Fixing or Failing

A Review of the key points in the Government’s White Paper:
“Fixing our broken housing market.”

In the UK today there is a growing disparity between house prices and income.  This disparity has in turn to a doubling of the population living in the private rented sector since 2000. Teresa May’s Government signposted the solution as providing more homes which in turn it was said will lead to a reduction in the cost of renting. In February 2017 the Government issued a white paper with the intention of addressing the increasing disparity.

The main question to be addressed is what is causing the lack of new housing being brought forward in the UK today.  Government figures show that over 40% of local planning authorities (LPA’s) do not have a plan to provide sufficient housing that meets the projected growth in number of households within their area.  Developers claim that they cannot build these homes because LPA’s have restrictive planning policies that inhibit development.  Both sides of the argument blame the other but is it that simple?  Probably not.

Since March 2012 when the bombshell that was the National Planning Policy Framework (NPPF) was dropped developers have been able to point to paragraph 49 of the NPPF which states that:

“49. Housing applications should be considered in the context of the presumption in favour of sustainable development. Relevant policies for the supply of housing should not be considered up-to-date if the local planning authority cannot demonstrate a five-year supply of deliverable housing sites.”

So where an LPA cannot demonstrate an up to date five-year housing land supply, policies intended to control such development can be said to be out of date, even if that particular local policy has only been implemented in the very recent past.  As the developers state, without conflict with policy development should be permitted “unless other material considerations” dictate otherwise.  This has lead to a number of planning applications in areas defined in Local Plans as unsuitable but which represent prime locations for development.  So why have the floodgates not opened and a plethora of new houses been provided?  Perhaps, because the problem is not that simple.

Even if permission is granted it does not ensure that the development will then come forward promptly or even at all.  The annual completions versus permissions graph found on page 13 of the White Paper shows the increasing gap between permissions granted and those actually completed from a low in 2009-10 growing year on year from just over 150,000 to over 250,000 in 2015-16.  Comparatively, completions have only risen from just over 100,000 to just over 150,000 in that same period.  This is echoed in the July 2016 Government figures, which showed that while there were 684,000 homes with detailed planning permission granted, building work had started on just 349,000 homes.

Many reasons are put forward by all sides for this; developers point to onerous pre-conditions while LPA’s point to “land banking” of such permissions by developers while the market is stagnant.  The simple truth is probably that a number of reasons exist for the failure to bring forward and develop sites.  There are probably almost as many reasons for the failure of current housing policies as there are sites!

Something had to be done, on that almost all sides were agreed and so the Government having consulted has now brought forward the White Paper, “Fixing the broken Housing Market, February 2017, which contains a number of proposals to ‘fix’ the problem.  These proposals have been grouped into four headings or ‘steps’:

Step 1: Planning for the right homes in the right places.

Step 2: Building homes faster.

Step 3: Diversifying the market.

Step 4: Helping people now.

[Below I have raised some of the topics covered by each of these ‘steps’ but these notes reflect only a selection of the issues raised and are not intended to be exhaustive.]

 

Step 1: Planning for the right homes in the right places.

The Government has realised that as a result of paragraph 49 (see above) development in many areas is coming forward in locations that are not desirable to, either LPA’s, or the local population or ‘neighbourhood’.  This has to be tempered by the undeniable argument that more housing is required in most areas.  It is often said that the age of “N.I.M.B.Y.” (Not in my back yard), has been replaced by “B.A.N.A.N.A.” (Build absolutely nothing, anywhere, near anyone).  This stance of no development simply does not provide the homes the Nation requires for the future.

Since the 1970’s there have been on average 160,000 new homes per year but the consensus now is that we need between 225,000 and 275,000 new homes per year to keep up with population growth and to start to tackle the deficit created by years of under supply.

The argument that there is no space or that the country is “full” is simply not true. It is estimated that only 11% of England has been built on.

So we need new homes but we need them in the right places.  The White Paper attempts to tackle this issue in the following ways.

