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Housing White Paper – A greater pressure on housing delivery

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Summary: The Housing White Paper, “Fixing our broken housing market”, was finally issued on 7 February 2017. It contains a range of proposals with a ratcheting up of pressure on local authorities through a new Housing Delivery Test at the heart of the reforms – much of the fine detail and bite will be left for further planning policy and legislative changes. We pick out the key themes to take away:

Support for Build to Rent:

In the early 1980s, Michael Heseltine, then Environment Secretary, said, “home ownership stimulates the attitudes of independence and self-reliance that are the bedrock of a free society." The White Paper faces up to the reality that historically low levels of housing delivery and declining affordability have pushed the aspiration of home ownership out of reach of a whole generation.

Part of the response to this is to strengthen support for the growing sector of institutionally funded Build to Rent, which is welcomed. A Consultation Paper on Planning and Affordable Housing for Build to Rent was published on the same day as the White Paper. In addition to necessary changes to the National Planning Policy Framework to encourage proactive local planning for Build to Rent, there are proposals for longer tenancies to support families, and consideration of how to treat the affordable element of private rental homes (nationwide proposals of minimum 20% content and an average discount to be offered across any development to be at least 20% relative to local market rent levels).

Of course, we have already seen the build to rent market move forward ahead of the pace of Government and the National Planning Policy Framework. In London, we have already seen the London Plan, the Housing SPG, and the current draft SPG on viability and affordable housing adapting to recognise the important contribution this format of housing delivery can make. Not least in speeding up delivery of homes closer to the places where people wish to live and work.

More Planning Reforms to stop local authorities “ducking the difficult decisions”:

The overriding objective of the white paper is to see more homes built. Further reforms to the planning system are (not for the first time) seen as key to this. At the heart of the planning reforms, the Government is proposing a series of measures to ratchet up pressure on LPAs and developers to plan for and then deliver housing sites – described as “a comprehensive approach that tackles failure at every point in the system”. 

In short, this involves a doubling down on requiring local authorities to have up to date plans in place; establishing a standardised methodology to the controversial assessment of 5 year supply which is proposed to be in place by April 2018; and perhaps the key to the planning reforms is a new Housing Delivery Test which is to “ensure local authorities and wider interests are held accountable for their role in ensuring new homes are delivered in their area” – the test will work as follows:

Initially, the test will see housing delivered measured against assessed need, as set out in an area's local plan. If the plan is not up to date, published household projections will be applied.

From November 2017, if delivery of housing falls below 95% of the authority’s annual housing requirement, the LPA must publish an action plan setting out the reasons why and actions to get building back on track;

From November 2017, if delivery of housing falls below 85% of the requirement, authorities will in addition be expected to plan for a 20% buffer on their 5 year land supply;

From November 2018, if delivery of housing falls below 25% of the requirement, the presumption in favour of sustainable development in the National Planning policy Framework would automatically apply

The 25% target increases to 45% in November 2019 and 65% in November 2020. So LPAs face the threat of unplanned development if targets are not met.

The statement of intent in the Paper is that Government will intervene to force the hand of local planning authorities in putting plans in place and actively reviewing them to ensure they are adhered to. Clarification will be need on how ‘delivery’ is to be measured as local authorities do not build houses. Legislation and amendments to the NPPF will be required. How readily such Government intervention then occurs when authorities (almost inevitably) miss the targets and with what success will be the real test. All of which has to take place in a context where the White Paper proposes no significant relaxation of Green Belt protection.

Plan making for housing is, of course, set against a backdrop where there is often deep local resistance to more homes being built. There is acknowledgement in the White Paper of the unpopularity of homes being built speculatively, largely as a result of a local planning authority’s failure to maintain a five year land supply. The Ministerial Statement of 12 December 2016 made clear that where communities plan for housing through neighbourhood plans, those plans should not be deemed out-of-date unless there is a significant lack of land supply for housing in the wider local authority area.

Presumably with an eye to a 2020 election, the Government has set some stiff timescales to put the new requirements in place, time will tell if these prove to be over ambitious.

Building homes faster: Developers

LPAs are not the only ones saddled with responsibility for the broken housing market with the White Paper also proposing to hold developers to account. Greater transparency is proposed in a number of areas to evidence success of delivery: land ownership and option arrangements, information about the timing and pace of delivery of new housing, with a requirement on the larger housebuilders to publish aggregate information on build out rates.

There is also a proposal to place greater pressure on rapidity of delivery: 2 year timeframes for implementation, the potential to withdraw planning permission through completion notices (“use it or lose it”), and the threat of CPO on stalled sites. Together with increased application fees and new appeal fees, there will need to be a careful balance to ensure these measures do not act as an outright disincentive to starting the development process and assuming development risk. Developers will certainly need to see improvements in decision making transparency, efficiency and rapidity.

But there will be questions over whether “use it or lose it” or compulsory purchase would realistically be used to remove either planning permission or land from a developer. Is a local authority really going to make out a compelling case in the public interest to compulsorily acquire land where a willing developer’s development has stalled? A more prudent use of CPO powers may be to identify and assemble suitable sites in multiple and complex ownership in the first place.

Conclusions

There is little doubt from the White Paper that the Government has the bit between its teeth in trying to remove the blockages to housing delivery. However, viability will always be central to delivery of development. It should not be forgotten that the pressures on developers proposed in the White Paper come at a time of considerable economic uncertainty. A telling paragraph that sits in the White Paper’s introduction states “Development is about far more than building homes. Communities need roads, rail links, schools, shops, GP surgeries, parks, playgrounds and a sustainable natural environment”. Those who work in the development sector are all too aware that these combined costs on development have huge viability implications. Combined section 106 obligations, CIL and affordable housing requirements have become an increasingly challenging and uncertain issue for developers which go to the bottom line of investment decision making.  Buried in the White Paper is recognition that this whole area requires reform, further policy and legislative change, and a further announcement on this is promised for the Autumn 2017 review. In our experience, this is often the biggest brake on speedy determination of planning applications and developments coming forward and reform cannot come soon enough.

In summary, the White Paper is a statement of intent from Government to inject new measures into the planning process to break the inertia with housing delivery. Planning policy over the past 20 years is littered with such statements of intent and we will only understand how serious Government is when these measures come to be implemented, particularly when in the face of local opposition. The White Paper talks of LPAs “ducking the difficult questions”. The real test will be whether, when such “ducking of the difficult questions” occurs, Government is prepared to step in.

 

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