Real estate - market insights Q3/Q4 2024

The King’s Speech

One of the new government’s key objectives is to tackle the housing shortage in the UK, with a housebuilding target of 1.5 million new homes within the next five years (or 300,000 new homes per year) and mandatory housebuilding targets.

The King’s Speech on 17 July 2024 was light on detail regarding the government’s plan to meet these targets, but did promise to “get Britain building, including through planning reform”.

If the plan is successful, it would be the most houses delivered by any UK government in nearly 60 years. Besides the historical shortfalls and the political challenges of imposing housing targets on local authorities, the government also faces the hurdles of high interest rates, a shrinking and aging workforce, and an increase in the cost of goods and materials.

The potential solution, similar to the solution proposed to housing shortages after the Second World War, is prefabricated modular houses. These properties are built as prefabricated components off-site and tested in a factory before being assembled at the construction site. Each module is entirely fabricated in the factory including staircases, kitchens, bathrooms, plumbing and wiring, and fixtures and fittings.

As there is a separation in the manufacturing and construction of modular homes, any defects may present unique risks to all of those involved in the construction and development of modular projects, including product liability, product recall as well as questions over the extent to which the properties might be insurable.

Biodiversity loss / nature recovery

Hot on the heels of the King’s speech, in July, Deputy Prime Minister, Angela Rayner, wrote to nature conservation organisations outlining the new government’s objectives for nature recovery. The new government has proposed to treat nature recovery and planning reform hand in hand and to move the conversation forward via a series of constructive dialogue over the coming months. The new government will treat nature recovery legislation as a last resort. Whilst they have outlined the vision, we will not see any details on how they plan to achieve a “development to proceed quickly and smoothly to support nature recovery” until September at the earliest.

Planning and Infrastructure Bill

The planning system is consistently criticised for being slow and cumbersome, and therefore preventing economic growth. The King’s Speech, accordingly, introduced the Planning and Infrastructure Bill, designed to introduce a series of measures to reform the current planning regime.

The Bill will envisage the acceleration of housebuilding and infrastructure delivery by:

• Streamlining the delivery process for critical infrastructure
• Making improvements to the planning system at a local level, focussing on modernising planning committees and increasing local planning authorities’ capacity to deliver an improved service
• Further reforming compulsory purchase compensation rules
• Using development to fund nature recovery, where currently both are stalled.

Whilst the precise detail of the Bill is awaited, these broad concepts will likely be welcomed by all stakeholders, including developers to local planning authorities.

The government’s commitment to improving planning certainty has already been demonstrated by reforms to the National Planning Policy Framework (NPPF), which sets out key national policy and considerations for the approach to local planning policy setting and the determination of planning applications. The NPPF published for consultation in July 2024. Some of the key proposed NPPF reforms include:

• Reintroducing mandatory housing targets with more stringent assessment and delivery requirements
• Applying “golden rules” to development in the greenbelt or “greybelt” (i.e. poor quality green belt land) to provide more certainty as to when proposed development can be permitted in these areas
• Dismissing the proposed introduction of the infrastructure levy
• A shake-up of the requirements for affordable housing provision.

There is currently no specific timeframe for publication of a Planning and Infrastructure Bill, though, but indications are that the government is treating this Bill, and planning reform generally, as a priority for the coming months.

Case developments

Collateral Warranties – to be or not to be a construction contract?

Abbey Healthcare (Mill Hill) Ltd v Augusta 2008 LLP (formerly Simply Construct (UK) LLP) [09.07.24]

The Supreme Court has clarified that, in most instances, collateral warranties are not construction contracts for the purposes of the Housing Grants Construction and Regeneration Act 1996.

Consequently, in the absence of specific drafting, funders, purchasers and tenants (in addition to construction parties to a construction project) will now be unlikely to have the right to issue statutory adjudication proceedings for breaches of obligations under collateral warranties.

Carbon emissions and supply chains: establishing the chain of causation.

R (on the application of Finch on behalf of the Weald Action Group) (Appellant) v Surrey County Council and others (Respondents) [20.06.24]

On June 20 2024, the UK Supreme Court handed down its landmark decision in this longstanding case on Scope 3 emissions. The decision is likely to have implications for future offshore oil and gas projects in the UK.

The Supreme Court considered the question of whether it was unlawful for Surrey County Council not to require the environmental impact assessment (EIA) for crude oil extraction project for commercial purposes, including an assessment of the impacts of downstream greenhouse gas emissions resulting from the eventual use of the refined products of the extracted oil.

The Supreme Court allowed the appeal, holding that the Council’s decision was unlawful because the emissions that will occur when the oil produced is burnt as fuel, are within the scope of an EIA required under the Town and Country Planning (Environmental Impact Assessment) Regulations 2017.