Plans & Neighbourhoods

In the White Paper the Government proposes to ensure that all LPA’s have up to date plans by enacting a requirement that all Local Plans be reviewed “at least once every five years.” Now this seems sensible but what will constitute a “review”? Does this mean an in depth review of all policies within a Local Plan or only those that have been called into question.  In the White Paper it states:

An authority will need to update their plan if their existing housing target can no longer be justified against their objectively assessed housing requirement, unless they have agreed a departure from the standard methodology with the Planning Inspectorate.”

However further on in the document it states that:

“1.13 The Government will, therefore, consult on options for introducing a standardised approach to assessing housing requirements. We will publish this consultation at the earliest opportunity this year, with the outcome reflected in changes to the National Planning Policy Framework.”

So any LPA currently under achieving in this area would be well advised to await developments as the goal posts in this area are clearly under review if not actually moving.

The White Paper also intends to make Local Plans easier to produce.  What the text actually says is that while LPA’s should ensure that all of their area is covered by a plan, Government intends to remove the requirement that this should be under a single plan.  Following the proposals in the Neighbourhood Planning Bill it would seem that the intention is that a single LPA could have a series of Local Plans covering different areas.

How this will work in practice remains to be seen.  Clearly areas set within the open countryside and those with limited Urban development may find it easier to “go it alone” than await input from the towns and cities where development issues maybe more pronounced.  Will that mean that there will be a race to produce such plans and thereby not be left with the burden of undesirable development? Time will tell.

Under the heading “Making enough land available in the right places” the White Paper attempts to deal with the biggest planning issue in modern times.  However the proposals contained within it are somewhat vague. They expect LPA’s to have a strategy to maximise the use of suitable land including re-utilising brownfield land placing more homes on public sector land, but these aims seem merely to reflect that which is already largely contained within the NPPF.  It continues with a stated aim of supporting small and medium sized sites especially within the rural community but again this merely echoes the main thrust of the NPPF for sustainable development.  Green belt protection is echoed and so is the requirement for neighbourhoods to have a greater say through neighbourhood plans.  Since over 270 neighbourhood plans have come into force since 2012 this is hardly ‘news’ or indeed a new solution to the existing problem.

Perhaps the only real development seems to be a wish to use land more efficiently.  As the White Paper states:

“1.51 Not all development makes good use of land, especially in areas where demand is high and available land is limited. London, for example, is a relatively low-density city especially in its suburbs. When people picture high-density housing, they tend to think of unattractive tower blocks, but some of the most desirable places to live in the capital are in areas of higher density mansion blocks, mews houses and terraced streets.” 

Whether this will represent an appropriate approach in more rural and regional centres is unclear.

In dealing with the possible biggest issue contained within the White Paper it appears that at present the issue is neither dealt with nor ignored.  The identification of the problem has occurred sometime ago the issue has always been ‘what is the solution’.

[The White Paper also states under this section that the Land Registry also intends to achieve comprehensive land registration by 2030.  One suspects that the Lands Tribunal will be busy for some years to come.]

 

Step 2: Building homes faster.

Under this section the White Paper does contain some distinct proposals.

Firstly it is proposed that the Government will amend the NPPF to give local authorities the opportunity to have their housing land supply (HLS) agreed on an annual basis, and then fixed for a one-year period. This is a positive and useful step for all concerned in housing supply.  Too often the failure of one scheme or a large windfall of housing can wrong foot either a developer or LPA at the last moment.  This leads to considerable indecision and a waste of costs on all sides.  Fixing the HLS for the year will at least provide all parties with a degree of certainty that can enable proper consideration of emerging sites.

Also where the White Paper clarifies and endorses the Written Ministerial Statement of 12th December 2016, that “where communities plan for housing through a neighbourhood plan, these 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.”  Thus those areas that provide more than their fair share of new homes should not be penalised for failures of neighbouring areas.

