Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Third Report

Conclusions and recommendations

Housing Supply and Household Growth

1.  The projections suggest that, unless house-building rates increase, there will be significant housing shortages in the future across many parts of England. (Paragraph 6)

2.  With the emphasis now being placed on matching new housing requirements with household growth as a basis for policy decisions, it is important that the variations in factors affecting household growth projections are kept under review as policy is implemented. (Paragraph 9)

3.  It is important that information from the new integrated household survey is used to update household growth projections regularly. (Paragraph 10)

4.  The number of households is increasing faster than current house-building levels. There are many estimates of the precise number of homes required. Several factors are contributing to household growth, including increased life expectancy, migration, both internationally and between regions, the growth in single households particularly those comprising older people over 55 and the housing market. Each of these could affect future housing demand. (Paragraph 18)

5.  The Government's objective to raise the net number of additional homes by 200,000 by 2016 may not be sufficient to keep pace with the latest household growth projections. We recommend that it be reviewed and regularly revisited. As part of adopting any revised target, it is important that the Government sets out in some detail what it expects to achieve in terms of tenure by promoting that level of building. (Paragraph 19)

6.  No uniform national strategy will meet the housing requirements of every area. Different strategies are needed to reflect the needs of different areas. By making the planning system more responsive to housing demand, the Government risks undermining the regeneration of those areas with surplus housing and low demand, and increasing the building on greenfield sites. (Paragraph 21)

7.  There is a danger that if there is an increase in housing supply, a significant proportion of the extra homes in some parts of the country will be taken up by second homes. We recommend that the Government considers further proposals arising from the Rural Housing Commission to discourage the purchase of second homes and to ensure that the new homes are occupied by households as their primary residence. (Paragraph 24)

8.  It is important that the increased house-building programme is not rushed and that the opportunities to produce well designed new housing and to improve the environmental quality of urban areas are maximised. We recommend that the Government ensure that issues relating to the quality of development and infrastructure provision are fully addressed as part of the plans for stimulating significant growth in new house-building within the planned time-scales. (Paragraph 26)

Meeting Housing Needs and Aspirations

9.  We welcome the Government's commitment to boosting investment in social housing as part of the next Comprehensive Spending Review. Housing needs differ from area to area, and any approach will have to allow flexibility for projects to meet specific local requirements. The overwhelming need is for social rented housing to make up the shortfall in supply and to recoup the very significant losses in social housing that have occurred over the last 15 years. (Paragraph 32)

10.  It is vital that social rented housing make up a significant proportion of the enlarged house-building programme proposed by the Government. We endorse Shelter's estimate that 20,000 homes are required above current proposals to achieve the Government's target to halve the number of homeless households in unsuitable temporary accommodation by 2010 and to meet newly arising housing needs. (Paragraph 33)

11.  Low cost homeownership schemes can meet the housing requirement of specific groups which housing authorities wish to retain or attract to particular areas. Schemes which subsidise homeownership without increasing the supply of housing risk contributing to increasing house prices. The Government is introducing new shared ownership schemes. We recommend that the Government ensure that all low-cost home ownership schemes operate in such a way as to support increases in overall housing supply rather than intensifying pressure on the existing supply. The benefits arising from the public subsidy should be passed on to future purchasers. (Paragraph 42)

12.  The increase in funding to the Housing Corporation over the last four years has, in the main, been used to support additional low-cost homeownership schemes. It is important that the Housing Corporation does not lose sight of its fundamental role as the main funder of new social rented housing. We recommend that a limit be set on the proportion of the Housing Corporation's funding that is allocated for low-cost homeownership schemes. The proportion spent on equity share and shared ownership will vary from one region to another depending on the nature of the priority needs. It is the responsibility of the Regional Housing Boards and Assemblies to identify priorities. The Chancellor's 2006 Budget statement gave prominence to expanding equity share schemes, but equal importance should be given to increasing the supply of social rented housing. (Paragraph 43)

13.  A simple supply and demand model cannot be applied uncritically to the behaviour of the housing market and house prices. The particular nature of the housing market makes it very difficult to be certain about the effect which a certain level of increase in supply will have on prices and thereby affordability. (Paragraph 52)

14.  It is unclear what impact the Government's objective to increase house building to 200,000 by 2016 would have on affordability. It is likely that a very large number of new homes would be required annually to have a significant impact on affordability. There is no clear reason why house-builders would be committed to increasing housing supply to such an extent as to compromise their profit margins. (Paragraph 53)

