Memorandum by the Royal Town Planning
Institute (RTPI) (AH 81)
INTRODUCTION
1. The Royal Town Planning Institute is
pleased to provide evidence to this important inquiry. The Royal
Town Planning Institute (RTPI) has a clear recognition of the
importance of housing in this country and of the crisis that we
face if adequate, decent housing is not provided. The RTPI is
a learned and learning society representing over 19,000 chartered
town planners. Following the adoption of its New Vision for Planning
and its merger with ROOM, the National Council for Housing and
Planning, the RTPI is taking a more direct interest in housing
issues and, in particular, the relationships between policies
and practice in housing with those in planning and regeneration.
2. The work of the RTPI and of ROOM@RTPI
displays both a clear understanding of the role that planning
plays in aiding the supply of housing and a commitment to play
our role in improving the ways in which we provide decent housing
for all those need it. A joint report with the Chartered Institute
of Housing—Planning for Housing: The role of planning in
delivering Sustainable Communities (2003) sums this up by stating
that:
The provision of adequate, decent, high quality
housing that is accessible to all those who need it is a fundamental
part of any national and local economic, social and environmental
strategy. Well planned, good, accessible and affordable housing
contributes directly to the range of key tasks that face this
country—improving the health of the nation, raising educational
standards, reducing social exclusion, contributing to sustainable
economic development, and reducing the need to travel, as well
as fulfilling a basic need for shelter. It is the role of both
planning and housing policy and practice to ensure that this happens.
It is not the role of either system to block the delivery of such
housing through an over narrow view of environmental protection,
through a lack of understanding as to how housing markets really
work or through an inflated view of the degree to which public
policy can influence them.
3. This overall approach underpins the RTPI's
responses to the Committee's specific questions set out below.
The potential benefits of and scope to promote
greater homeownership
The extent to which home purchase tackles social
and economic inequalities and reduces poverty
4. It is recognised and accepted that home
ownership is a common aspiration—a 2000-01 BSA survey revealed
that nine out of 10 households would like to own their own home
at some point. Greater opportunities for homeownership are welcomed
by the RTPI, as are more options of housing tenure. The provision
of a decent home for all those that need one must be a basis of
any planning policy and the planning system must not serve to
frustrate this aim nor to dash people's aspirations.
5. However, for many, home ownership will
only ever be an aspiration, it is important that housing policies
reflect this and are thus broad enough to encapsulate those on
the margins of housing markets. The RTPI believes that housing
and planning policies should place a much greater emphasis on
the greater issues associated with housing need instead of assuming
that an emphasis on home ownership will necessarily lead on to
the provision of a decent home for all those in need.
6. One of the key roles of planning is to
provide mixed and balanced communities. The narrow pursuit of
home ownership without balancing policies for those who cannot
achieve this aspiration under current conditions would militate
against this overall role of planning—and one of the ODPM's
key policy objectives.
7. Housing is being seen more and more as
a form of investment and this has been a factor in a greater demand
for housing. The vast majority of housing is provided by the private
sector and without the provision of subsidies, home ownership
is beyond the reach of many. There is a risk that those outside
housing markets whom cannot influence market demand risk being
marginalised by Government housing policy. The values and importance
of social, subsidised and rental housing must not be forgotten
in Government housing policies.
8. Equally, planning and housing policy
must be directed at new, intermediate forms of tenure to help
more people to obtain some equity in housing. A recent report
from the Joseph Rowntree Foundation—Affordability and the
Intermediate Housing Market (2005) shows that, in the majority
of areas in the South East, East and South West of the country
and in pockets elsewhere, the intermediate housing markets forms
more than 30% (and in places more than 40%) of the total market.
The economic and social impact of current house
prices
9. In 1990 the average price paid by first
time buyers was £45,000, 2.7 times their average household
income. By the second quarter of 2005 the average price paid was
£145,000, 4.2 times their average household income. First
time buyers are having to raise larger deposits and average mortgage
advances have increased from 2.2 times to 3.2 time's annual household
income, in spite of falling interest rates.
