星空传媒

For what seems like the umpteeenth time in recent years, the cost of planning is under the Whitehall microscope. At the end of last year, economist Kate Barker completed a study into the impact of planning on economic competitiveness, and a planning white paper is due to be published once next month鈥檚 local elections are over. But the growing weight of paperwork that developers are required to produce in order to win planning approval has resulted in spiralling costs for developers. Regenerate examines where the money is going.

拢2,000 for Pre-application

The application has not even been submitted yet and already the meter is running. The government increasingly expects developers to resolve issues before they submit an application. As a result, councils are charging for pre-application meetings. Cushman and Wakefield head of planning Ian Blacker estimates that these meetings can cost up to 拢2,000 apiece. Brian Waters, a partner at architect BCWP, doesn鈥檛 believe that charging is necessarily a bad thing if it concentrates the client鈥檚 mind. 鈥淏ecause they have to pay, they have to start valuing what we are doing.鈥�

Add 拢20,000 for the application

This is where the big cheques start being written. Developers pay a fee to register an application. This used to be very modest but the government recently lifted the 拢5,500 cap on fees to make the planning system more self-financing. Barker鈥檚 recent report stated that fees of up to 拢50,000 are now being charged. Regenerate鈥檚 investigations reveal that sums of 拢20,000 are increasingly common for larger schemes.

But the fee is just a fraction of the overall cost of submitting an application. Countryside Properties chairman Alan Cherry says: 鈥淭he main reason for rising costs is the amount of information that you have to provide.鈥�

The increasing volume of information being demanded can be measured in the way applications get delivered. 鈥淲e used to put planning applications in envelopes; now they go off in two or three brown boxes,鈥� says Gary Halman, a partner at the Manchester-based HOW Planning consultancy. Countryside had to use a van to deliver the 150 boxes full of documents sent to support the company鈥檚 800-home Clay Farm scheme on the outskirts of Cambridge. And every one of the documents in those boxes is compiled by a professional consultant.

The biggest cost element is generally the environmental impact assessment (EIA), obligatory for all schemes containing more than 150-200 homes. Taylor Woodrow strategic land director Tim Lawrence says the company paid 拢150,000 to carry out the EIA of its 4,500-home south Swindon major development area scheme and 拢200,000 to carry out the same exercise at its Telford Millennium Community. These costs are backed up by Countryside鈥檚 Cherry. 鈥淵ou won鈥檛 get much change out of a couple of hundred thousand pounds,鈥� he notes.

It is not only greenfield sites where EIAs are a significant cost. Brownfield land throws up a lot of environmental issues too, such as the flora and fauna growing on long-term derelict land. Crest Nicholson Regeneration managing director Chris Tinker estimates that around one third of the planning costs for any brownfield site will be accounted for by the EIA.

The EIA is one of the ever-proliferating number of assessments that developers are required to provide. Transport impact assessments are routine and those for flood risk mandatory since the publication of Planning Policy Statement 25 in December last year. Assessments covering issues such as archaeology, noise and vibration, design and access have recently become mandatory, and health and education assessments are becoming increasingly commonplace. To handle all these assessments, up to 20 different teams of consultants may need to be called in. Each of these assessments may only cost a few thousand pounds, but added up, they can set the developer back another 拢100,000.

The other big source of costs is the government鈥檚 demand that any significant outline application must be accompanied by a detailed masterplan showing what the scheme will look like in three dimensions.

As a result, even quite modest sites require architectural input nowadays. 鈥淎n architect on a meaningful site will be charging a minimum of 拢30,000 to do a simple masterplan and it could be a multiple of that,鈥� says HOW鈥檚 Halman.

We used to put planning applications in envelopes; now they go off in two or three brown boxes

Gary Halman, HOW

Former Royal Town Planning Institute president Clive Harridge sticks up for the new approach. 鈥淚t has to be an improvement on the days when you could put in a plan with a red line on it. It鈥檚 making for much more sustainable and high-quality development. Where it breaks down is on the local administration.鈥�

Add 拢50,000 for considering the scheme

To help ensure that their schemes are handled quickly, many developers are paying for planning officers鈥� time. This ensures a dedicated resource for handling the application, but involves paying an annual salary of at least another 拢25,000 for a junior officer once pension and benefit payments are taken into account.

Once the application has entered the administrative sausage machine, developers often have to think about several different decision-making layers. This is particularly the case in London where the local council, mayor Ken Livingstone and the government office can all potentially throw a spanner in the works. The situation is even more complicated in east London, where the London Thames Gateway Development Corporation also has a say in the process. Things can get held up when any of these parties insist on changes, which can trigger knock-on revisions. In east London, one scheme is known to have been revised 25 times, involving architectural input each time.

But as well as working with officers, developers also need to woo local residents. Running a public consultation on a major housing or mixed-use scheme will typically cost the developer 拢50,000. The theory is that by doing such an exercise properly, potential objections will be nipped in the bud, enabling the application to proceed relatively smoothly. If only, many developers will sigh at this point, life were that simple.

