House of Commons - Abolition of Regional Spatial Strategies: a planning vacuum? - Communities and Local Government Committee

Abolition of Regional Spatial Strategies: a planning vacuum? - Communities and Local Government Committee Contents

5 Housing

Housing targets

82. A primary driver for the abolition of RSSs is the Government's view of housing targets. The Government believes that much of the resistance to house building around the country has derived from the imposition of targets through regional plans, but that if authorities were left to take responsible decisions for themselves, they would choose to build more houses than have been built in the recent past. DCLG claimed:

Our proposals will stimulate housing development. By abolishing Regional Strategies local planning authorities will be able to work with communities to see their vision for development realised. A key element of this will be decisions about housing and planning policy, including housing numbers and the pattern of development, which should rightly be taken locally.[98]

83. The DCLG also argued that housing targets were "all stick and no carrot. They were an ineffective incentive for housing delivery."[99] The Minister for Housing, Rt Hon Grant Shapps MP, told us in an oral evidence session in September last year on the priorities for the work of the Department that one of the measures of its success will be whether more houses will be built annually in future than were built immediately before the recession:

Building more homes is the gold standard upon which we shall be judged. The idea is to get a system which delivers housing in this country.[100]

84. The Government's approach to achieving this aim is based on the principles of localism. Its intention is to ensure that local communities are more involved in the planning process, and it has taken steps to introduce "neighbourhood planning" and a "community right to build", as well as the "New Homes Bonus", on which we comment further below.[101] The Government hopes that local authorities, freed from the imposition of RSSs and the associated regional targets, will (in partnership with their communities) be responsive to local needs and provide more houses in future.

85. However, the tension between local choice and national need cannot merely be wished away. There is a balance to be struck between housing targets set at a national or regional level, which are seen as being imposed against the wishes of local people, and leaving it to local communities to decide, which can lead to house building proposals being repeatedly blocked.

86. That tension was nicely summed up in the evidence of Councillor Jeremy Heron, from Ringwood Town Council. On the one hand, he was convinced that:

[...] the regional spatial strategy was simply too far removed from the community. It was covering a vast area, trying to be all things to everyone and, as such, representation that was made to the RSS quite often got lost in the noise of everything else that was going on, and if yours wasn't a big regional issue, it failed to be identified and noticed.[102]

However, he went on to list numerous examples where local planning applications met with objections and had no support, highlighting the dilemma which elected representatives face:

So, if you leave it locally, everyone is very aware there is a housing need in the area, but they do not want it if it takes out the field that they've looked over for the past five years. So, if you leave it to a simple local decision and local planning, it will end up in a hiatus, because, as elected representatives, your job is to support them. You know that these people will remove you if you don't support that view.[103]

87. John Acres, of developers Catesby, suggested that this tension could only be addressed by making people more aware of the positive side of new housing development:

I quite understand that people do not want building close to them if they feel it will be detrimental, but I think it is important that people should understand the bigger picture. They should understand the wider planning advantages of housing and that housing is not necessarily detrimental. It is not about putting more pressure on schools or services; it is about making those services work more efficiently so that more children going into a school means that that school gets more resources, or more people shopping at the local supermarket or whatever brings more business to that community, making it a wider and more interactive community, and allowing people to move from one place to another.[104]

88. Roy Donson, from Barratt Development, made a similar point, arguing that it is the responsibility of Government to change the negative public perception of house building:

Clearly, what has to happen to make communities more in favour of housing is a cultural change, which starts with these sorts of issues. That cultural change can come only from the Government essentially; it has to come from that top-down process. It has to be established that house building is not only necessary for the benefit of all but is a good thing for the country as a whole and cohesive for society. We have to establish that as a basic principle. Having done that, we can then start to turn round the idea that, for some reason, which completely defeats me, house building is bad.[105]