15.  There are many factors, other than supply, which affect the affordability of housing. The Government needs to examine a range of strategies which might influence demand such as interest rates, the availability of credit and taxation, as possible approaches to stemming price rises and improving affordability. (Paragraph 56)

16.  We recognise that homeownership is popular and is an important means of increasing personal wealth. The recent increase in homeownership has been achieved as a result of increasing household formation, right-to-buy purchases, higher incomes and low repayments. There will always be a sizeable number of households which either cannot afford to buy or choose not to. The rights and security for people who rent either in the private or social sector, and issues of exclusion, will be considered in a further report. (Paragraph 61)

17.  Some households have accumulated high levels of debt from buying their homes and borrowing for other purchases, making them vulnerable to interest rate rises and economic downturn. The high levels of consumer debt make households more vulnerable to losing their homes. The Government should investigate the effect of easy access to consumer credit and its connection to home repossessions and take appropriate action. It should also look at offering opportunities through the Housing Corporation for homeowners to reduce the equity they own in their homes to avoid them losing their homes. (Paragraph 62)

18.  Existing house-building targets are not yet being achieved. There are a large number of sites which have been allocated for housing, some with outline planning permission. There is potential to increase the take up of these sites. Local authorities need to investigate any housing sites not being developed in their areas and identify the reasons for the delay; where infrastructure problems or other reasons are holding it up, Councils should be encouraged to work with the Regional Development Agencies and English Partnerships to unlock the development potential. (Paragraph 66)

19.  If house-builders are holding on to sites which are ready for development, Councils should be encouraged as a last resort to use their compulsory purchase order powers and to find an alternative developer. (Paragraph 67)

20.  Higher density development does not have to comprise smaller units or a preponderance of flats. To create sustainable areas, a range of unit sizes which caters for a range of needs is required. Funding priorities and local authority policies need to be sufficiently flexible to enable the new housing supply to reflect the range of needs and household sizes in their particular areas. (Paragraph 73)

21.  The buy-to-let market is attracting additional investment and new opportunities for private renting in many town and city centres. In some areas, however, the transient population living in the private rented housing adds to the instability of the area; the activities of investment funds can skew, albeit temporarily, any indicators of affordability as the house prices reflect the expected financial return rather than what the local population can afford. The local population is thus excluded from homeownership. (Paragraph 76)

22.  Local authorities should be encouraged to take account of the potential impact of housing developments being used as buy-to-let schemes when giving planning approval. If necessary, the Government should consider whether local authorities need additional powers to ensure a broad range of family housing units are available in inner cities. (Paragraph 77)

23.  With the Government's emphasis on promoting home-ownership, there is a danger that the needs of disabled and older people, and those with other special housing needs are neglected. It is important that the housing, in both the private and social rented sectors, is built to a standard which can be easily adapted to meet the lifetime needs of their occupants. We recommend that the Code for Sustainable Homes be amended to give greater priority to ensuring homes are built to lifetime home standards. We further recommend that the Government ensure that housing for disabled people is provided on sites with easy access to essential services. (Paragraph 83)

24.  Many older people are occupying homes which are too big for them. We recommend that the Government work with the Housing Corporation, house-builders and local authorities to increase the provision of smaller homes suitable for older people. (Paragraph 84)

25.  Many equity release schemes offer poor terms. We believe that the Government should work with financial services providers to develop more appropriate schemes which enable older people to realise some of the capital tied up in their homes. (Paragraph 85)

26.  The higher level of house-building being promoted by the Government should be delivered in a way that ensures the overall tenure mix is appropriate to an area. Local authorities need to develop evidence-based approaches which ensure that new housing development provides for the full range of needs of local residents, especially families, the elderly and disabled people. We recommend that Government guidance also encourages the provision of private housing to meet the aspirations of all those living and working in the area. (Paragraph 88)

Housing Growth and Urban Regeneration

27.  The planning system has traditionally played a key role in mediating different pressures on the physical environment. With current proposals, it is expected to give particular weight to market considerations and as a result there is a risk that environmental and social issues may be overlooked. We recommend that PPS3 ensure that economic, environmental and social issues are given equal weight when housing sites are first considered. (Paragraph 92)