In terms of the costs of planning there is definitely a sting in the new White Paper.  LPA’s will now be able to increase their fees by 20% from July 2017 if they commit to invest the additional fee income in their planning departments. The Government may also allow an increase of a further 20% for those authorities who are delivering the homes their communities need.  By which it is assumed that those LPA’s that have a 5 year HLS may be allowed to increase their charges by 40%!  Certainly the White Paper is welcome news for many beleaguered LPA planning departments.

Also the hitherto free access to planning appeals may be removed. The Government intends to consult on introducing a fee for making a planning appeal. One option being proposed would be for the fee to be capped, for example at a maximum of £2,000 for the most expensive route (full inquiry). All fees could be refunded in certain circumstances, such as when an appeal is successful, and there could be lower fees for less complex cases.

The White Paper also seeks to tackle the delay in planning permissions being implemented due to onerous pre-commencement conditions.  It suggests that in future pre-commencement conditions can only be used with the agreement of the applicant.  This seems to suggest that unless such a condition is being proffered by the developer such conditions are unlikely to be able to be applied by LPA’s.

The Government through the White Paper will also seek to simplify obligations under the Community Infrastructure Levy (or CIL as it is more commonly known).  What these ‘reforms’ are to be we are not told but apparently an announcement will be made in the Autumn Budget 2017.

Perhaps the biggest change to the forward delivery of housing is contained within the sections on “Sharpening local authority tools to speed up the building of homes” (para.s 2.39-2.46) and the ‘Housing delivery test’ (para.s 2.47-2.51).

Under the first of these, (the LPA’s tools), the Government intends to amend national planning policy to encourage LPA’s to consider how realistic it is that a site will be developed, when actually deciding whether to grant planning permission for housing development. This will include whether an applicant’s track record of delivering previous, similar housing schemes and can be taken into account by LPA’s when determining future planning applications.

Perhaps more importantly to developers is the intention contained in para. 2.41 which states:

“We are considering the implications of amending national planning policy to encourage local authorities to shorten the timescales for developers to implement a permission for housing development from the default period of three years to two years, except where a shorter timescale could hinder the viability or deliverability of a scheme.”

Clearly in this case the devil will be in the detail.  What would constitute ‘implementation’ would have to be considered.  At present very little is required to ‘implement’ a planning permission but should such ‘implementation’ be taken to include the required infrastructure for example, this will undoubtedly cause a rethink on certain projects.  It may well be that the get out clause of avoiding such shortened timescales under the heading of ‘viability’ may be a well trodden path.

The White Paper also proposes a “Housing delivery test.” This will be the developers response to the ‘improved’ powers of the LPA detailed above.  The test is intended to assess whether the number of homes being built in any particular area is below target.  If the numbers do fall below such a target the test will aim to establish the reasons why, and where necessary trigger policy responses that will ensure that further land comes forward.

Where under-delivery has been identified, the Government proposes a tiered approach to addressing the situation that would be set out in national policy and guidance, starting with an analysis of the causes for the delivery failure so that targeted action can be taken.  The proposed test is as follows:

 

  • “From November 2017, if delivery of housing falls below 95% of the authority’s annual housing requirement, we propose that the local authority should publish an action plan, setting out its understanding of the key reasons for the situation and the actions that it and other parties need to take to get home-building back on track. 
  • From November 2017, if delivery of housing falls below 85% of the housing requirement, authorities would in addition be expected to plan for a 20% buffer on their five-year land supply, if they have not already done so.
  • From November 2018, if delivery of housing falls below 25% of the housing requirement, the presumption in favour of sustainable development in the National Planning Policy Framework would apply automatically (by virtue of relevant planning policies being deemed out of date), which places additional emphasis on the need for planning permission to be granted unless there are strong reasons not to.
  • From November 2019, if delivery falls below 45% the presumption would apply.
  • From November 2020, if delivery falls below 65% the presumption would apply.”

The effect of this ‘test’ would be to require the 20% buffer only where the level provided falls below 85% of the requirement by 2017 so only those with less than 4 years and 3 months housing land supply would be caught.