TETLOW KING RESEARCH

89. The question to which the Government has assumed it already has the answer is whether a localised planning system will be any more successful than regional targets in countering the negative public perception of house building and increasing the number of new homes built. So far, the signs are that the number of new homes coming through the planning system is falling, and falling significantly. Cameron Watt of the National Housing Federation (NHF) warned us of "a big fall-off in the delivery of all homes, including affordable ones", as a result of the abolition of RSSs. He cited research that the NHF commissioned from their consultants Tetlow King. Steve Hinsley, senior director at Tetlow King, told us about the research:

The work we did on behalf of the federation began shortly after the announcement of Eric Pickles of the intention to abolish the RSS […] Our first assessment found 85,000 homes no longer being planned for, rising to 100,000 on 2 September; early in October, authorities indicated 160,000; and the most recent assessment we have undertaken is 182,000. I think that shows not only the scale of the planned losses but also the speed at which those numbers have fallen away.[106]

90. When the Secretary of State gave evidence, he rejected the research, saying:

I am sure the Committee doesn't need me to point out how iffy that evidence was. It was conducted on the basis of a telephone call in which the person at the other end might decide on various numbers. No formal decision has been taken by local authorities. The immensely important thing is that this was about a theoretical number put together; it was not about real houses. It was not about real permissions; it was about people thinking whether they were going to change their numbers. I found the actual numbers very unconvincing.[107]

91. We invited Tetlow King to respond and it duly sent in supplementary evidence on 4 January 2011, rebutting the Secretary of State's claims:

The number of homes no longer being planned since the Government announced its intention to abolish regional strategies has now increased to a total of around 201,509. This number has risen dramatically since our first assessment was carried out in July 2010; this concluded that 84,530 dwellings were no longer being planned for.

88% of the estimated 201,509 dwellings derive from official local authority sources, such as Core Strategy consultation documents or press releases. Whilst it is true that the remaining 12% do come from unofficial tip offs or estimates, we have been very cautious in applying such figures. As our research has evolved, however, it has become evident that some unofficial reductions from earlier iterations have subsequently been formally confirmed by local authorities. In every case where this has occurred our earlier estimates have been proved to be either correct or an underestimate of the final total reduction. In no instance have we been shown to have exaggerated the reduction.

The local authorities mentioned in our report have, for the most part, set out or decided to set out their reduced housing targets in Core Strategy consultation documents, in preference to the RSS figures. Despite the lack of any independent testing, many of the authorities concerned are according these reduced housing targets full planning policy status and using them as the basis for calculating current five year land supply requirements.[108]

NATIONAL NEED AND LOCAL DECISION-MAKING

92. Each of the local authorities that has decided to plan for lower numbers of houses than required under the RSSs would presumably argue that it is doing so because those lower numbers will still meet local need. Tetlow King suggests that in many places that may not be the case. Additionally, however, decisions made by individual local authorities on housing numbers for their area may not necessarily add up to the sum total of housing need across the wider area. The Town and Country Planning Association explained the consequences as follows:

The removal of [regional spatial strategies] and the associated abolition of the National Housing Planning Advice Unit will have a substantial impact on the way housing needs are forecast and provided for through the planning system. In short, a nationally organised and regionally and locally expressed housing regime based on targets has been replaced by exclusively local consideration of housing needs. 'The Future of Planning Report' [published by the TCPA in June 2010] concluded that the consequences of these measures would be a significant 'under provision' of housing because local housing needs assessments may not adequately consider international, national and regional housing pressures.[109]

93. The Joseph Rowntree Foundation summarised it as follows:

There are concerns that housing targets determined by individual local authorities will not add up to meet the needs of the country and will not provide the 'right' type of housing in the 'right' place as the spatial distribution of housing is crucial.[110]

94. Roger Tym & Partners explain that migration over local authority boundaries—both urban extensions, where towns and cities spill over into adjoining districts, and the so-called "Growth Areas", where demand was being shifted over longer distances, away from the most congested areas in southern England—makes some form of supra-local planning for housing need necessary:

