Planning law changes will be a key theme for strategic land and regeneration in 2025
Changes proposed to planning law and the planning framework are likely to impact strategic land and regeneration in 2025. However, there will also be other developments which those developers and investors in that sector will want to keep an eye on.
Planning
The Labour Government’s flagship planning policy is to deliver 1.5 million homes within the next 5 years. In the Autumn 2024 budget, the Government announced a number of measures to improve the effectiveness of the planning system. For example, it intends to allocate £70 million in 2025-2026 to support infrastructure and housing development while boosting nature recovery and £47 million to support the delivery of up to 28,000 homes that “would otherwise be stalled due to nutrient neutrality in affected catchments”.
The National Planning Policy Framework (NPPF) was updated at the end of 2024 and introduced a raft of amendments ranging from amending the standard method (i.e. the approach used to establish housing requirements in an area) to changes to Green Belt provisions. Arguably the most significant of these changes includes the introduction of “grey belt” land, which removes the presumption that development in the Green Belt is inappropriate providing that a number of criteria are met (including that any residential scheme includes uplifted affordable housing provision). In theory, this policy could allow for more development in the Green Belt; however, there remains uncertainty as to how local authorities and the Courts will apply these policies. We anticipate that 2025 may bring a significant number of planning appeals relating to the interpretation of the new NPPF policies.
Although the legislation mandating that developments provide 10% biodiversity net gain (BNG) came into force in February 2024, analysis indicated that, for planning applications submitted between April and June, only 0.5% of applications included a promise to deliver this level of BNG. It is anticipated that in 2025 the proportion of developments meeting the statutory requirement will be significantly higher, potentially adding significant cost to strategic development proposals.
The Planning and Infrastructure Bill is expected to be introduced to Parliament during 2025, which aims to streamline the planning process by introducing a national scheme of delegation to standardise which decisions are decided by committee and which are delegated to officers. In addition, there are proposals to introduce mandatory training for planning committee members and smaller, targeted committees for strategic development. As part of the Planning and Infrastructure Bill the Government is seeking to introduce a more strategic approach for developers meeting environmental obligations and contributing to nature recovery. The Government hopes that a strategic approach will allow for development to be unlocked in areas where issues such as nutrient neutrality are acting as a barrier to development.
The Government is currently consulting on the Compulsory Purchase Process and Compensation Reforms, particularly as to the compensation payable for the value attributed to the prospect of obtaining planning permission (“hope value”). The consultation closes on 13 February 2025 and the results are expected before the end of the year.
Sophie Willis, an Associate in our Planning Team comments: “The intention behind the vast majority of the Government’s planning reforms and consultations is to speed up housing delivery. We will have to wait and see how many of the various proposals ultimately reach policy / the statute books”.
Leasehold reform
The Leasehold and Freehold Reform Act 2024 became law during 2024. This includes a ban on the creation of new leasehold houses, except in very limited circumstances. Those provisions are expected to formally come into force during 2025 but as these have been publicised by the Government for many years, the market has already adjusted. LAFRA 2024 will introduce the ability for local authorities to impose financial penalties for breaches of the ban on the creation of new leasehold houses. In addition, a lessee of a house where a long residential lease has been granted in breach of LAFRA 2024 will have the right to acquire the freehold and any superior lease at no cost. Again, these provisions are expected to become law during 2025.
In addition, LAFRA 2024 contains significant changes to the regulation of freehold estate management charges and also service charges payable by lessees of residential houses and flats. These could be introduced towards the end of 2025 and may impact the sale and purchase of residential properties.
Leasehold and Commonhold Reform Bill
The Government has committed to pushing commonhold as the predominant form of home ownership in England and making commonhold the default tenure for new flats. The Government expects to produce a white paper and consultation during early 2025 with publication of a Leasehold and Commonhold Reform Bill during the second half of 2025. Currently most new developments involve the sale of freehold houses and leasehold flats so the Government will need to consider how it will persuade developers to sell new flats under a commonhold structure rather than under the traditional leasehold model. There will be a lot for the Government to unpack as the ability to create commonhold has been available since 2004 and there has not been widespread take up. This will represent a huge change for developers of residential flats which can be assessed further once more details are available of how the Government intends to push commonhold as the main model of home ownership in England.
Construction and building safety
Building safety will continue to dominate the news.
