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The Government's White Paper on Housing Supply Something old, something new, something borrowed, something brown (or green)
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The Government's White Paper on Housing Supply Something old, something new, something borrowed, something brown (or green)
Neil Bucknell Partner | Real Estate neil.bucknell@laytons.com +44 (0)1483 407 000
The Government's White Paper on Housing Supply | March 2017
Four Steps to Where? The Government’s long awaited White Paper addressing various issues surrounding the continued failure to deliver an adequate supply of new housing in England appeared on 7 February. Reviewing it, it is proverbial curate’s egg. While there is a welcome recognition of some areas where there does seem to be a realistic prospect of boosting housing supply, such as encouraging off-site pre-fabricated construction, encouraging the private sector rented market and institutional investment in housing, there is also a failure to address some of the fundamental problems, misunderstandings as to how the planning system and the market really work, and a number of proposals, which read together, have contradictory results.
There are four “steps” under which the Government has grouped its proposals – “Planning for the Right Homes in the Right Places”, “Building Homes Faster”, “Diversifying the Market” and “Helping People Now”. As always with Government planning announcements, everything is dressed up as apple pie and motherhood, but the devil as they say is in the detail.
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The Government's White Paper on Housing Supply | March 2017
Problems with Plan Making? The longest list of recommendations comes under the first heading – Planning for the Right Homes in the Right Places. The White Paper (rightly) deplores the fact that there are still 34 local authorities that have not even published a draft local plan, as was required to meet their obligations under the Planning and Compulsory Purchase Act 2004. However many of the local plans made under that act are now out of date, and are failing to provide an adequate housing supply within their area.
recently the amalgamation of many rural authorities into single unitary authorities that exclude their main economic hubs which are in separate unitary authorities. All too frequently, local authority government boundaries reflect historical boundaries, and overlap urban areas and travel to work areas, all of which makes coherent plan making impossible. At least the Government recognises this now, and specifically proposes to remove the requirement that every local government area has a single local plan, and to give Councils more flexibility to cooperate to produce plans. That is easily said, but we consider it naïve to expect that neighbouring urban and rural areas will necessarily work together well, especially as they are often under the control of different political parties, and the residents and voters of the surrounding rural areas are usually anxious to ensure that
The problems though are manifold. Firstly, we have had a half
their neighbourhoods are not “swamped” by development
century of unsatisfactory and incoherent local government
generated by their adjoining town or city.
reforms. The first attempt, under the Local Government Act 1972 ended up as a political compromise, largely re-drawing
What the Government has not recognised is that by
local government boundaries outside the Metropolitan
introducing a further tier of plan making (neighbourhood
areas only where the local political sentiment supporting
plans) it has further clouded the picture. We consider that
historic shire county boundaries would permit. It did however
the written ministerial statement made in December, which
have the merit of some clarity – everybody knew on 1 April
sets a different threshold of housing supply in a district
1974 what matters were dealt with by the County and what
when determining whether or not a neighbourhood plan
was dealt with by the District or Borough, which gave us
is up to date, only adds to this confusion. While it might be
a hierarchy under which structure plans and local plans
a noble aim to encourage communities to participate in
could be put in place. Since then, we have had shambolic
the plan making process, there has to be a recognition that
local government reforms. Instead of trying to make our
somebody somewhere has got to look at the larger picture,
local government boundaries match economic areas (such
and potentially make some decisions that will be unpopular
as travelling to work areas), we have ended up with an
at the neighbourhood level in order to deliver the housing we
incoherent patchwork – some shire counties broken up into
need. Furthermore, hard pressed and under-resourced local
a set of unitary authorities, others having their urban centres
planning departments are unlikely to be well placed to deal
removed into unitary authorities, leaving the remainder (often
with cooperation with neighbouring authorities in trying to
its hinterland) under two tier local authorities, and more
put in place their plans against the background of a growing
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The Government's White Paper on Housing Supply | March 2017
Gathering the Information, Assembling the Sites The Government’s stated intention to look again at how housing need is assessed, to try and produce a more transparent and consistent approach is to be welcomed. However, a declared intent to “make land ownership and interest more transparent” is 20 years too late.