[…] in real life very many people do move house across administrative boundaries or would like to do so. In this case, extreme localism will not produce the right answer, because potential migrants into the local area do not have a voice or a vote in the destination community. Under the old system, regional planning provided a mechanism (whether effective or not) to represent the interests of these potential migrants.[111]

95. Star Planning and Development asked the question that is implicit in the comments of many witnesses on this point:

Without some form of national context or framework for the provision of new dwellings, how can there be a reasonable degree of certainty that the housing needs of the country [will] be met in a co-ordinated manner?[112]

96. The Government's answer to this question is the same as it is to the other issues of strategic planning which we considered above: voluntary cooperation between local authorities.[113] Unfortunately, there is no better evidence that such cooperation will be effective on the issue of housing than on any other strategic planning issue: indeed there is, if anything, less. Steve Hinsley from Tetlow King Planning told us about his pessimistic view of local authorities working together:

[...]the difficulty is that in the past local authorities have been expected to work in a loose relationship with each other. If we look at examples of their coming up with an answer at the end of the day, it has not worked very well. If we take the example of Bristol and authorities there, they just do not get on and there is a hiatus and inertia in going forward. There need to be some powers.[114]

He went on to discuss the problem of local authorities looking at the areas beyond their own areas when looking at housing needs, and taking account of the needs and preferences of adjoining local authorities:

How do you look at the opportunities in the wider planning sense and where the housing should go relative to need and constraints? I think that is the level that needs to be handled very carefully, because I do not think that to go back to the old style of district-wide surveys is the answer.[115]

97. As with other areas of strategic planning, witnesses suggested that binding powers were necessary to ensure effective cooperation between individual local planning authorities. Cameron Watt of the National Housing Federation told us:

[…] we think that binding powers are one option that should be seriously looked at because, obviously, if local authorities themselves have come together and set out a vision for the future and made commitments to meet identified housing needs themselves clearly those commitments must be meaningful.[116]

He went on to emphasise the case for consistency across local authorities when dealing with housing need, and proposed that new guidance should be issued centrally "to help local authorities ensure that they robustly and accurately identify housing need":

[…] I think that process should be as consistent as possible across the country so it is right therefore for local authorities, having identified need on their own patches, to come together […] and have a meaningful conversation, and also for individuals to hold their local authorities to account on whether they are accurately identifying housing need and planning to meet it.[117]

These comments were made in the context of Local Enterprise Partnerships. We have already concluded that LEPs are not themselves a suitable vehicle for strategic planning, but that does not diminish the need for local authorities to come together to undertake this function.

98. Finally, he raised the issue of planning inspectors having the power to check whether local authorities' housing figures are accurate:

I think it is vital that when local authorities identify housing need at a local level, by whatever means, inspectors should be able to continue to check the new local plans that they have developed to see whether the needs that those local authorities have themselves identified are credible and the numbers are adequate; otherwise, some authorities may abuse their new freedoms and revise their housing numbers significantly downwards even though there is significant unmet need at local level.[118]

99. Meanwhile, Kay Boycott from Shelter raised the issue of democratic accountability if houses are not built and where responsibility for any shortfall in housing needs rests:

What we look for is the ability to hold people accountable. What worries us is: is part going to the LEP, is part going to local authorities, is part going to sit with the national plan? What about county councils and parish councils? Where is the point at which we can hold local politicians to account for the delivery of affordable homes? In a way, it does not matter where it sits as long as those people collaborate, it is based on housing need and they come together in a timely way to make the decisions, but being very clear it does not mean that in five years' time everybody can point to everybody else about why it went wrong.[119]

100. Debate in the Localism Public Bill Committee has also raised the question of how local authorities can be held to account for the housing numbers contained in their local plans. An amendment to the Bill which would have placed a statutory duty on local authorities to make "an assessment [of] the level of housing need and demand in the district of the local planning authority, together with the authority's proposals for addressing such need and demand" was rejected by the Government on the grounds that powers already existed, in primary legislation and in planning guidance, to achieve the same end. However, in responding to the arguments for the amendment, the Minister for Planning gave a welcome commitment to strengthening the requirement for assessments of housing need to be undertaken and to be met in the local plan:

