Housing supply: recovery

The politics of recovery

22 July 2011

Stimulating housebuilding by incentivising communities and calming the nerves of developers may be the UK government’s greatest challenge. What are the prospects of success? Nigel Moor reviews a precarious situation

The scale of the housing problem confronting the coalition government is expressed in one figure: the estimate from the Home Builders Federation that planning permissions for new dwellings in the third quarter of 2010 – post-election – were more than 20% down on the first quarter, at 31,553 dwellings – and this from an already low base. The government’s response is contained in two documents: the white paper Local Growth: realising every place’s potential, published in October last year, and the Localism Bill.

The UK government can point to housebuilding having reached an historic low despite RSs, but there is great concern that their abolition will only make a bad situation even worse

The white paper outlined the plan for a New Homes Bonus, the details of which were published in February, ahead of the scheme becoming operational on 1 April. The bonus replaces the Labour administration’s Housing and Planning Delivery Grant (HPDG), which the present government claimed was uncertain and unreliable and, as the housing figures indicate, certainly failed to deliver. The bonus is designed to incentivise and reward housebuilding. DCLG has set aside nearly £1bn for the scheme: nearly £200m in year one (2011–2012) and £250m for each of the following three years. Any other funding required will come from the general local authority grant.

The rationale for the bonus is that communities have received very little benefit from housing development in their areas in the past, and if they perceive such development as putting strain on public services and infrastructure, and causing a reduction of amenity while building is in progress, they and their elected councillors object. The bonus match-funds the council tax for each new home and property brought back into use for six years, with an additional amount of £350 offered for every unit of affordable housing.

Councils and communities can work together to decide how to spend the extra funding – for example, on council tax discounts for local residents, improvements to frontline services, such as rubbish collection, or new facilities, such as swimming pools or leisure centres.

There is scepticism about whether the bonus will be enough to turn around the declining trajectory of housebuilding. In January, the South East Strategic Leaders Group, made up of the political leaders of the county councils in South East England (mostly Conservatives and Lib Dems) voiced their doubts, and were particularly critical of the meagre additional affordable housing bonus.

Coupled with the New Homes Bonus is the Affordable Rent regime, which gives housing associations (HAs) the flexibility to offer fixed-term tenancies (as short as two years) to some new tenants at rent levels higher than social rent – up to 80% of local market rents. To take advantage of this, HAs must have an agreement with the Home and Communities Agency outlining how additional rental income will be reinvested in the supply of new affordable housing. The government is investing £4.5bn to deliver up to 150,000 new affordable homes over the next four years and of this, £2bn has been set aside to deliver Affordable Rent.

Living with the Localism Bill

The target for passing the Localism Bill is November 2011, with the all-important National Planning Policy Framework due to be published at the same time, according to the latest prediction. This will do away with the – literally – scores of planning documents that have to be pored over, usually by lawyers, in the interests of interpreting planning policy. The government has signalled that this document will define what is meant by a ‘presumption in favour of sustainable development’, which is designed to safeguard developers against ‘ultra-nimbyism’ and local council resistance to development.

Regional strategies (RSs) will be abolished, as expected, but the Bill introduces a new statutory duty to cooperate on planning matters, applicable to local authorities and other public bodies. The abolition is likely to be challenged by some housebuilders during the committee stages of the Bill, in the light of the successful CALA Homes court challenges, which forced the government to reinstate RSs and set out certain procedural measures that will need to be complied with if the strategies are withdrawn.

RSs were introduced (as regional spatial strategies (RSSs) and regional economic strategies (RESs), later combined into single regional strategies) by the Planning and Compulsory Purchase Act 2004 in response to the Barker Review of Housing Supply, published the same year. RSs were the means by which housing targets agreed by regional planning bodies were imposed on individual district councils.

From the outset, the Conservatives in opposition made clear they were opposed to top-down planning and the Lib Dems were never happy with the unelected regional planning bodies. Housebuilders and their professional advisers liked the new system, however; it was predictable, the targets, once agreed, were valuable evidence at planning application or appeal stage, and the public examinations that considered the RSs gave developers a chance to contribute to the decision-making process. It is no surprise, therefore, that their abolition is at best controversial and at worst extremely unpopular.

The housing and regeneration powers of the Mayor of London are dramatically increased by the Bill. The Mayor’s office effectively takes over the responsibilities of the Homes and Communities Agency and the London Development Agency, which is abolished. The Mayor is required to prepare and publish an Economic Development Strategy for London and can designate Mayoral Development Corporations to bring about regeneration in areas where urgent action is required.

For better or worse

No one can accuse the new government of failing to implement manifesto promises once elected, or of being risk-averse in its approach to planning reform. However, the localism agenda is facing enormous opposition from the development and construction industry and its professional advisors, who fear that it will only raise the level of local objection to development. They point to local authorities who collectively struck 189,000 new homes off local plans after the Secretary of State for Communities announced his intention to abolish RSs.

That there has been a hiatus in planning has been admitted by DCLG. Not only did the department act prematurely over regionalism without putting transitional arrangements in place, but it seriously underestimated the extent to which the previous government has embedded changes recommended in the Barker reviews into the planning system. For example, the change that created RSs out of RSSs and RESs, and resulted in regional housing totals being handed down to local authorities by unelected regional agencies, was ultimately endorsed in the Local Democracy, Economic Development and Construction Act 2009, many of the provisions of which are underpinned by European law and will be hard to unravel.

The government can point to housebuilding having reached an historic low despite RSs, but there is great concern in the development industry that their abolition will only make a bad situation even worse. Emboldened by the CALA Homes decision, some housebuilders might oppose the Localism Bill by arguing that, even if RSs disappear, their evidence base cannot be withdrawn. This raises the spectre of a large number of planning appeals in which housebuilders challenge reduced housing targets adopted by local authorities under the new regime.

For all the hand-wringing among professionals used to the current system, there is no denying that the government has made a number of important concessions, while encouraging developers to consult earlier and more extensively with local communities. There are no rights of appeal for third parties in the Bill and the rules for appeals by applicants against council planning decisions remain unaltered.

In the end, developers and their professional advisors have no choice but to attune to the new mood. These are changes wrought, not by civil servants as so often in the past, but by politicians with a firm grasp of their political ideology and, more than likely, with four more years to bed in the changes and demonstrate that the housing bonus scheme and local decision-making work.

It is in all our interests that they succeed. There can be no doubt in anyone’s mind that housebuilding has  a huge role to play in economic recovery. However, housing production has been plagued by ideology for more than 30 years and we are still searching for a solution.

Nigel Moor is Co-Director of Planning Pilots Ltd and author of the book The Look And Shape of England (How politics has influenced its appearance over the last century) published 2010. This article reflects his personal opinion.

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