Land ownership details have been open to the public
One issue regarding bringing forward sites for development
since the Land Registration Act 1999 was enacted, and the
that is only peripherally addressed in the document is the
Registry’s own online Land Registry portal system gives
difficulty in assembling sites when there is more than one
anybody who subscribes to the system the ability to obtain
private sector landowner involved. One of the questions
information both as to ownership and interest in the land
raised in the consultation section is how land pooling could
already, most titles having now been registered. We are
make a more effective contribution towards assembling
concerned though that the Government is to consult on
prospective development sites. Clearly, the civil servants at
improving the transparency of contractual arrangements
the Department for Communities and Local Government
used to control land, as it could undermine the genuine
are unware of one of the problems that landowners and
requirement of both landowners and developers to maintain
developers face when assembling sites to promote the
confidentiality as to their own financial affairs. It should be
land for planning. If two private landowners enter into
sufficient that local authorities can verify that an applicant
an agreement between them to share value, so that (for
has a registered interest in the land in question. This is a
example) if one of them is the owner of land that is ultimately
well-developed procedure (the Unilateral Notice) enabling
designated for a school as opposed to private sector housing,
such interest to be registered without the details of the
they do not lose out, they are immediately subject to the
arrangements being made public.
possibility of a charge for Capital Gains Tax for such an arrangement is deemed to be a “disposal” giving rise to a tax charge, even though no money is realised in the hands of the landowner to pay the tax. Addressing this issue would help!
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The Government's White Paper on Housing Supply | March 2017
Where is "The Right Place"
The key problem though is what is “the right place”. Here the same tired old formulas are trotted out. Having suggested that all local authorities have a robust up to date plan in place, we are back to the same tired old clichés about using brown field land, releasing public sector land and supporting “thriving rural communities”.
second homes bring visitors (and much needed money) to these areas. While we fully appreciate the need to maintain the visual amenity of these areas, surely it is time for the Government to recognise this and develop proper policies for such areas, to provide a sustainable level of recreational linked development, and low cost housing for the local population that needs to support it. Finally, consistent with its support for apple pie and motherhood, the Government has restated its commitment to the “Green Belt”. No doubt this is a reaction to the over-reaction of bodies such as the National Trust and the
Surely those in the department must know that the areas of
circulation chasing Daily Telegraph to the NPPF in 2012. We
highest demand (such as the M11 corridor, or the Thames
would urge the Government to be brave and look again at
Valley) are areas with very little brown field land left. These are
Green Belt policies. While we can understand the need to
not derelict industrial areas ripe for development following
maintain some green space around the largest of our cities,
the decline of our traditional heavy industries. Furthermore,
in practice the Green Belts around (for example) Oxford and
the public sector has been a major supplier of surplus land for
Cambridge have had deleterious effects. These are now cities
development for the last quarter of century. We must soon
which are strangled by tightly drawn Green Belts, served
be running out of redundant hospital sites, which formed a
by satellite towns outside the Green Belt, often without any
large part of the land supply in many parts of England in the
adequate public transport, many of their railway links to the
1990’s and first years of the current century! The problem with
surrounding countryside having been lost in the 1960s. The
“thriving rural communities” is that the nature of the British
traffic jams on the A40 into West Oxford, or the A14 around
countryside changed dramatically during the 20th Century.