I am at one with the right hon. Gentleman [who proposed the amendment] in requiring an absolutely clear, transparent, robust numerical assessment of housing need. Powers are available in planning law to do that. They will be reinforced, and we will strengthen their importance by making sure that no plan can be assessed and found sound unless it conforms to a rigorous assessment […][120]

The Minister also indicated his intention "to invite professional bodies to make recommendations for robust methodologies that can be shared with members of the public, so that they can be held to account".[121]

101. We welcome the Government's intention to strengthen the obligations on local authorities to ensure that they undertake robust assessments of housing need, and that local plans take adequate account of that need. However, there is no indication that such obligations will operate other than at the level of the individual local planning authority. Not all housing needs can necessarily be met in the local authority area where they arise, and it is one of the purposes of planning to ensure that overall housing provision is sufficient whilst respecting the constraints on and opportunities for new development. As our witnesses have made clear, housing need operates across local authority boundaries and there is no guarantee that, even if every local planning authority meets its own locally defined need, the national need for new housing will be met. We recommend, in line with our earlier recommendations about the framework for 'larger-than-local' planning, that the Government ensure that a robust mechanism is in place to assess, and ensure that each local authority plays its part in meeting, wider housing need.

CONCLUSION

102. We welcome the Government's recognition of the need for more homes. We especially welcome its intention of ensuring that more homes are built in total than were built immediately before the recession, and of building 150,000 affordable homes over the next four years (although this is not an exceptional number by historic standards).[122] However, we question whether either of these aspirations will be achievable under the Government's current proposals for the planning system. With the figures for new house building contained in local authorities' plans already estimated to have reduced by 200,000 following the announcement of the abolition of RSSs, we conclude that the Government may well be faced with a stark choice in deciding whether to compromise either on its intention to build more homes than the previous Government, or on its desire to promote localism in decisions of this kind. No evidence was produced to support the Government's view that local authorities will achieve comparable rates of house building to those in the past, let alone an increase. If the evidence of success fails to materialise very quickly, the Government is going to have to review its selection of levers of influence. We recommend that the Government report back to the House in two years' time on the extent to which the measures it is taking are achieving the aim of increasing the rates of building of both affordable and market homes.

New Homes Bonus

103. The New Homes Bonus (NHB) is a new system designed "directly [to] reward councils for new homes built".[123] The Government published a consultation paper on the NHB on 12 November 2010,[124] following which the "final scheme design" was published on 17 February 2011.[125] The final scheme design document describes the purpose of the Bonus:

The New Homes Bonus is designed to create an effective fiscal incentive to encourage local authorities to facilitate housing growth. It will ensure the economic benefits of growth are more visible within the local area, by matching the council tax raised on increases in effective stock. This will redress the imbalance in the local government finance system, whereby resources for growth areas did not keep pace with growth.[126]

104. The document goes on to explain in greater detail the unit of reward of the NHB:

We will link the level of grant for each additional dwelling to the national average of the council tax band for the following six years to incentivise local authorities to build and bring back into use the types of homes people want and need, in the places that people want them. We are doing this by measuring the change in dwellings on council tax valuation lists […] This approach recognises:

increases in housing stock
the relative value of the properties - larger family homes require more land and that homes built in areas of highest need are more expensive and tend to be in a higher council tax band and
that local council tax levels have a variety of historic and local reasons and we do not want to penalise authorities which have been prudent.

