Planning for Housing: a review of the Housing White Paper

On 7 February 2017 the Government published the much anticipated Housing White Paper (the Paper), entitled ‘Fixing our broken housing market’. Announced in the House of Commons by Sajid Javid, Secretary of State for Communities and Local Government, with the solemn words “our housing market is broken”, the Paper demonstrates that the Government has grasped the seriousness of the housing crisis and also betrays some frustration with the limited effect of previous measures to increase housing delivery

A key feature of the Paper is that it embraces all types of housing and all types of needs. This includes support for private build to rent (BTR) development and a more diverse range of affordable housing options.

In this briefing, we explore the ways in which the Paper considers the housing market to be ‘broken’, the causes of this and the remedies proposed.

The Paper notes that, since the 1970s, there have been on average 160,000 new homes each year in England whereas the consensus is that 225,000-275,000 are required to keep up with population growth and start to tackle years of under-supply. Indeed, relative to population size, Britain has had Western Europe’s lowest rate of house-building for three decades.

However, as is becoming characteristic of Theresa May’s new administration, the problem is considered through the prism of ordinary working people. The Prime Minister notes in her foreword to the Paper that the lack of homes manifests itself in increasingly unaffordable homes “particularly for ordinary working class people who are struggling to get by”. As such, the lack of affordability of housing in England is another ‘problem’ which the Paper seeks to address.

The Paper highlights some startling statistics in this regard, demonstrating the depth of research which has contributed to the Paper and perhaps explaining the delay in its publication:

• Today, the average house costs almost eight times average earnings; an all-time record. Since 1998, the ratio of average house prices to average earnings has more than doubled and nearly 30% of local authorities have house prices over 10 times average earnings;
• Home ownership between 25-34 year olds has fallen from 59% just over a decade ago to 37% today and in 2014/15, 27% of first time buyers had help from friends or family to raise a deposit. The Council of Mortgage Lenders predicts that, by 2020, only a quarter of 30 year-olds will own their own home (compared to more than half the generation currently approaching retirement);
• The proportion of people living in the expensive private rented sector has doubled since 2000 and more than 2.2 million working households with below-average incomes spend a third or more of their disposable income on housing; and
• The loss of a private sector tenancy is now the most common cause of homelessness.

Furthermore, the lack of homes has wider-reaching consequences: high property prices stop people moving and decrease the flexibility of the workforce, the Government’s expenditure on housing benefit increases and high rents reduce disposable income and purchasing power, thus harming the general economy. The Paper also dispels any notion that the problem is limited to the capital; since 1997, house prices relative to earnings have more than doubled in major cities in the North.

In short the Paper provides a helpful reality check on the desperate shortage of housing across the UK.

In a nutshell, the Paper identifies three problems: local authorities are failing to plan for a sufficient quantity of homes to meet their local housing requirement; delivery of housing is too slow; and the housebuilding industry is dominated by a small number of big players.

Taking each in turn, firstly, the Paper notes that over 40% of local planning authorities do not have a plan that meets the projected growth in households in their area. The Government is committed to a plan-led system, noting that up-to-date plans are essential because they provide clarity to communities and developers about where houses should be built so that development is planned rather than the result of speculative applications.

Secondly, the Paper notes that the pace of development is too slow, citing the large gap between permissions granted and new homes being built (more than a third of new homes that were granted planning permission between 2010-11 and 2015-16 have yet to be built). While acknowledging a variety of causes for delays, the Paper repeats the Government’s long-held suspicion of ‘landbanking’ by developers who purchase land for housing and then delay development until prices rise; however, in reality there is little evidence for this.

Finally, the Paper points to a more structural problem in the housing market which is the dominance of the large housebuilding firms; currently Britain’s largest ten housebuilding firms build around 60% of new private homes. The Government considers that incentivising smaller (SME) housebuilders, bringing forward smaller sites and diversifying the housing market can help to increase supply.