10. The current trend of increasing/high
house prices has serious implications on the success of the Governments
sustainable community's agenda, for example, the impact on the
ability of a whole range of key workers—not just those identified
in the ODPM's key Worker Living Scheme—to work in areas
of housing demand. People on moderate/low wages are being priced
out of areas where there is demand for housing, which means that
these communities will suffer from a lack of such skilled residents.
11. Opportunities for first time buyers
to get "on the property ladder" are becoming less and
less available, particularly in areas of high demand. In the current
housing market, housing is increasingly regarded as an investment
opportunity. This means that one factor is an increased demand
for housing as more people look to multiple home ownership with
second and investment homes. As Shelter has pointed out, the gap
between those with assets in housing and those without is widening
with real implications for the distribution of wealth and future
opportunity within this country.
The relationship between house prices and housing
supply
12. A relationship clearly does exist between
house prices and supply, but supply is only one element of many
that influence the affordability of housing. A belief that more
house building alone will reduce house prices is simplistic and
will never help to resolve the housing affordability crisis.
13. The economics of housing markets are
far more complex. Housing has several unique features that make
conventional market economics inappropriate, such as a fixed location,
with values dependent on many externalities, their long life and
the fact that they are (increasingly) regarded as an investment,
rather than consumption, good, demonstrated, for example, by the
growth of the buy to let sector.
14. As it stands, new, open market housing
is out of reach for many, especially if they are not already on
the property ladder. Yet, increasing housing supply, even on a
substantial scale, is only likely to have a negligible effect
on affordability.
15. According to evidence in the Barker
Review, (using current levels of construction), reducing the rate
of growth in real house prices by 1.8 per cent, would require
an additional 70,000 private sector homes per annum; and more
ambitiously, to reduce the trend in real house prices to 1.1%,
an additional 120,000 private sector homes per annum would be
required. It needs to be made quite clear that this level of additional
housing will only serve to reduce the rate of rise in house prices—not
reduce house prices themselves. In this context, it is worth recalling
the Government's response to the Select Committee's previous inquiry
into Sustainable Communities in the South East. This stated, in
relation to the announcement of 200,000 more homes in the south
east, that "we never claimed that our proposals would cause
the absolute level of house prices to fall"—merely
that they "should help to moderate the growth trend in house
prices in the longer-term."
16. It is understood that the ODPM has undertaken
a study to determine the effect that an enhanced house building
programme may have on house prices. The publication of this study
is awaited with great interest. Such research that has been undertaken
in the past indicates that it would require an extremely large
expansion of the house building programme to reduce house prices
to any significant extent. For example, a study published in 1996
found that "releasing a lot of extra land has only a moderate
impact on prices. For example, a 32% general increase in plan
provision might only reduce prices by 8% in the medium term."
Earlier studies had found that "increasing plan targets by
75% would raise output by 16% on average over six years and lower
prices by 7.5%, so enabling an extra 3-4% of new households to
buy a new home." This demonstrates a negligible impact on
affordability by a substantial increase in private sector house
building.
Other factors influencing the affordability of
housing for sale including construction methods and fiscal measures
17. As has been stated, it is recognised
that the planning system has an important role to play in solving
the housing affordability crisis that is currently being experienced
in this country, but cannot do so in isolation. The RTPI is concerned
that current Government policies focus overmuch on planning's
role and, on development control in particular. It is essential
that planning's role in the provision of affordable housing is
taken within a broader consideration of all the factors that constrain
supply. These include such factors as mortgage rates and the range
of mortgage products, stamp duty, salary levels, patterns of public
investment, demographic and migration factors; interest rates;
the attractiveness of housing for institutional investments; the
availability of finance, public investment in housing; the availability
of personnel and skills in the construction and related industries
and the behaviors within the house building industry.
18. Secondly, it should be noted that new
housing forms a very low proportion of total housing turnover.
In 2001, there were 1,458,000 transactions in the housing market
and, yet, only 123,451 new homes were completed. It is also worth
noting in this context that the price of new housing is more expensive
than prices within the existing stock. In 2002 the median price
of new housing in the UK was £133,500 and that of other housing
was £100,000. Only 6.0% of new housing was priced at less
than £60,000 whilst 23.6% of other housing came into this
band.
