If there is one theme to Britain’s planning woes, it is a system that is too special for its own good. From discretionary approvals to bespoke Section 106 agreements, the UK does not have a unitary planning process so much as a separate one for each development. The result is uncertainty at every stage for everyone, producing a system that consistently fails to supply enough homes.
The government has begun the process of turning the ship around. In December 2024, changes to the NPPF laid the groundwork for more construction on the green belt. The Ministry of Housing, Communities and Local Government has followed up by releasing six working papers on issues like brownfield land and planning committees, floating policy proposals for each and asking for feedback.
One of these working papers considers the critical issue of speeding up construction on sites with planning permission. While often overshadowed by the paucity of planning permissions, the failure to convert permissions into completed developments has risen up the agenda in recent years. Analysis cited in a report from planning consultancy Lichfields concluded that an incredible 30 to 40 per cent of residential planning permissions expire. The Letwin Review set up to consider the same issue found that the median build out period on selected large sites was 15.5 years.
The working paper on speeding up construction proposes a number of fixes, including giving councils greater powers of compulsory purchase and the right to levy a delayed homes penalty on tardy developments. The paper suggests limiting the application of these powers to sites over a certain threshold, with 500 homes mooted as a possible minimum. The penalty would also only apply “where there is evidence of a developer falling substantially behind a build out schedule”.
While these caveats sound sensible in theory, they raise the distinct prospect of repeating the mistakes of the past. This threat is particularly present with the delayed homes penalty. Before any implementation, the government would need to select a threshold, set a standard for evidence of delay and define what it would mean for a project to fall “substantially behind” schedule. The inevitable result would be years of legal uncertainty, compounding the issue at the heart of our housing crisis.
All of this complexity can be avoided. If the government is looking for a simple means of holding developers to agreed timelines, they need look no further than a typical construction contract. As standard, these agreements include a liquidated damages provision requiring the contractor to pay a per diem charge for late delivery, applied from the first day of delay past a timeline agreed at the outset of works.
The advantages of adopting this approach are manifold. While inventing a new legal framework would introduce years of uncertainty, relying on this system taps into a body of law that is already well-established. A liquidated damages clause also has the advantage of operating regardless of the project size. Indeed, it appears as standard in the most commonly used contract for construction projects worth less than £500,000. If, on the other hand, the delayed homes penalty were only applied above a certain threshold, the current problems of delay would by definition be left in place for any development below that minimum size. To make matters worse, there would be a cliff-edge effect where any business considering a development around the dividing line would be incentivised to reduce the size of the development to just below the threshold in order to avoid the prospect of a penalty.
The proposed rules for enhanced compulsory purchase and a delayed homes penalty are still at consultation phase, with plenty of opportunity for improvement. In publishing the working papers and making many changes besides, the government deserves praise for moving quickly to correct the accumulated errors from decades of failed policy. But to ensure that this Parliament is remembered as the turning point in that trajectory, it is vital that new policies like a delayed homes penalty are designed in ways that make our planning system more predictable rather than less.