In September of last year, the Grenfell Tower Inquiry published the Phase 2 report on the series of failures leading to the tragedy seven years ago. Of the 58 recommendations made in the report, one recommendation is for the definition of a higher-risk building to be urgently reviewed by the Government, potentially moving away from the current definition of buildings over 18 metres in height (or at least seven storeys) with at least two residential units, to instead focus on the nature of the building’s use and, in particular, whether vulnerable people are likely to be present for whom evacuation in the event of a fire or other emergency may be difficult. If more buildings are brought within the higher risk buildings regime, this could have a substantial impact on the sector; particularly if having to then contend with the relatively new building control regime for higher-risk buildings, a regime currently struggling under the weight of applications to be processed.
One of the headline issues for developers in 2025 is the building safety levy which is intended to recompense the Building Safety Fund for the costs / future costs of remediating building safety defects in England. In early December 2024, the Government announced its intention to bring into effect the building safety levy in Autumn 2025, to be charged on all new eligible residential buildings in England. Having completed two public consultations in 2023 and 2024, what isn’t entirely clear at this stage is how the levy will be implemented but it is intended to raise around £3.4 billion over the next 10 years.
In early December 2024, the Government announced its Remediation Acceleration Plan to ramp up the pressure on the sector to progress remediation works, including a joint plan that commits developers for the first time to stretch targets to assess all of their buildings by July 2025, to start or complete remedial works on 80% of their buildings by July 2026, and on all their “unsafe” buildings by July 2027.
The broadening of liabilities in association with building safety legislation continues to be a major risk area for developers and the construction industry.
- Among many other changes, the Building Safety Act 2022 (BSA) created Remediation Contribution Orders (RCOs) and Building Liability Orders (BLOs). RCOs and BLOs have the potential to lift the corporate veil of companies to allow associates to be pursued for the cost of rectifying defects causing building safety risks.
- The BSA also extended the limitation period during which claims can be commenced to 30 years, retrospectively, for claims concerning dwellings under the Defective Premises Act 1972 (DPA). For adjudicators, it looks like the floodgates will open this year following the landmark decision handed down late last year in BDW Trading Limited v Ardmore Construction Limited [2024] EWHC 3235 (TCC), in which it was found that the adjudicator had jurisdiction over a tortious claim under the DPA notwithstanding that it had long since been outside of the limitation period under the contract but had been brought back within limitation through the 30-year extension. It remains to be seen whether an adjudicator’s decision will be viewed as sufficient evidence of the existence of a relevant liability or relevant defects (as applicable) to allow BLOs or RCOs to be directly applied for.
With a number of high-profile building safety related cases listed for hearing in 2025, a picture should start to form of how impactful these new tools put in place by the BSA are going to be.
Whilst the requirement for second staircases in all new tall residential buildings over 18 metres will not start to take effect until 2026 (subject to transitional provisions), it is anticipated that some developers will choose to adopt the change early.
On a note of caution, with the increased rate of insolvencies in the construction sector (an ongoing trend from 2024), those procuring works will want to be vigilant in the selection of their contractors.
Energy efficiency
The previous Government intended to implement a Future Homes Standard and Future Buildings Standard in 2025 to ensure that new build homes contained low-carbon heating and high levels of energy efficiency and carried out a number of consultations between 2019 and 2024. However, it is not clear whether the Labour Government intends to pursue this initiative.
In December 2024, a joint consultation between the Ministry of Housing, Communities and Local Government and the Department for Energy Security and Net Zero was published on “Reforms to the Energy Performance of Buildings Regime”. It closes on 26 February 2025 and seeks views on the Energy Performance of Buildings Framework. The consultation proposes that Energy Performance Certificates (“EPCs”) for domestic properties contain multiple metrics for measuring energy performance rather than a single headline metric such as the current energy efficiency rating. There are also proposals to reduce the validity period for EPCs and increase the trigger points for obtaining a new EPC. The Government also published its response to the Climate Change Committee’s 2024 progress report in December 2024, which indicates that the current Government continues to adopt the proposal for homes in the private rented sector to meet improved minimum energy efficiency standards (“MEES”) by 2030, preventing landlords renting out homes under an EPC rating of C or equivalent. It intends to issue a consultation on these proposals in early 2025. It also intends to publish its response to the non-domestic private rented sector consultation in 2025.
Final thoughts
The Government aims to promote growth within the sector with a focus on building more houses and changes to planning law to achieve that aim. However, Suzi Gatward, Partner in our Real Estate team notes that: “there could be a few stings in the tail including high interest rates, no replacement for help to buy, an acute skills shortage and ageing labour force and Stamp Duty Land Tax changes which are likely to affect demand. The outlook is for a lower sales forecast than in previous years and the impending building safety levy is likely to be very expensive for the sector. There are certainly many challenges which may mean that the 1.5 million houses target is simply unattainable.”
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