Further the provision of section 49 of the NPPF (see above) would only apply to those who have less than 15 months supply from November 2018 rising to 27 months, (2 years 3 months), in 2019 and 39 months (3 years 3 months) in 2020.  It would seem that only those LPA’s who are seriously underachieving will be caught out.  Undoubtedly the reason for this approach is to ensure that development comes forward in line with agreed Local Policy unless there is a considerable local shortfall in housing land supply.

Overall the proposed changes seem to be a mix of developing sustainable targets supported by local policy and then supporting those policies through the planning system.  Where LPA’s are falling woefully short of housing supply the proposed changes will promote almost any development, anywhere.  Therefore it is beholdent to LPA’s to ensure robust housing land supply numbers supported by up to date policies.  In return the Government will then seek to ensure that those policies are respected and prevent the current ebb and flow of unsupported sites as developments come forward or are discarded.

 

Step 3: Diversifying the market.

The main thrust of this section of the White Paper is to encourage a greater diversity of house builders.  The Government is concerned that small builders have been declining and were hit hard by the recent recession, (the number of homes registered by small builders is down from 44,000 in 2007 to 18,000 in 2015).  To facilitate this diversity the Government launched the £3 billion Home Building Fund on 3rd October 2016, and continues the Housing Growth Partnership with Lloyds Banking Group. Other intentions are to support custom-build homes and bringing in new contractors through the Accelerated Construction programme.

The White Paper also seeks to support housing associations and local authorities to build more homes while also ensuring that the public sector plays its part. This will include changing the NPPF so that LPAs know they should plan proactively for Build to Rent where there is a need, and to make it easier for Build to Rent developers to offer affordable private rental homes instead of other types of affordable housing.

The Government also wishes to provide family-friendly tenancies of three or more years are available for those tenants that want them.

In recent times Housing Associations have achieved considerable success with 193,000 homes being built between 2011-15 under the ‘Affordable Homes Programme’.  This represented 23,000 homes above target.  To support housing associations to build more, the Government are planning to set out a rent policy for social housing landlords (housing associations and local authority landlords) for the period beyond 2020 to help them to borrow against their future income.  The Government also has confirmed that the 1% rent reduction will remain in place in the period up to 2020.

The White Paper also seeks to put social housing regulation on a more independent footing. The intention is to make the Social Housing Regulator a standalone body, (as recommended by the Tailored Review of the Homes and Communities Agency).  They, the Government, have also reiterated their position that housing associations belong in the private sector and they will be bringing the necessary deregulatory measures to allow them to be classified as private sector bodies.

LPA’s will also be encouraged to build on their own land.  The White Paper states that tailored support packages will be offered to Councils who want to build on their own land, through the new Accelerated Construction programme. They have also announced a new £45m Local Authority Land Release fund for land remediation and small-scale infrastructure, with priority given to innovative delivery models as well as areas of high housing need.

Whether these plans to diversify the type of house builder will correlate to an actual increase in the number of houses being built will be the acid test.

[One final point under this section is that the Homes and Communities Agency will be relaunched as Homes England with a clear, unifying purpose: ‘To make a home within reach for everyone’. What effect this change of name will achieve remains to be seen].

 

Step 4: Helping people now.

The Government and indeed everyone is aware that stepping onto the home ownership ladder is becoming increasingly difficult with the gap between the average wage and the average house price ever increasing.  Within the White Paper a number of measures are set out to address this issue and some of these are highlighted below:

Saving for a deposit 

In 2015 the Government introduced the Help to Buy ISA to boost the savings of prospective first-time buyers. It offers a 25% savings bonus, up to a maximum of £3,000, towards the purchase of a first home. More than 720,000 accounts have been opened to date and over 38,000 bonuses worth £20.5 million have been paid to September 2016, supporting over 27,000 home purchases. In April 2017, the Government intends to introduce the Lifetime ISA. This will support younger adults to save flexibly for the long term, giving them a 25% bonus on up to £4,000 of savings a year. Savings and the bonus can be put towards the purchase of a first home, or withdrawn once they reach the age of 60.