Currently the amount of grant relating to an additional council tax band D property will be about £1,439 per annum or £8,634 over six years, and the grant relating to an additional band E property will be about £1,759 per annum or £10,553 over six years. This will be reviewed if council taxes rise.[127]

105. It also explains how affordable housing will be additionally incentivised through the Bonus:

To ensure that affordable homes are sufficiently prioritised within supply, there will be a simple and transparent enhancement of a flat rate £350 per annum for each additional affordable home. This is about 25 per cent of the current average Band D council tax or 36 per cent of the average Band A council tax, and will be reviewed if council tax rises. Over six years an affordable home would receive an enhancement of £2,100.[128]

106. The money to fund the bonus scheme will come partly from the former Housing and Planning Delivery Grant (HPDG), which was worth around £146 million/year, topped up to £196m in the first year of the scheme and £250m in each of the following three years. The remainder will come from redistributing revenue support grant to local authorities. The money will go to local authorities and, according to the final scheme design document, and confirmed by the Secretary of State when he gave evidence, local authorities can decide how to spending the funding, in line with local community wishes.[129]

107. The NHB consultation document predicts an increase of housing supply of between 8 and 13 per cent. from 2016-17 as a result of the New Homes Bonus, using a 'baseline' of what would have happened in terms of housing supply in the absence of the NHB. The baseline is described in the consultation document:

In making the assessments of potential impact, a baseline for future net additions has been assumed [...] The baseline takes view of future housing supply (as measured by the net additions measure of changes in the housing stock) based on past performance in the market across housing market cycles.[130]

108. The evidence base includes many presumptions about the behaviours of different local authorities, as illustrated by the following extract, which explains the predicted figure:

When considering the financial impact of the New Homes Bonus it is important to focus on the net impact, that is: both monies taken away from formula grant and received through incentive payments upon housing delivery […] Our retrospective analysis provides us with an estimate of each local authority's net financial position; this analysis considers the behavioural impact in terms of housing supply resulting from this net financial position.[131]

109. The Secretary of State explained to us in oral evidence how he thought the New Homes Bonus would enable local authorities to get houses built where regional targets had failed:

They get nothing if they grant planning permission and do not build the houses. That is the beauty of it. You could meet your targets by granting planning permission but nothing much happened. What we are saying is, "Give permission and build the house and it's only on completion that it happens." You will be very well aware how difficult it is sometimes for that completion to go through, so there is a vested interest in ensuring those houses are built.[132]

110. As our predecessors found in their inquiries into housing and the credit crunch[133]—and as witnesses pointed out in evidence to us[134]—the ability to build houses has as much to do with the availability of mortgages as it does with planning permissions; and over that local authorities have virtually no influence. However, witnesses raised many more objections to the New Homes Bonus, both of principle and of practice.

OBJECTIONS TO THE NEW HOMES BONUS

111. Overwhelmingly, written evidence we received expresses not only considerable scepticism about whether the NHB will be effective in increasing the number of new homes built, but also concerns about whether it may encourage house building of the wrong kind in the wrong place. The most widely-held objection to the New Home Bonus is that it is inimical to a plan-led system on which spatial planning in this country is supposed to be based. Hallam Land Management Ltd. summed up the problem:

What can be the logic of giving more cash to local authorities simply to grant planning permissions when there may not be any actual specific requirement for that cash? Can it be good use of public money to proffer cash to those councils for giving planning permissions when they should in any event be granting the permissions without the need for incentives?[135]

112. Fiona Howie, from CPRE, illustrated the potential effect of the Bonus:

[...] We're concerned that cash-strapped authorities, if they really are seduced by the incentives, may well feel that they can grant permission for housing that comes forward outside the plan-led system, and we're concerned that that then overrides all the good aspirations of localism and bottom-up and really engaging communities in discussing where properties should go.[136]

Worse, the NHB could give rise to allegations that planning permission had been granted not because it was itself desirable, but because of the financial rewards:

[…] we very much would want to see an incentives scheme that ensures the implementation of the local plan, which has come up in consultation with the local communities and neighbourhoods, so that they see that the local authority are giving permission in line with the development plan and reaping the rewards, potentially. I think the big risk will be […] if a scheme comes forward that's outside the development plan and the local authority potentially looks at it favourably for the financial incentives. That could be where the real problems with their local community start.[137]

113. These fears were echoed by the evidence we heard from three representatives of local groups. Ron Morton, of Shortwood Green Belt Campaign, told us what sort of approach would be preferable:

