Written evidence from Levvel Ltd (ARSS
118)
REVOCATION OF
RSS
1. INTRODUCTION
The purpose of this note is to respond to the Government's
consultation in respect of the decision to abolish Regional Spatial
Strategies. In particular, it is intended to respond to the implications
of devolving the responsibility for setting overall targets in
respect of house building to local planning authorities. Whilst
we support this policy, we consider that it would be helpful to
provide guidance on the manner in which such targets are to be
set.
In general, we consider that it is logical for local
authorities to be given responsibility for determining their own
targets for development. However, given that development often
faces local opposition, it would be helpful if the devolution
of this responsibility could be accompanied by a statement of
principles from the centre:
Central government should make clear its view that
there is an acute shortage of housing in this country which has
immense consequences for homelessness, for people's quality of
life and for economic competitiveness;
It should make clear that it expects to see this
shortage addressed and that it considers that all new supply mitigates
rather than exacerbates the affordability problem;
Local Planning Authorities should be required to
base their targets for housing delivery on robust estimates of
the level of local need and should take into account demographic
changes—both in terms of population growth and the decline
in household size;
The current proposal to incentivise housing delivery
by matching 100% of Council tax receipts for new homes for six
years should be formalised;
The relationship between CIL and S106 obligations
should be clarified in order to make clear that affordable housing
is not given a lower priority than all the infrastructure items
sought through CIL;
It should be reiterated that, although the level
of infrastructure and affordable housing that can be sought from
development is limited by consideration of viability, the allocation
of additional development will deliver additional affordable housing;
and
Local Planning Authorities should consider their
relationship with neighbouring authorities who constitute part
of the same housing or employment market and should develop appropriate
mechanisms to collaborate with them in order to ensure that the
total quantity of development required is allocated.
2. CONTEXT
Over the past 15 years the supply of housing in England
and Wales has fallen far short of the targets set out centrally.
In the face of constricted supply, prices have risen sharply and
far faster than incomes. Addressing the shortage of housing in
all tenures and easing the consequent pressure on affordability
will require a flourishing housing industry and an adequate supply
of land upon which to build. Moreover, in recent years, the development
of new housing has become an increasingly important source of
both affordable housing and infrastructure as well as providing
crucial, skilled jobs.
Despite these facts, the provision of new housing
is generally unpopular at the local level. There is therefore
some concern that the decision to devolve the responsibility for
setting overall housing targets to the local level will hand an
effective power of veto to those who object to the development
of housing at a time when house building needs to be encouraged.
Whilst we acknowledge that this is a potential risk associated
with this policy we also note that decisions about the provision
of infrastructure and affordable housing and the capacity of new
development to bear that burden are already made at the local
level. Since the overall volume of development will be the biggest
single factor in determining the level of such benefits that can
be provided, it is logical that the two issues should be considered
together.
In moving towards such a system, we consider that
it will be important to ensure that the system:
Makes it possible to put forward a positive case
for growth;
Is transparent, consensual and encourages early engagement;
and
Does not impose large additional costs on local planning
authorities.
3. THE NEED
FOR HOUSING
The principal reason for our confidence that the
revocation of RSS should not lead to the adoption of far lower
targets at the local level is demographic. The ONS continues to
predict substantial increases in population whilst average household
sizes are falling. These facts have long been recognised. As far
back as 2002, the Joseph Rowntree foundation concluded that, if
house building rates continued at their then current level, the
country would face a shortfall of over one million homes by 2022.
In 2003, the Barker report noted that the rapid run
up in house prices was at least in part a price signal pointing
to a shortage. She estimated the level of increase in overall
housing delivery required in order to stabilise prices at 1.1%
in real terms would be an additional 145,000 homes per annum.
To stabilise prices at zero growth in real terms would require
an additional 240,000 homes per annum on top of the 155,000 homes
for which RSS then made allowance.
Since then, national targets have increased; most
notably when Gordon Brown committed the government to the delivery
of three million homes by 2020—an annual rate of around
240,000 per annum. Despite the fact that this target remains far
below the level identified by Kate Barker as being necessary for
the stabilisation of house prices, it was never reached during
the housing boom up to 2007 and housing delivery since the market
turned in the third quarter of that year has been far lower.
Even if house building were to recover quickly, years
of under-supply relative to targets set at the regional level
mean that, notwithstanding the fact that some authorities have
exceeded their targets, the national picture remains one of massive
under-supply.
At the local level, estimates of the overall need
for housing have tended to find that the demand for housing has
been generally larger than the RSS target. We have certain reservations
about the findings of Strategic Housing Market Assessments—in
particular about the scale of identified need for affordable housing
relative to the need for market housing. Nevertheless, in many
cases, the overall need for housing is found to exceed the quantity
planned for by RSS policies.
Thirdly, we would point out that the steep run up
in house prices over the past 15 years is a clear price signal
that demand has outstripped supply. Even though prices have fallen
considerably from their peak in 2007 the relationship between
house prices and household incomes is less affordable than it
was during the majority of the Twentith century. This is an important
issue for the economy and the international competitiveness of
the UK in world markets.
Since local planning policies must rest upon a robust
evidence base, we are confident that any such robust assessment
of the need for housing at the local level will, in the majority
of cases identify a need for more housing rather than less. Whilst
it would be desirable for the Government to give a clear signal
that it recognises the shortfall in housing supply at the national
level and expects to see it addressed, what is essential is that
local assessments of the need for housing are robust and take
into account the factors cited above.
