UK commercial and residential property development is being frustrated by an inflexible planning system that is discouraging new foreign investment and holding back the economy, financial experts have warned.
At the Urban Land Institute's UK Annual Conference on Thursday, investors and financial experts said issues with UK planning were slowing new development and affecting investment appetite from abroad, particularly around the housing sector.
Experts added that the rigidity or "sclerosis" of the UK's planning set-up meant that developers and investors were slower than their peers in other countries to respond to emerging trends within markets and act quickly to investment opportunities.
Speaking at a session discussing the state of the UK real estate sector, Castleforge co-founder Michael Kovacs said the UK retained an “amazing ability to attract talent and management teams”, but said the country was being held back by "its inability to build" places to house it.
“The UK is very unique in that it doesn’t have a zoning system. You go to the US, buy an acre of land and it has zoning for 25 housing units per acre as its density, and you just build… So, these places are very reactive to where people want to live, using housing as an example.
“In the UK, on the other hand, you have to get zoning clearance for every single thing you want to build. Just imagine what that does in terms of the ability to actually build stuff? So, it means it is just not reactive to changes in demand where people want to live. Now, as an investor, you might then want to buy into those things where you're early into seeing growing demand.”
Kovacs added: “That’s one of the biggest things that creates barriers to entry into the UK versus other places, it’s a planning system that really just doesn’t respond to changes in demand very rapidly.
“So, we are currently seeing an inability to react to increased residential demand in new areas because of a planning system which is, for a number of reasons outside the control of the planners, often sclerotic.”
The planning system has been a source of frustration for commercial real estate for many years with people int he sector saying it has though become worse than ever recently due to capacity issues in planning teams and a lack of a government strategy.
Whitehall officials have stressed the Government is working to support local planning authorities “to speed up the planning process” and resolve staff challenges to build a “modern and efficient planning system” through the Levelling Up and Regeneration Bill.
On 12 May it launched a new bursary initiative to attract more students into planning and pledged £1 million in March earlier this year to help councils recruit and train skilled planners and increase awareness about careers in local government.
Despite these initiatives, Lloyds Bank former chief economist Trevor Williams told delegates at the conference that a willingness to improve the planning system was, ultimately, a “political decision”.
He said: “The UK faces big challenges, growth has been in low single digits for the last 15 years, with productivity growing by just half a percent. We know what the solutions are, it’s the politics around how we do it.
“We don’t build a commercial or residential properties where people want to live at prices they can afford and that is a political decision, we chose not to do it. It is a myth that we don’t have enough space in the UK, there is plenty of space. We choose not to do it.
"So, that lack of flexibility, which is not just the UK, there are other countries with the same issue, but it’s holding our economy back."
The Urban Land Institute is a global research and education organisation, orginally founded as the research arm of the US's National Association of Realtors in 1936.