I think a financial incentive is the worst possible option. I think the biggest incentive would be to involve local communities in the future of their communities, in the growth and the development of their communities—just that; just the involvement—because they are the ones with the expertise. They know what they can cope with, the sites that are available and what the need is.[138]

114. The Bonus also risks incentivising development of the wrong type in the wrong areas. Lawrence Revill, managing director of planning consultancy David Lock Associates, explains:

It is unclear how the incentive scheme will relate to housing need - the mechanism announced so far appears to provide a financial reward for delivering housing, regardless of whether the amount of housing delivered is sufficient to meet identified local housing requirements and needs. Thus the mechanism appears to ignore any national objectives for housing delivery (in relation to demographic need and household formation rates), and will emphasise housing as a commodity rather than a fundamental human right. There is considerable potential for those authorities not in need of further financial support to simply turn away housing proposals and for those in need of financial support to find it difficult to refuse proposals, irrespective of local requirements and needs. This approach appears to fundamentally distort the principle that housing supply should respond to assessed housing needs and be underpinned by rational spatial planning.[139]

115. A plan-led system should ensure that new housing development is coordinated with the necessary provision of supporting services and infrastructure. The lack of such supporting infrastructure is often a significant factor behind local objections, as Catriona Riddell, from the Planning Officers Society, observed:

[...] My experience with South East England Councils is that their main concern, reflecting what their communities told them, was that 100 houses here and 100 houses there had a knock-on impact on their doctors' surgeries, roads, skills and everything else.[140]

Although a financial incentive scheme is superficially attractive as a solution to this problem, the fact that the New Homes Bonus will be paid to the local authority, not the local community, and will not be ringfenced, so that it will not have to be used for any service directly connected with the new development, raises significant doubt about whether it will be effective. That is particularly so given that, beyond the £250 million per year set aside in 2012-13 to 2014-15, further money for the Bonus will be top-sliced from Revenue Support Grant—or to put it another way, local authorities will need to ensure that a certain level of house building takes place if they are to retain even the same level of Government grant they were receiving before. It is scarcely credible that local authorities will divert such money to support the infrastructure that new housing development needs if it is needed to maintain current day-to-day spending.

116. Nor is there any guarantee, even if NHB money was used for supporting infrastructure, that the building incentivised will be what the local community needs, as Miles Butler explains:

Who knows? Left to communities, we may end up with a perfect match between the housing requirements for the local economy and what a community desires, but there are some real risks in that approach without the parallel strand of some strategic thinking about what it is we actually need in this sub-region to deliver the economic growth we need. The housing must be balanced with economic development, which in turn must be balanced with the appropriate infrastructure to make all of that hang together in a sustainable way.[141]

117. Hugh Ellis of the TCPA summed up the problems arising from the NHB being paid to local authorities:

Which local authority—top tier or local tier in two-tier authorities? How is the money divided up and what's it spent on? Finally, if the weight of this is the idea that you can persuade communities to accept more housing because you pay local authorities, I don't think that politically stands.[142]

118. The level of the Bonus was also criticised. John Acres, from Catesby Property Group, commented:

My view is that they probably will not be enough. They will encourage authorities that want to build anyway; they will not encourage authorities that do not want to build because those incentives will not be sufficiently strong to promote that building.[143]

119. The local authority witnesses who gave evidence to us had a similar view. Councillor Ken Thornber, leader of Hampshire County Council, told us:

While the bonus is welcome—there will be councils with deprived areas that want to take advantage of this— there will be affluent areas that are willing to forgo not a very great amount of money in order not to upset their vociferous populations.[144]

Such areas may, additionally, be those with the greatest need for new housing, since the Bonus is not weighted to encourage house building where is it most needed.