Decision day

Here the developer submits itself to what is all too often the lottery of democratic planning decision making. Tony Kitson, a partner at City solicitor CMS Cameron McKenna, says: 鈥淲here it gets very frustrating is when the applicant has gone through the whole process before getting to the committee where local politics kick in and they are refused for NIMBY reasons, which largely disregard the huge amount of work that has gone into bringing forward the application.鈥� One way of ameliorating this is to hire political consultants.

Add 拢250,000 for an appeal

Appealing is a costly activity, especially if it ends in a public inquiry. Kitson describes the risks involved: 鈥淚f you go to appeal, that鈥檚 another quarter of a million pounds with no certainty that you are going to come out ahead. But, if the local authority is hostile from the outset, you may have to.鈥�

Think Shed loads for section 106

The consent is in the bag, but the bills don鈥檛 dry up. The meter continues to run as the long-winded process of negotiating the Section 106 continues. Developers are often required to pay not only their own, but the councils鈥� legal fees. This often involves hiring the services of a top London law firm, charging a typical 拢350 per hour.

In addition, the demands outlined within Section 106 agreements have ballooned in recent years as cash-strapped local authorities have become better at negotiating them. Proportions of social housing have increased and the scope of demands has broadened. Nottinghamshire council, for example, has introduced a standard rate for transport projects contributions, which is now being used by boroughs across the county. Kitson gives as an example, the increasing percentages of affordable housing that councils are demanding. 鈥淔rom 10-15%, it鈥檚 gone up to 25-30% and in exceptional cases, we are seeing 50%. And health and education contributions used to be the exception, now they鈥檙e the norm.鈥�

If you go to appeal, that鈥檚 another quarter of a million pounds with no certainty that you鈥檒l come out ahead.

Tony Kitson, CMS Cameron McKenna

The only good news for the developer at this point is that it is unlikely to bear the brunt of this cost 鈥� that honour is more likely to go to the landowner.

The reckoning

A key question for the government鈥檚 housing aspirations is: are these costs so high as to be a disincentive to develop? Developers will typically earmark a percentage of a scheme鈥檚 expected value for professional fees. Cushman and Wakefield鈥檚 Blacker says: 鈥淚t鈥檚 not a huge amount of the client鈥檚 money, but it has to be found from somewhere. A lot of clients have been put off by the cost and the risk.鈥�

HOW鈥檚 Halman says cost factors will weigh more heavily on clients鈥� minds where property values are lower: 鈥淚f you are faced with a planning prospect that鈥檚 looking difficult and you have to risk three or four hundred thousand to test, you are not going to risk it.鈥�

One side effect of spiralling costs is that developers are increasingly expecting their consultants to take a share in the risk of securing the final consent. Blacker says: 鈥淓verybody is sharing risks, which we wouldn鈥檛 have done 10 years ago.鈥�

So what鈥檚 the final bill for getting a scheme through planning on a greenfield site? Taylor Woodrow鈥檚 Lawrence says: 鈥淥n a strategic scheme of 1,000 homes, I would expect a site to cost 拢1m and it鈥檚 not going to get cheaper with design and access statements. There鈥檚 going to be a much greater degree of work involved in proving that the principle of development should be accepted.鈥� The costs of piloting such large greenfield sites through the process only tail off when the 5,000 dwelling barrier is breached, he says. 鈥淲hen you come down to the hundreds of homes, the cost comes down quite substantially because of the size of the site.鈥�

Brownfield sites are no cheaper than greenfield. Crest Nicholson鈥檚 Tinker estimates that Bath鈥檚 Western Riverside site, yet to receive consent after nearly a decade of debate, has cost more than 拢5m for its former owner Grosvenor, Crest Nicholson and the local council. The epic battle at Bristol Harbourside set all parties back by 拢2m, while even Southampton鈥檚 relatively uncontroversial Woolston Riverside site will soak up 拢1.5-拢2m in planning costs. 鈥淕etting an implementable planning permission for 1,500 dwellings in a town and city centre frequently costs between 拢1.5 and 拢2m,鈥� he says.

Former Barratt chief executive David Pretty breaks the figures down to the individual home. 鈥淔or the average 拢200,000 home, it must be costing 拢6,000,鈥� he says. 鈥淚 wouldn鈥檛 be surprised if the cost of seeing through a significant development has gone up in real terms at least four or five times over the last 10 years.鈥�

鈥淐osts started to rise 10 years ago, but it鈥檚 spiralled in the last five,鈥� says BCWP鈥檚 Waters, who believes that developers are meeting these costs by cutting architectural corners.

Costs have to be measured not only in the form of cash, but time. Countryside鈥檚 Cherry says: 鈥淵ou can spend two years on pre-application and three, four or five before you get on site.鈥� Tinker agrees: 鈥淚f you look at big brownfield sites, it takes five to seven years to get on site.鈥�

The time and money wasted in the planning process help to explain lagging completion rates, which are in turn pushing house prices beyond the reach of first-time buyers, argues Pretty. 鈥淚t鈥檚 probably costing us 30,000 homes a year,鈥� he says.

On which note, over to you, Gordon.