The Paper is split into four chapters which seek to address these problems in turn, as follows:

Planning for the right homes in the right places

• Making sure every community has an up-to-date, sufficiently ambitious plan (via the Neighbourhood Planning Bill) with potential for Government intervention if not. There will be a requirement for local plans to be reviewed at least once every 5 years and a consultation on strengthening the duty of co-operation so that local authorities can better work together to meet housing need across their respective boundaries;
• Making local plans easier to produce – simplify the process and make plans more transparent;
• Planning to standardise the method by which local authorities assess housing need – the Government will consult on this with the aim of facilitating a more transparent and consistent basis for plan production and having this in place by April 2018 as the baseline for assessing five year housing land supply and housing delivery;
• Making land ownership and interests more transparent so as to help identify land which may be suitable for housing – this involves enhancing the services currently provided by the Land Registry and aiming to achieve comprehensive land registration by 2030; 
• Through amending the National Planning Policy Framework (NPPF), the Government plans to ensure that more land is available for homes in the right places by maximising the contribution from brownfield and surplus public land, regenerating estates, releasing more small and medium sized sites, allowing rural communities to grow and making it easier to build new settlements (such as garden towns and villages). Notably, this section of the Paper also emphasises the Government’s commitment to maintaining the Green Belt providing that policy will be amended to make clear that authorities should amend Green Belt boundaries only when they can demonstrate that they have examined fully all other reasonable options and, where land is removed from the Green Belt, local policies should require the impact to be offset; 
• Building on measures in the Neighbourhood Planning Bill to encourage the preparation of neighbourhood plans and give communities greater powers to influence the design of housing in their area.  However the Paper also raises the prospect of Neighbourhood Plans having to meet their share of local housing need; 
• Proposals to encourage the more efficient use of land for development by amending the NPPF to make it clear that plans and individual development proposals should avoid building homes at low densities and address the particular scope for higher-density housing in urban locations (including by extending upwards).

Building homes faster

• Plans to amend the NPPF to give local authorities the opportunity to have their housing land supply agreed on an annual basis and fixed for a one-year period;
• Boosting local authority capacity and capability by increasing nationally set planning fees (by 20% from July 2017), making £25m of new funding available to help ambitious authorities in area of high housing need to plan for new homes and infrastructure and consulting on introducing a fee for making a planning appeal so as to deter ‘unnecessary’ appeals;
• Ensuring infrastructure is provided in the right place at the right time by aligning new infrastructure with new housing – in particular, the £2.3bn Housing Infrastructure Fund will be targeted at the areas of greatest housing need with bids open in 2017 and local authorities will be required to identify development opportunities provided by new infrastructure when funding is committed;
• Encouraging developers to build out more quickly by tackling unnecessary delays caused by planning conditions via the Neighbourhood Planning Bill (such as pre-commencement conditions only being imposed when agreed by the applicant), addressing impediments to development caused by protected species legislation (most notably, great crested newts via a strategic licensing system), simplifying developer contributions in light of the independent review of CIL (announcement to come in the Autumn Budget 2017) and addressing construction sector skills shortages;
• Holding developers to account for the delivery of new homes by requiring greater transparency though the planning and build-out phases and giving local authorities more powers to speed up house-building, including through potentially shortening the default time-frame for planning permission implementation from 3 to 2 years, simplifying and speeding up the completion notice process and encouraging their use of compulsory purchase powers to support the build out of stalled sites;
• Holding local authorities to account through a new ‘housing delivery test’ which will assess local authorities against their housebuilding targets with consequences if they fail to deliver, such as imposition of the presumption in favour of sustainable development.

Diversifying the market

• Promoting a diverse and vibrant group of housebuilders who regularly cite land, planning and finance as major barriers to expansion – in particular, the Government’s £3bn Home Building Fund will be targeted at SMEs, custom-builders and innovators and the Government’s Accelerated Construction programme will see the Government partner with small and medium-sized builders, contractors and others to build out surplus public sector land;
• Supporting the growth of custom-built homes through the new ‘Right to Build’ which requires local planning authorities to find land for those seeking a custom-built home in their area to keep a register of those wanting to build their own home; 
• Expanding the contribution from other parts of the housing market by encouraging the building of more homes for private rent or BTR. This includes amending the NPPF so that local authorities will have to plan for BTR and to expand the scope of affordable housing to include affordable private rental options. The Government also wishes to attract further institutional investment into BTR;
• Supporting housing associations to build more homes (in particular, by facilitating borrowing against future income) and encouraging more house-building by local authorities through a variety of means;
• Relaunching the Homes and Communities Agency (the Government’s housing delivery body) as Homes England with an expanded remit which will include working innovatively with local and combined authorities, LEPs and other partners to increase housingdelivery; and
• Boosting productivity and innovation in the housebuilding sector by, for instance, supporting modern methods of construction including off-site fabrication (potentially 30% quicker and 25% cheaper).

Helping people now

The purpose of this chapter of the Paper is to acknowledge that it will take some time to fix the ‘broken housing market’ and to offer some interim relief for the Government’s favoured ‘ordinary households and communities’.