28.  We welcome the Government's commitment in draft PPS3 to promote house-building on brownfield sites but we do not consider that as currently drafted it gives Local Authorities the tools necessary to implement this commitment. The sequential approach to prioritising brownfield sites in PPG3 has contributed to the revitalisation of many urban sites, increasing the proportion of housing developments on them. We are very disappointed, despite assurances from the Deputy Prime Minister, that the draft PPS3 appears to abolish this approach. We recommend that draft PPS3 be revised to provide for the retention of the sequential approach. (Paragraph 99)

29.  We accept that Local Authorities should ensure an adequate land supply to meet their housing targets: proposals in draft PPS3 to restrict their ability to phase the release of sites could undermine their ability to prioritise brownfield urban sites and allow developers to cherry pick the easier sites. These sites may be on the edge of towns and cities, so promoting urban sprawl and encouraging flight from urban centres. We recommend that draft PPS3 be revised to provide Local Authorities with the power to manage effectively the release of sites. (Paragraph 100)

30.  The Government's proposals to boost house-building in areas with high housing demand could undermine attempts to regenerate nearby areas with low demand, particularly in the Midlands and the North. Many of these areas include under-utilised housing, which, with some improvement, could make a significant contribution to meeting housing demand and to reducing the pressure on those nearby areas with high demand. The evidence of growing demand in the Midlands and the North points to the need for strategic planning to ensure meeting housing demand is managed in such a way as to utilise the spare housing capacity in nearby low demand areas. (Paragraph 104)

31.  If new house-building is concentrated in areas of high housing demand on the edges of towns and cities, there is a danger that commuting times will be increased and quality of life will suffer. It is vital that urban sprawl is avoided and, where possible, the new housing is concentrated in existing urban centres offering employment opportunities nearby. (Paragraph 106)

32.  The Government's target to reduce the number of long-term empty private properties by 25,000 by 2010 is insufficient. We recommend that it should set a more ambitious target of a 50% reduction in the number of homes empty for more than 6 months by 2010. (Paragraph 112)

33.  The Government has gone some way to reduce the VAT on refurbishment and renovation to promote the reuse of empty homes and to redress the preference given to new housing. It should now consider reducing the VAT on all empty properties to five per cent. (Paragraph 113)

34.  The level of demand for private housing in some rural areas fuelled by migration from elsewhere in the UK and the desire for second homes exceeds the potential supply to the extent that any increase in house-building would be unlikely to affect affordability. The provision of social rented and affordable housing is therefore particularly important in these areas. We recommend that the Government increases its allocation to the Housing Corporation for rural areas. (Paragraph 118)

35.  Government housing and planning policies must be flexible enough to allow new housing to take place in smaller settlements to support their regeneration and to enable them to support a wider range of services. We endorse the objectives of the report by the Government's Rural Housing Commission and urge the Government to consider its recommendations seriously. (Paragraph 119)

36.  The experience of previous house-building programmes using prefabrication demonstrates the potential problems of poor design and the major maintenance problems which can arise. We agree that MMC has some benefits, but it is important that design considerations are not again compromised. We recommend that the Commission for Architecture and the Built Environment monitor closely the design quality of homes emerging under the Housing Corporation's new programme. (Paragraph 126)

37.  It is important that both house buyers and house builders are confident that their new homes are mortgageable. We recommend that the Government make the building standard LPS 2020 a requirement for all homes built using off-site manufacturing. (Paragraph 127)

Implementing the House Building Programme

38.  We believe that the Government must accept that, as development proposals are brought forward, an appropriate mix of revenue and capital funding mechanisms need to be identified to meet the requirements of different kinds of infrastructure. (Paragraph 132)

39.  We recognise that the timely provision of infrastructure is essential for successful and sustainable development and acknowledge the Government's commitment to finding an appropriate funding mechanism. We are examining the Government's proposals for a planning gain supplement through a separate inquiry. (Paragraph 136)

40.  There has been progress in identifying additional funds for infrastructure in areas where there are major house-building programmes. However, the current funding for infrastructure to support the house-building programme is insufficient. The formula-based funding mechanisms for revenue services are inadequate. Some Government Departments have made revisions to cope with the increased number of households in some areas. Nevertheless, we recommend that the Government conduct a comprehensive review to identify how it can better ensure the provision of adequate infrastructure to support its ambitious house-building programme both in the South East and nationally. The Cross-Cutting Review, which is part of the 2007 Comprehensive Spending Review, offers an important opportunity to make a clear assessment of the costs and to identify funds. It is vital that all Government Departments are committed to it. (Paragraph 137)

