One in three homes with planning permission left unbuilt

More than a million homes granted planning permission since 2015 have not yet been built, according to new data.

The inaugural Planning Portal Market Index has found the number equates to around  a third of the total given the green light over the period  

At the same time, planning applications during the first five months of 2024 are at the lowest level since 2020, calling into question the scope for housebuilding numbers to recover in the coming years.

The Planning Portal Market Index’s statistics are drawn from planning applications submitted to local authorities in England and Wales – more than 90% of which are made through the Planning Portal.

Had all homes granted planning permission ultimately been built, the government’s target of building 300,000 new homes a year would have been achieved in eight of the last 10 years.

Geoff Keal, CEO at TerraQuest, the operator of Planning Portal, said: “These figures suggest that the near-exclusive focus on the planning system in the political debate around housing is misplaced. 

“Until recently, planning permission was being granted for enough new homes to meet the government’s targets.

“While the planning system is by no means perfect, and those homes granted permission could be in the wrong places, this data strongly suggests that policymakers need to look more widely at the factors stifling the completion of homes for which planning permission has been granted.” 

The Planning Portal Market Index report highlighted the impact of high interest rates, skills shortages in the construction industry and materials shortages as possible culprits.

Keal added: “High interest rates have a double impact on the completion of new homes. 

“By dampening the housing market in the short term, they limit the potential commercial rewards available to housebuilders for proceeding with projects. At the same time, the high cost of borrowing to finance projects in the first place pushes up costs and eats into developer profits.

“This is compounded by the well-publicised challenges facing the construction sector in overcoming skills shortages that have left its headcount more than a quarter of million short of the number needed to meet projected demand. 

“Meanwhile, the supply of fundamental construction supplies of bricks and blocks are down by 4.3% and 9.8% over the year to April, according to official statistics.

 “Our analysis shows just how profound the challenges are for policymakers in ensuring enough new homes are built to meet the needs of a growing population.”

Click here to download the first Planning Portal Market Index report.