Help to Buy: Equity Loan 

The help to Buy Equity Loan was originally established in 2013 to support homebuyers and boost housing supply after the recession. Government has committed a further £8.6 billion for the scheme to 2021. 

Starter Homes

Starter homes will be targeted at first time buyers who would otherwise be priced out of the market. The NPPF will make it clear that starter homes, like shared ownership homes, should only be available to households that need them most, (i.e. those with an income of less than £80,000 (£90,000 for London)). Eligible first time buyers will also be required to have a mortgage in order to buy a starter home which is intended to stop cash buyers.  It is also intended that there will be a 15 year repayment period for a starter home so if the property is sold on to a new owner within this period, some, or all, of the discount will be repaid. This, along with the mortgage requirement, will reduce the risk of speculative investors buying into the market and thus ensure there will be more affordable homes available to those that need them whilst allowing home owners to move onwards when the time is right

There is also a stated intention to amend the NPPF to introduce a clear policy expectation that housing sites should deliver a minimum of 10% affordable home ownership units. It will be for local areas to work with developers to agree an appropriate level of delivery of starter homes, alongside other affordable home ownership and rented tenures.

The White Paper also seeks to change the NPPF so as to allow more brownfield land to be released for developments especially those with a higher proportion of starter homes by:

“a) bringing forward more vacant, unviable and unused employment land by introducing new rules for retaining employment land. We will make it clear that any proposal on employment land that has been vacant, unused or unviable for a period of five years, and is not a strategic employment site, should be considered favourably for starter home-led development.

b) extending the current starter home exception site policy to include other forms of underused brownfield land – such as leisure centres and retail uses – while retaining limited grounds for refusal;

c) allowing development on brownfield land in the Green Belt, but only where it contributes to the delivery of starter homes and there is no substantial harm to the openness of the Green Belt.”

The White Paper also seeks to clarify that starter homes, with appropriate local connection tests, can be acceptable on rural exception sites. This will be seen as a welcome exception in many rural areas where the lack of low cost and affordable housing is altering the demographic of rural inhabitants so that the available work force in some areas is critically low.

Other measures proposed will include:

  • Extending Right to Buy discounts to housing association tenants.
  • New homes for Shared Ownership, Affordable Rent and Rent to Buy
  • A fairer deal for renters and leaseholders
  • Reviewing Leasehold.

Finally the White Paper supports the Local authorities through the existing powers and incentives to tackle empty homes. Through the New Homes Bonus Councils can earn the same financial reward for bringing an empty home back into use as building a new one. They also have flexibility to impose a council tax premium of up to 50% (on top of the council tax bill), on properties that have been empty and substantially unfurnished for more than two years.

 

Conclusion

The contents of the White Paper, if brought into legislation will have some profound effects on the way both developers and LPA’s view the future provision of housing.  While undoubtedly the current system was failing in some regards many of the proposed changes are bold new initiatives that have yet to be tested in reality.  Perhaps the ‘hydra’ or many headed, approach to tackling this issue was always going to be complex to reflect the numerous problems facing both industry and local government.

Is the White Paper a fix or a fail? The truth is probably a bit of both.  Some of the steps to release land and to simplify development will work but whether the intended flood of new homes will be facilitated by these measures only time will tell.  Certainly some of the proposed changes within the White Paper will highlight where the failure to provide new homes is occurring.  However just as some problems will be solved by these initiatives others will arise.  Overall the White Paper does address some of the issues but whether those solutions prove to be anything more than a sticking plaster will have to be reviewed through hindsight. Perhaps the truth is that we simply cannot fail to fix this increasing problem.

[Any errors factual, grammatical or typographical remain the fault of the author)]

Gavin Collett

Magdalen Chambers

3rd April 2017

[Any issues or question arising please do not hesitate to contact the author through his Chambers (01392) 208484].