41.  Much of the scepticism towards the Government's house-building programme arises from concerns about the provision of essential services. We recommend that the Government demonstrate that services in existing housing areas will not suffer because funding and local services are diverted to the new developments or additional demands are to be placed on existing services. This may require a reassessment of local government finance formulae and a revision of funding formulae used by central government departments when distributing funds to local service providers. (Paragraph 138)

42.  The Government needs to adopt a more strategic approach to the provision of infrastructure; one which takes full account of differing local circumstances, requirement and aspirations. The existing availability of services should be a factor in determining the location of new house-building. By encouraging new house-building in existing urban areas, the need for new infrastructure is reduced, and, where it is required, it can be provided more easily. The provision of infrastructure should be used to open up areas which have surplus housing or potential sites and thus disperse demand to a range of urban areas. (Paragraph 141)

43.  The Government's new programme to fund 'growth points', with its emphasis on improving infrastructure provision in smaller urban areas, although initially very small, is welcome. The programme needs to be expanded to encompass not only areas with excessive housing demand but also those areas where new housing can be more easily accommodated but demand needs to be stimulated. (Paragraph 142)

Managing the Environmental Impact

44.  Housing makes a very significant contribution to climate change. The DCLG has important responsibilities alongside other Government departments for tackling climate change. It should consider signing up to the Climate Change PSA and identify how the planning system can contribute to tackling climate change. (Paragraph 146)

45.  The scale of house-building proposed by the Government could have a major impact on the natural environment, particularly in terms of affecting biodiversity and generating increased car use. The Government is encouraging the use of masterplans and design codes to ensure high quality development and that the impact on the environment is minimised. It is set to publish guidance on the use of these planning documents. We recommend that this guidance require planning authorities to consider the impact of housing development on the physical and natural environment, resource efficiency and the promotion of sustainable lifestyles. Landscape character assessments should also become standard on major schemes. (Paragraph 152)

46.  We support the Government's objective to increase the environmental performance of new housing but the proposals in the Draft Code for Sustainable Homes are not sufficiently ambitious. We are disappointed that the basic level proposed in the Code does not exceed current Building Regulations. We welcome the Government's commitment to revise the Code in the light of the consultation. We believe it to be vital that the Code delivers an improvement in environmental performance by being aspirational and including a basic level which is higher than the Building Regulations (Paragraph 157)

47.  There is no certainty that the Code will be applied by the private sector if it remains voluntary. This is a significant weakness. We recommend that the Government set a timetable for the incorporation of the Code for Sustainable Homes into Building Regulations. The requirements taken forward from the Code and incorporated into the Building Regulations in this manner should be sufficiently challenging to deliver a major improvement in the environmental performance of new homes. (Paragraph 158)

48.  Water consumption can be reduced through improved standards of efficiency in new and existing housing. However, new water and sewage facilities will be required to meet the demand from the new homes. Water infrastructure is a precondition of growth yet spare capacity in water and sewage facilities in the wider South East is extremely limited. There is a long lead-in time for the provision of water facilities such as reservoirs and sewage treatment works. We recommend that the Government strengthens the measures to ensure that adequate water and sewage facilities are planned as part of the infrastructure to support housing growth. We recommend that sustainable urban drainage systems become a standard requirement in all new housing developments. (Paragraph 164)

49.  New homes add only 1% to the housing stock each year. There is huge potential to improve the environmental efficiency of existing homes. If housing growth is well-planned and high environmental standards are achieved there are real benefits in reducing running costs to individual homeowners. The Government should consider introducing incentives to reduce the water use and energy consumption of existing homes. It should consider offering additional incentives for the installation of micro-generation. (Paragraph 168)

50.  We endorse the recommendations in the Report by the Environmental, Food and Rural Affairs Committee into the Environment Agency which welcomes the proposals to make the Environment Agency a statutory consultee on all planning applications in flood risk areas. We support the Committee's call for additional resources being allocated to the Agency to fulfil this role. We also support its call that developers and investors should be given more information about the risks posed by building in flood plains. (Paragraph 171)

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