North Cambridge are surely the result of encouraging Green
The agricultural labour force largely disappeared, and much
Belts around two cities which are already sat in the middle
of rural Britain is now a dormitory for the better off or the
of a large area of open country with no danger of their
newly retired. As a result most local services (public transport,
amalgamating with any other adjoining urban areas.
schools, retail) have either disappeared or consolidated into a few sites. Furthermore, the economy of some of our most attractive areas, such as the National Parks, is becoming increasingly dependent upon tourism, which unfortunately only generates low waged employment. The policy reaction of restricting development and limiting its availability to local residents has been counter-productive. Holiday homes and
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The Government's White Paper on Housing Supply | March 2017
Speeding Delivery – or missing the point? In relation to building homes faster, we consider that the Government’s proposals are in many ways unrealistic, and fail to grasp the real issue. One of the fundamental reasons why the planning system moves so slowly is that planning departments are now poorly resourced, a situation exacerbated by the demands made by the policy makers at national level. How are local authorities going to find the resources to ensure that they regularly review their local plan policies every 5 years, if over 30 have not yet produced a 2004 Act compliant plan, and most have not been able to do so since the NPPF came into force in 2012?
Furthermore, the White Paper shows lamentable ignorance of the way the planning system and the land market works, exemplified by the suggestion that there should be a further reduction in the life of planning permissions, requiring implementation within 2 (and not 3) years, or they will be “lost”. The grant of an outline planning permission, especially on a large scheme, is only the first step. From a planning point of view, the detailed design stage has only just started, and sometimes it can take years to obtain the requisite approval of reserved matters before work can actually start on site. The developers are further discouraged from making an early start where Community Infrastructure Levy applies, for such a start usually triggers substantial payment of levy to the local planning authority. Most strategic sites are held on market value option agreements. These options only become exercisable once a planning permission has been obtained. At this point the process of negotiating what the price should be begins, and this too can take a long time – if the landowners and the developers fail to agree what the market value is as the first step to fixing the price to exercise the option, the usual course of action is for an independent expert to be appointed, and make a decision on the parties’ behalf. The issues involved are complicated, and again it can take months (occasionally years) to resolve such matters. If you are a small developer, not only do you have to pull together your land interest and obtain your reserved matters approval, but you probably also have to secure a source of funding as well.
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The Government's White Paper on Housing Supply | March 2017
There is also a failure of the authors of the White Paper to
One section of this part of the White Paper immediately
appreciate that planning permissions for a large scheme of
causes concern – when you see a heading “Deterring
several hundred (or even a few thousand) houses do not
Unnecessary Appeals” you know that there is a hidden
immediately mean that the houses spring from the ground
agenda – read down and you will find that it is to start
like mushrooms even when the reserved matters approvals
charging fees for appeal. The appeal system, coupled to the
are obtained and the precise amount of the price has been
NPPF, has actually unlocked quite a lot of land that has been
determined under the option agreement. Housing delivery in
tied up in the planning process since 2012. If fees are now
England is largely driven by the sale of housing on the open
going to be introduced, this is only going to be a further
market, albeit helped in many cases by schemes such as the
discouragement to those smaller and medium sized builders
Government’s Help to Buy Initiative. Capacity constraints and
that the Government said it wants to bring into the market.
market constraints usually mean that a site can only deliver
There is a short section on unlocking infrastructure problems,
economically 50 – 200 houses a year, depending upon the
but we consider that, while the announcement of Government
market in which the site is being offered. It was a failure to
money to provide infrastructure is welcome, the Government
appreciate this basic economic fact that has led (once again)
ought to try and take many infrastructure issues out of the
to allegations of land banking arising. Controlling land under
planning system. In particular, we note the concern the
a strategic option is a long way from delivering completed
commitment to bringing local authorities and their planning
housing, and if developers are going to be penalised for
departments into the provision of digital infrastructure. Leave
taking long term options to assemble substantial sites to bring
this to the market, and government subsidy where digital
forward housing it is going to be counter-productive to the
infrastructure is not being delivered for good economic
government’s declared aim of increasing the supply of new
reason. We do not want planning further delayed by badly
housing.
thought out planning obligations designed to encourage the delivery of digital infrastructure being added to other obligations under negotiation, as happened in the recent past where the issue of improving the energy efficiency and sustainability of houses moved from where it should have been (the Building Regulations) into the sphere of planning obligations.