The relative importance of increasing the supply
of private housing as opposed to subsidised housing
19. For decades there has been a failure
to deliver adequate sustainable housing in the numbers that are
required. In England alone, this shortfall now constitutes nearly
95,000 homes per annum against assessed requirements.
20. There has been a significant shortfall
in the provision of affordable housing; in 2000-01 26,735 affordable
homes were provided, against a recognised requirement of 83,000.
To put it simply, there is a great need for more housing, in particular
housing that is accessible to all and, thus, truly affordable
housing.
21. In 1990-91, the private sector was responsible
for 132,499 completions, housing associations 14,575, and local
authorities 12,958. In 2004-05 the private sector completed 137,730
units, housing associations 16,627 and local authorities 100.
This is a pattern that can be traced back to the post war years.
If we look back to the 1950's, Local Authority house building
numbers were regularly over 150,000 and private sector housing
numbers were small in comparison. The trend has been that private
sector house building has increased and now stabilised around
current figures, whereas local authority housing has rapidly declined
to a point where it practically no longer exists.
22. The private sector has kept up a fairly
constant level of house building for many years, yet the impact
of the mass reduction of local authority house building has never
been addressed and this has had a huge impact on the availability
of affordable housing. Local authorities, as strategic housing
bodies, have a responsibility to ensure that housing is accessible
to all. Their ability to fulfil this responsibility directly has
been lost with the loss of commitment to local authority house
building. As the chart below shows, housing associations, which
have taken on that responsibility, have not succeeded in maintaining
a level of building of supported housing.
23. Housing associations (Registered Social
Landlords) are finding that they are becoming more and more reliant
on the private sector to provide sites for affordable housing.
This is mainly because of a shortage of publicly owned land that
can be disposed of at a subsidised rate, the increasing price
of land, and competition for available sites with the private
sector. This has resulted in Housing Associations becoming more
reliant on affordable housing planning polices such as S106 mechanisms
to help maintain a supply of affordable housing. This, in turn,
means that the sustained provision of subsidised housing is directly
linked to the sustained growth of private sector house building.
24. The private sector does not have the
responsibility to provide affordable housing for those unable
to compete in the market. By its very nature, it has a responsibility
to its investors and thus expecting the affordability crisis in
housing to be resolved by the private sector does not form a balanced
and responsible policy response. It is worth noting that, "the
Office of Fair Trading is launching an inquiry into Britain's
house builders. The OFT is concerned at the quality of newly built
British homes. The inquiry may also investigate whether the industry
acts as a cartel to keep prices artificially high by restricting
the supply of land." (The Observer: 4 September 2005)
How the planning system should respond to the
demand for housing for sale
25. In the past, the planning system has
been accused of failing to respond to changing demand for homes
in different places, and this lack of flexibility has played its
part in creating the housing crisis that we now face. It has also
been said that development plans need to take better account of
housing markets and need, and should reflect the needs and circumstances
of different areas better. The RTPI agrees that there is the need
for the whole planning system to reflect the better practice that
exists within it in these respects but, as the following paragraphs
show, we do not believe that the current ODPM proposals for changes
to planning practice in relation to housing are the best way of
achieving this.
26. Government's plans to boost housing
supply, as described in the 2005 consultation paper Planning
for Housing Provision concentrate on:
— assessments of need and demand, and
development of plan policies, on the basis of a robust evidence
base, that look at housing markets and are developed in partnership
with stakeholders; and
— a proactive approach, using positive
planning to deliver appropriate housing land, keep provision under
review, and maintain a rolling five-year supply of housing land
within a 15-year time horizon.
27. Put simply, the intention is to facilitate
housing development by making the planning system more responsive
to the housing market. However, it is the RTPI's belief that the
Governments plans go too far, and instead of making the planning
system responsive to housing markets, we risk making the planning
system subservient to housing markets.
28. Housing allocations, as proposed, will
follow housing demand, not need. This will result in housing being
delivered where it is a demanded rather than, necessarily, where
it is needed. Housing demand is directed by housing aspirations,
therefore allowing development to follow demand will place further
pressure on areas of existing growth, and will ignore areas of
market failure that have a recognised need for new development.
29. There is a big difference between housing
need and demand, particularly in terms of location, tenure, size
and affordability. House builders will naturally and rightly seek
to provide housing that maximises economic return, but by allowing
market demand to lead house building we will be failing those
that need our help the most, those who are unable to influence
demand in the market place.
