Why Michael Gove is being blamed for the housing crisis

Red tape is forcing developers to buy up agricultural land and trout farms to get permission to build homes elsewhere, says Melissa Lawford

As he unleashed a blizzard of regulation on Britain’s house building industry, Michael Gove failed to consider the impact on the humble trout farmer.

But the Housing Secretary presides over a tangled mass of environmental rules that has turned this most unlikely of businesses into a must-have asset.

Developers have realised they can get around so-called nutrient neutrality restrictions, which ban them from increasing the amount of nitrates in the water supply, by buying up trout farms – and then closing them down.

It is just one example of the planning acrobatics that have become all too familiar to long-suffering building companies as they attempt to fight their way through reams of red tape.

As restrictions become ever more burdensome, the industry fears that the Government risks causing a collapse in building that will make the housing crisis even worse.

“The Government’s capitulation to the Nimby [not in my back yard] lobby and its mishandling of water and drainage legislation could see fewer homes built than ever before,” says Stewart Baseley, executive chairman of the Home Builders Federation (HBF), a trade body. The policy framework is now the most hostile for house builders in at least 15 years, he adds.

On the current policy trajectory, in a worst case scenario, net annual housing supply will fall from about 230,000 to 111,000, according to analysis by Lichfields, consultants for the HBF. This would be a record low and a loss of 122,000 homes a year – a drop of 53pc.

“The Nimby lobby has got the upper hand in government at the moment,” says Simon Coop, head of the housing development group at Lichfields.

Of the total projected lost homes, 41,000 a year will be lost to nutrient neutrality rules introduced by Natural England in 2019, which require any changes in the levels of nitrates in the local water supply as a result of development to be offset.

Plans spanning 120,000 homes in catchment areas in 74 local authorities are on hiatus as a result.

One developer in the North calculates that for their development to get the green light, up to 3,500 acres of agricultural farmland will need to be removed to comply with the regulations.

“Large house builders are going around the countryside buying up farms and closing them down, in order to reduce the nitrates leaking into rivers, so that they can demonstrate neutrality,” says Baseley.

Acquiring trout farms, which are naturally close to waterways and therefore make big differences to the local nitrate levels, is the most efficient way to offset, he adds.

The Government has failed to act to stop the requirements from hitting house building, says Baseley. It has also thrown planning targets into disarray.

According to Lichfields’ calculations, a further 77,000 homes will be lost per year owing to other changes to the planning system.

Gove’s relationship with Britain’s house builders has produced more conflict than many other housing secretaries because he has been tasked with fixing the building safety crisis that unfolded in the wake of the Grenfell fire in 2017. Gove broke the deadlock over the issue by demanding that builders commit to paying for repairs in affected blocks. He has described house builders as a “cartel”.

This combative stance has brought him results on building safety, but it looks like there is a downside.

Late last year, Gove conceded to a backbench rebellion against his Levelling Up and Regeneration Bill led by Theresa Villiers. He agreed to make changes to the National Planning Policy Framework, which have dealt a further blow to house builders.

The Conservatives campaigned in 2019 on an election manifesto promise to build 300,000 homes a year. But Gove agreed to make local authority housing targets advisory rather than mandatory. He also relaxed requirements for councils to demonstrate that they have identified developments that will deliver supply for their five-year plans.

This shift has not yet become official policy, but local authorities know that it is coming, and many have put plans on ice in response.

“At the same time that he is saying that we need to build more housing, his policies are having the opposite effect,” says Coop. “Effectively, if the methodology says a local authority needs to build 1,000 homes a year, they could say, ‘Well, we don’t want to, thank you very much.’ And they will be perfectly entitled to do that.”

The changes come on top of a system that was already creaking. In theory, local authorities are required to make decisions on large planning applications within eight to 16 weeks. Now, builders are often waiting for six months or more, says Coop.

Gove is trying to crack down on local authorities that are slow to grant planning permission. He has threatened to strip planning powers

‘At the same time that he is saying that we need to build more housing, his policies are having the opposite effect’

‘The Nimby lobby has got the upper hand in government at the moment’

from nine councils and the Peak District National Park for their failures to speed up building. But it is an empty threat, according to Coop.

The delays are hitting a market that is already grappling with high mortgage rates and a property downturn.

House builders have been cutting back following a slump in demand. Excluding the spring 2020 lockdown, construction in May hit its lowest level since April 2009, according to the S&P/CIPS purchasing managers’ index.

Tim Moore, economics director at S&P Global Market Intelligence, said: “The clear message was that in the wake of higher mortgage rates and lower housing market confidence, volume house builders have been cutting back on new projects.”

Back in 2009, the market was reeling from the financial crisis. One of the things that brought house building back to life was the introduction of the Help to Buy equity loan scheme in 2013. Under the scheme, buyers could purchase new build properties with a 5pc deposit and a 20pc Governmentbacked equity loan (40pc in London). In its heyday, it supported about 50,000 new build sales a year.

This time around, as the house building sector begins another downturn, Help to Buy has just been removed. Prime Minister Rishi Sunak is reportedly planning to introduce a replacement scheme, but it would apparently apply to all properties rather than only new builds.

A Department for Levelling Up, Housing and Communities spokesman said: “Our ambition of delivering 300,000 new homes a year remains and we are investing £11.5bn to build more of the genuinely affordable homes the country needs.

“Supporting aspiring homeowners is a Government priority.

“The Levelling Up and Regeneration Bill will reform the planning system to help bring certainty to communities and developers, enabling them to build houses more quickly and support economic growth.”