120. There was also scepticism about whether the enhanced flat rate of £2,100 over six years for affordable housing would be adequate to persuade local authorities to build affordable housing, when not under any obligation to do so. Cameron Watt of the National Housing Federation, representing housing associations, told us:

The additional premium for affordable housing delivery could perhaps be increased [...] Housing development in many parts of the country is unpopular, and affordable housing in some areas even more so. At the moment, there is a proposal for a 125% bonus for affordable housing. I think a bonus of about 150% might well be more effective. We do need more for affordable housing and flexibility so that if the New Homes Bonus generally is not delivering the amount of housing that is needed the pot can be increased as soon as possible by top-slicing more formula grant.[145]

121. We discovered therefore, a widespread scepticism about whether the New Homes Bonus will work. Roy Donson, from Barratt Development, echoed the views of many witnesses when he commented:

[…] the Government has set so much store by the effect of the New Homes Bonus as part of the package. That is a completely novel approach, and we cannot put our hands on our hearts and be certain it works. I am absolutely certain in my own mind that Ministers are sincere about their desire for more housing and that they believe the New Homes Bonus-type structure will work, but it is quite a high-risk strategy because nothing like that has ever been tried before. I think there must be a plan B, and probably that plan is that if the New Homes Bonus as currently outlined—we do not have much detail on it at the moment—does not do the trick something must be added to it to make it work and we must keep at it until it does. I suppose that in the medium term there is a wee problem about money and about how that resource is made available.[146]

122. When this point of view was put to him, and he was asked what he will do if the bonus does not work and the target number of homes are not built, the Secretary of State replied:

We are very confident that it will work. If you forgive me, I don't want to undermine the policy by suggesting an alternative. I think human nature and our consultation with local authorities suggest that, as part of an overall package, this is a considerable inducement to build […] There are limits to what government can do in terms of the supply side, but we have always tried to move with the flow of the market. I think these reforms have the advantage of doing that, whereas the old system merely ignored the market.[147]

123. Pressed by our Chair on whether the Government had any evidence to show that the New Homes Bonus scheme would deliver more homes, the Secretary of State replied simply, "I hope my charm might have worked its magic on you, Mr Betts." This answer does nothing to rebut the widespread view that there is no evidence to show that the NHB will work.

124. In earlier evidence to the Committee, on 13 September 2010, the Housing Minister Grant Shapps MP was asked what the Government would do if fewer houses were built as a result of the change. He responded, "Ultimately, if everything else fails you would increase the incentives until they got built": a response which raises serious concerns about where the money would come from for such an increase and what effect it would have on the distribution of Government grant funding to local authorities.[148]

125. Miles Butler, from the Association of Directors of Environment, Economy, Planning and Transport, summed up the concerns of a scheme that is not based on firm evidence and is subject to change:

The whole notion of the New Homes Bonus is very much untested ground and is what Sir Humphrey might call 'a bold experiment, Minister'.[149]

NEW HOMES BONUS: CONCLUSION

126. Alongside 'neighbourhood planning' and the 'community right to build', the new housing regime proposed by the Government rests on the success of the New Homes Bonus. Instead of local authorities being obliged to provide a number of houses allocated to them through a regional planning process, they will be incentivised financially to build them. This is a bold experiment; but not one which, on the evidence we have before us, we can have any confidence will be successful.

127. Nevertheless, the Government has, in publishing its "final scheme design" document, indicated its determination to proceed with the New Homes Bonus scheme. The final scheme is not substantially different from that which was being proposed when we took our evidence. Our witnesses' concerns about the potential effects of the operation of the scheme therefore remain valid. If the number of houses built were allowed or even encouraged to rise substantially above the target in the locally approved plan, given the uncertainties and difficulties of co-ordinating with the necessary provision of other services and infrastructure, this may lead to the creation of unsustainable communities. Further, we doubt that the Government's objective of reducing conflict in the planning system and encouraging local communities to welcome new housing is likely to be achieved as long as there is suspicion that financial considerations are influencing how much land is being allocated for housing or whether permission is being granted for new housing.