30. Following demand and not need will severely
damage planning's ability to promote brown field development,
and will thus place great development pressure on green field
sites as these are often the more attractive options for developers.
It is important to ensure that planning's role in creating and
managing markets—as well as being informed by them—is
not inhibited. The planning system has a duty to help stimulate
demand in existing communities through upgrading social infrastructure,
creating better environments and improving the perception and
appearance of an area.
31. If housing development is led purely
by market demand, it may be at the cost of other sustainable planning
considerations. The planning system does need to understand and
fully take into account housing demand, and we must support the
drive for more housing, however the planning system also has a
responsibility to find balance between often competing land use
interests. This potential conflict in aims is demonstrated in
the ODPM's own public service Agreement (5) which requires it
to "achieve a better balance between housing availability
and the demand for housing, including improving affordability,
in all English regions while protecting valuable countryside around
our towns, cities and in the green belt and the sustainability
of towns and cities."
32. The inherent risk of the planning system
simply following the housing market is that other considerations
such as social issues and the environment would suffer in favour
of market demands.
The scale of the Government's plans to boost housing
supply
The scale of housing development required to influence
house prices and the impact of promoting such a programme on the
natural and historical environment and infrastructure provision
33. As paragraph 16 indicates, scale of
housing development needed to influence house prices significantly
could be so high that it would be unrealistic to expect this to
happen. If the only action taken by Government to resolve housing
affordability was mass house building in isolation of any other
policies then this would have a very significant environmental
and social impact. For example, a statement by the Chartered Institute
of Water and Environmental Management in August 2005 said that,
"The Environment Agency expresses concern that if all new
homes were built to current energy efficiency requirements, domestic
CO2 emissions would increase by 24%, placing strain on long term
targets for carbon emissions reduction. The Environmental Audit
Committee notes that unless significant action is taken, carbon
emissions from the housing sector are likely to almost double
from their present 30% contribution to the UK's target amount,
to over 55%."
34. Importantly, the RTPI believes that
the Government commitment to the provisions of infrastructure
needed to support greater levels of house building is not currently
present, and that a lack of investment in infrastructure is holding
back the achievement of the Sustainable Communities Plan. For
example, in the South East of England, where there is a desperate
need for increased housing provision, 40,000 dwellings that already
have planning permission are being held back from construction
because of shortcomings in infrastructure provision according
to the Barker review.
35. It can therefore be argued strongly
that a lack of investment in infrastructure is stymieing the Government's
agenda for growth. The planning system has a key role in identifying
the need for, and bringing forward, infrastructure, and it is
important that this is recognised as being a key requirement to
delivering housing in sustainable communities. The RTPI is campaigning
for greater recognition of the importance of infrastructure and
a greater level of government co-ordination and prioritisation
of investment.
The regional disparities in the supply and demand
for housing and how they might be tackled
36. The ODPM, alongside the Treasury and
the DTI, is required to, make sustainable improvements in the
economic performance of all English regions by 2008, and over
the long term reduce the persistent gap in growth rates between
the regions, demonstrating progress by 2006 (PSA 2). The RTPI
is concerned that Government plans to concentrate housing growth
within designated areas (predominately in the South East) may
have the effect of intensifying the existing problems rather than
reducing them, especially if the growth leads to a cycle of further
economic expansion in already favoured parts of England.
37. To truly address issues of disparity
in housing supply and demand, it is vital at the regional, sub-regional
and local levels, that strategies for urban renewal and housing
market renewal are allowed to take a locally sensitive but comprehensive
view, looking across neighbourhoods and tenures and ensuring that
land use policies support those for social and economic regeneration
and renewal.
38. At the national level, this is best
done through a national spatial framework. The RTPI has been at
the forefront of those calling for such a strategy. This is not
designed, as some critics avow, to encourage the mass movement
of population from one region to another but is designed to provide
a clear spatial view of England and the United Kingdom to inform
decisions on priorities for investment, to analyse the differential
spatial impacts of government spending plans, and to analyse trends
in different functional areas of the UK to enable more informed
decisions to be made.
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