while bureaucratic hurdles for smaller projects are less concentrated in space.

Overall, we document that there have been substantial shifts in the composition of new housing in the UK towards applications involving larger units. These applications also face larger hurdles within the planning system. The wait-time distribution suggests that housing supply elasticity in the short run (ie. within a year) is close to zero, with housing supply being essentially fixed making it difficult to respond to shocks in demand for given areas due to a rise in employment opportunities or amenities.

About the authors

• Edoardo Badii is a PhD student in the Department of Economics at the University of Warwick
• Johannes Brinkmann is a PhD student in the Department of Economics at the University of Warwick
• Nikhil Datta is Assistant Professor of Economics at The University of Warwick and CAGE Research Associate
• Amrita Kulka is Assistant Professor of Economics at The University of Warwick and CAGE Research Associate

References

• Ahlfeldt, G.M., Moeller, K., Waights, S. And Wendland, N., 2017. Game of Zones: The Political Economy of Conservation Areas. The Economic Journal, Volume 127, Issue 605, October 2017, pp. F421–F445.
• Hilber, C.A. and Vermeulen, W., 2016. The Impact of Supply Constraints on House Prices in England. The Economic Journal, 126(591), pp.358-405.
• Koster, H.R.A., 2024. The Welfare Effects of Greenbelt Policy: Evidence from England. The Economic Journal, 134(657), pp.363-401.

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