• Continuing to support people to buy their own home through the new Lifetime ISA to be introduced in April 2017 (supporting younger adults to save flexibly for the long term and use savings towards the purchase of a first home) and consider the future of the Help to Buy Equity Loan scheme beyond 2021;
• Limiting the availability of Starter Homes to households with an income of less than £80,000 (£90,000 in London) to ensure that they are available to those most in need. In addition, the Paper signals a move away from the previous requirement for 20% of starter homes on all developments over a certain size and, instead, a focus on delivery of a range of affordable homes to buy. As such, it is proposed to amend the NPPF to introduce a clear policy expectation that housing sites deliver a minimum of 10% affordable home ownership units;
• Extending right to buy discounts to housing association tenants;
• Investing in the Affordable Homes Programme – total investment will now reach £7bn to build over 225,000 affordable homes during this Parliament. This funding was originally earmarked for shared ownership properties but the programme is now being relaxed so that providers can build a range of homes including for affordable rent;
• Consulting early in 2017 on banning letting agent fees to tenants, implementing measures introduced in the Housing and Planning Act 2016 which include banning orders to remove the worst landlords or agents from operating, promoting 3-year family-friendly tenancies and consulting on a range of measures to tackle unfair and unreasonable abuse of leasehold;
• Improving neighbourhoods by continuing to crack down on empty homes and support areas blighted by numerous second homes;
• Enhancing the offering of specialist housing for those in particular need such as the disabled and the elderly and developing more ‘supported housing’ units, including consulting on new funding arrangements for this sector; and
• Taking steps to reduce homelessness by supporting the Homelessness Reduction Bill which will reform England’s homelessness legislation and doubling the size of the Rough Sleeping Fund.

The Government has also launched a consultation paper on BTR to encourage its increasing role in the housing market. Government recognises that BTR attracts stable institutional investment, provides quality and choice including longer term tenancies and helps to accelerate build rates compared with market housing.

The consultation paper includes a number of measures but most importantly details the proposals to recognise BTR as a form of housing that local authorities should consider and plan for and to identify affordable private renting as an acceptable form of affordable housing that can be provided on BTR schemes.

In conjunction with the publication of the Housing White Paper, the Government has also published the independent CIL review which was commissioned in November 2015 to assess the extent to which CIL can provide an effective mechanism for funding infrastructure and to recommend changes that would improve its operation. The Government acknowledges in the Paper that the review found that the current system is not as fast, simple, certain or transparent as originally intended and states that it will respond to the review and make an announcement in the Autumn Budget 2017. The key recommendations of the CIL review are that the Government should replace CIL with a hybrid system of a broad and low level Local Infrastructure Tariff (LIT) and Section 106 for larger developments and that combined authorities should be enabled to set up an additional Mayoral type Strategic Infrastructure Tariff.

Debate is already raging over whether the Paper represents the “radical vision” for housebuilding, as claimed by the Government.

Critics will say that the Paper repeats well-worn ideas such as more high-density building on brownfield land and a failure to make any dent on the Green Belt, considered sacrosanct by many Conservative supporters. Indeed, many of the proposals have been foreshadowed by previous announcements.

Local authorities’ reactions are likely to be mixed. On the one hand, there is the ability to increase resources through levying higher planning application fees, encouragement to use powers to speed up development (including through compulsory purchase powers) and opportunities to partner the Government in bringing forward housing developments; on the other hand, they will be concerned about the housing delivery test to monitor their progress against housing targets with real consequences of under-delivery, the Government’s tough talking on local plan production and more intervention in their assessment of local housing need.

As for developers, many will lament the failure to look more seriously at the option of Green Belt release and there will be concern about the somewhat unrealistic proposal to require the speedier implementation of planning permissions. However, developers will welcome the further initiatives to speed up the planning process and in particular the stricter requirements on local authorities in terms of planning for their local housing need and the production of Local Plans. In addition, the attempt to diversify the housebuilding market will be welcomed by most of the industry and institutional investors will be greatly encouraged by the moves to recognise BTR within the NPPF and to embrace affordable private rent as a means of addressing affordable housing requirements on BTR schemes.

These proposals are not “radical” but they are comprehensive and sensible. The stakes are high; in her foreword to the Paper, Theresa May cites the “broken housing market” as “one of the greatest barriers to progress in Britain today”. The Government is clearly correct to say that there is “no one single magic bullet” to boost housing supply, and on balance, the package of proposals set out in the Paper should, when taken together, go some way towards both stimulating housing delivery and addressing affordability.