128. The final scheme design document, and the Government's response to the consultation on the New Homes Bonus, give some important indications that the Government has recognised these concerns. The final scheme design document states:

The Bonus will sit alongside the existing planning system. It is intended to help deliver the vision and objectives of the community and the spatial strategy for the area. In particular, it will be relevant to the preparation of development plans which concern housing where it assists with issues such as service provision and infrastructure delivery. However, it is not intended to encourage housing development which would otherwise be inappropriate in planning terms.[150]

129. In response to concern about whether the Bonus could be a "material consideration" in local authority decisions on planning, the Government's response to the consultation on the Bonus expands on this statement:

[…] Local planning authorities will be well aware that when deciding whether or not to grant planning permission they cannot take into account immaterial considerations. The New Homes Bonus cannot change this and nor is it intended to. Local planning authorities will continue to be bound by their obligations here.

However, this is not to say that the New Homes Bonus will always be irrelevant to decisions on planning applications. In some cases it could lawfully be taken into account as a material consideration where there is a direct connection between the intended use of the Bonus and the proposed development - but this will vary according to the circumstances of the case. An example of this could be paying for the widening of a road to allow for the extra traffic the new development would bring or to provide for substitute open space that is lost as a result of a housing development.[151]

130. It is potentially a matter of some concern that the Government should suggest that the New Homes Bonus might be used to pay for road-widening or substitute open space. Under current planning rules, such matters are dealt with by ensuring that the developer pays for them, either through section 106 agreements or as a condition of the grant of planning permission. Without such agreements or conditions, planning permission should not be granted, since without the provision of the consequential improvements the development would be unacceptable and would have to be refused. If the NHB is intended to replace such obligations on developers, serious questions arise both about the future of the system of planning obligations (section 106 agreements) and about the amount of money being provided by the NHB, which would rapidly be exhausted were that to be the case.

131. We assume that this cannot be the Government's intention. That being so, it would appear that the New Homes Bonus is intended to function as an incentive only at the development plan preparation stage, and not at the point of considering individual planning applications. If authorities were to start granting large numbers of permissions in excess of their planned number, the implication would be that they had been incentivised by the NHB to do so, which the Government's response suggests would usually be unlawful. Local authorities will only receive the Bonus once houses have actually been built, overcoming one of the problems with regional spatial strategies, which provided only for targets, not actual homes. If the Bonus functions as indicated, incentivising local authorities to provide in their development plans for the housing which their assessments of housing need indicate are required, that is very much to be welcomed.[152]

132. However, the Government has not made its intentions explicit, and has not built them into its proposals in any meaningful way. We recommend that the Government ensure that the New Homes Bonus scheme keeps the local development plan at its heart, where planning decisions are based on sound evidence and judged against criteria which include issues of sustainability. It should do so by explicitly linking the Bonus to homes provided for in the local plan following robust assessments of housing need. We agree that it should be paid only when those homes are actually built.

133. Similar principles should apply to the incentivisation of the building of affordable homes. Just as the Government has no evidence that the Bonus will actually result in more development, so it has no evidence that the additional payment to incentivise an affordable home will encourage the building of one type of house rather than another. While the evidence suggests that there are some local authorities that would need a considerably greater differential incentive to promote affordable housing, there are also others that are more enthusiastic about affordable homes rather than private housing, so the structure of the incentive may even be misjudged. The NHB scheme, being demand-based rather than needs-based, is particularly likely to fail in the affordable housing sector, where need rather than demand is the defining feature. We recommend that the Government redesign the New Homes Bonus so that it better rewards the meeting of demonstrable need for affordable housing.

98 Ev 150 Back

99 Ev 150 Back

100 Uncorrected transcript of oral evidence taken on 13 September 2010, The Work of the Department for Communities and Local Government, HC (2010-11) 453-i, Q39. Back

101 See the Department for Communities and Local Government Business Plan 2011-2015, November 2010, and the Localism Bill. Back

102 Q 111 Back

103 Q 115 Back

104 Q 194 Back

105 Q 193 Back

106 Q 219 Back

107 Q 304 Back

108 Ev 127 Back

109 Ev 92 Back