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The Government's White Paper on Housing Supply | March 2017
Helping Smaller Developers The third part of the White Paper, entitled “Diversifying the Market�, deals with trying to encourage new entrants into the development industry, in particular bringing back small and medium size builders, now to be supported by the Home Building Fund. As the White Paper points out, the last recession has led to a considerable consolidation in the industry. The percentage of homes delivered by builders who produced less than 100 units a year has shrunk from 28% in 2008 to just 12% in 2015, whilst the contribution and volume of house builders, producing more than 2000 units, has gone up from 31% to 59% in the same period.
There is, though, a lack of recognition of the factors that have driven small builders out of the market. Firstly, there has been the problem of obtaining funding in the aftermath of the banking crisis of 2008 and 2009. The increasing demands of the planning system, with the introduction of, and then increase in application fees, the need to engage with the long process of local plan production, ever increasing standards of energy efficiency and sustainability all mitigate against this sector growing. Who wants to go through the pain of investing in making a planning application on a small site, endure the often ill-considered and ill-tempered response of objectors to the proposals, struggle through the process of agreeing a planning agreement to procure the issue of a consent, only then to have to borrow from a bank and put your house at risk by offering it as security? There are encouraging signs, with housing associations and local authorities now stepping into the market, which is recognised by the White Paper. The Government does though need to recognise that housing is ultimately a consumer product business. Many of the trends that it seeks to encourage, such as an increase in the amount of prefabricated off-site assembled housing can only really work if this is supported by substantial businesses with deep pockets to underwrite the investment that is needed. We do though welcome the Government’s commitment to encouraging the search to help promote such methods of construction.
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The Government's White Paper on Housing Supply | March 2017
... And Buyers & Tenants The final section is entitled “Helping People Out”. This contains a number of proposals, dealing with issues as diverse as preventing homelessness, dealing with abuse by the freeholders and managers of leasehold properties, regenerating run-down housing estates and various schemes to encourage home ownership.
Elsewhere in this Spotlight we comment on the starter home scheme, which is still part of the Government’s proposals, albeit now not such a prominent feature of housing policy as it was a year ago. We would though urge the Government to look at simplifying the system, and taking the planning system out of many aspects of affordability. We only really need three categories of affordable housing for planning purposes – social rent (highly subsidised housing for those at the bottom of the ladder), affordable rent (sub-market housing for those who cannot compete at full market rates), and shared ownership housing (to help those on the housing ladder or indeed moving up the housing ladder to afford units for family housing beyond the means of existing home owners in small starter units). While we welcome the proposal to encourage private sector renting, and we welcome more innovative thinking (such as freeing up pension funds to invest in private sector housing) we see no reason why institutional investors should not be encouraged to go out into the market to buy housing to manage and let on the open market in competition with owner occupiers, to help provide a good variety of decent quality housing for those unable to cross the threshold of raising the initial deposit to gain access to home ownership. If such provision is to be secured through the planning system, it will cause delay, and any units limited by planning condition or planning agreement to letting only will be less valuable and less attractive to investors.
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The Government's White Paper on Housing Supply | March 2017
Our verdict No Lessons Learnt? In summary, while there are some things to welcome, there is still a lot of out-dated thinking and repetition of many discredited policies and imagined problems. Surely it is time that the Government acknowledges that the Barker Review demolished the myth of land banking nearly a decade ago, and learnt from the lessons of PPS3 and PPG3 in the early years of the current century, which resulted in many flats being built in unsuitable locations, which were acquired by investors fuelled by cheap money which ultimately lead to many of the problems that afflicted the house building industry in the aftermath of the housing crash, and has failed to deliver the housing that we really want in the areas we really want to live?
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