We recognise that the forecasting of demographic
trends is not a precise science—either at the national or
local levels. However, it would certainly be possible to identify
the upper and lower bounds of a range. Where a local authority
wished to position itself within that range could then be determined
by other considerations, as we will consider below.
4. CHALLENGES
Local Opposition
As regards the first of these points, it is certainly
the case that, when invited to comment on proposals in Local Plans
and Local Development Frameworks members of the public have tended
to be opposed to, rather than supportive of, development. If the
target for house building is to be set at the local level, where
opposition is sometimes fierce, it would be helpful if Government
could provide incentives to plan for growth. In this context,
we welcome the proposed amendments to current Council tax arrangements
which will provide some incentive to allocate additional residential
development through the plan process. At around £7,000/dwelling,[147]
the proposed incentive payments associated with new development
are considerable in proportion to the scale of housing delivery
and may be a substantial motivator for local authorities but members
of the public may see them as comparatively modest in relation
to the scale of the entire Local Authority budget and thus a limited
motivator.
Secondly, and in our view more importantly, in winning
over public opinion current system provides little incentive to
support development. Circular 05-2005 and its predecessors explicitly
prevent developers from being asked to provide benefits beyond
the mitigation of their own impact through S106 agreements. It
is scarcely surprising to find that local people are not motivated
to support development which is officially prevented from providing
benefits.
The move towards a Community Infrastructure Levy
ends this principle and allows local planning authorities to seek
contributions towards the provision of any infrastructure that
would "support the development of their area". We have
seen no reason to assume that its replacement by a Tariff, as
announced in the document Open Source Planning, will revert to
the status quo ante. The regulations which govern the introduction
of CIL made it clear that the process is to identify the total
level and cost of infrastructure required and then to divide it
by the overall quantity of development (assessed on a per square
metre basis).
However, because the overall quantity of development
is assumed to have been decided at a prior stage, through the
RSS, the impression was given that the amount of new infrastructure
that could be delivered via planning gain is entirely independent
of the overall level of development envisaged by the plan. This
is not the case. In practice, delivery is constrained by the economic
viability of development in the local area and it therefore follows
that a higher level of development will allow the local planning
authority to meet a higher proportion of its objectives. Linking
the allocation of new homes to the benefits they will provide
thus helps to make the case for new development. We will dwell
on the means of doing so in greater detail below.
In the meantime, it is worth considering the current
system. With the introduction of CIL, residential development
is required to contribute towards planning gain in three distinct
ways:
Through the Levy towards infrastructure required
for the development of the area—which may include making
good existing deficiencies;
Through Section 106 agreements towards infrastructure
necessitated by the development itself; and
Through Section 106 agreements towards affordable
housing;
Of these three items, only the second is limited
by the nature of the development itself. If a development creates
a need for a certain number of new school places, it can, and
will, be asked to contribute towards the provision of those places.
However, the first and last items are limited by
factor other than the nature of the development itself. If the
schools in a particular area are already overcrowded or in need
of replacement, the local planning authority may seek a further
contribution towards new schools through CIL and this contribution
would not need to bear any relation to the number of schoolchildren
who were likely to move to the new development from other areas.
Similarly, if the area has a pre-existing need for affordable
housing, the local planning authority may seek new affordable
homes—despite the fact that the development itself does
not create that need.
However, although the amount of planning gain which
may be sought from new development is not limited by the nature
of the development, the maximum contribution that developments
can afford to make is limited by the financial viability
of that development.
In recent years, planning authorities have recognised
that the amount of infrastructure and affordable housing that
is needed in their areas often far exceeds the quantity that can
be delivered from the amount of development envisaged by the RSS
whilst retaining viability. Under the present CIL regulations,
the functioning assumption is that, where need exceeds capacity,
the gap will be filled by public subsidy—as previously.
Whilst this is perfectly proper—there is, after all, no
reason why developers should be expected to meet the whole cost
of any infrastructure that the local planning authority deems
desirable, guidance should recognise that central government funding
is, itself limited.
Where there are insufficient fund (public and private)
to deliver all the necessary affordable housing and infrastructure,
it is surely sensible to consider whether the allocation of more
development would deliver more funding for more benefits.
Moreover, as we noted above, an analysis of the overall
need for housing in an area might reasonably produce a range of
possibilities. However, where local authorities are able to consider
their overall need for housing in light of their need for infrastructure
and affordable housing, an incentive will be created to deliver
a larger volume of affordable housing in order to secure the maximum
level of contribution towards infrastructure.
In summary, we would suggest that, in setting the
target for overall delivery of development, consideration should
be given to the likely levels of infrastructure that can be secured
from different quantities of development.
Complexity and Expense
The process of developing a robust and credible evidence
base in support of local planning policies is already complex
and expensive—it comprises a host of technical documents
and financial appraisals which are not only difficult for the
public to understand but can be difficult to integrate with one
another.
It is not uncommon to see financial appraisals of
the effects of two different aspects of policy, carried out on
very different bases, in the same local authority evidence base.
The justification is often that values and construction costs
have changed but, since the Core Strategy upon which those studies
are based is intended to last for 15 years, it is worrying if
the evidence underpinning them struggles to remain pertinent for
the length of time taken to adopt them.
It might be argued that adding a further variable—the
overall level of development—to this situation would create
further confusion. Taken in isolation, it might.
However, we would argue that the evidence collected
to inform local policy could usefully be reformed in any case.
The nature of the evidence that is now generally deemed to be
required has emerged gradually in a piecemeal fashion. For example,
since Circular 6-98 established the possibility of seeking affordable
housing through planning policy, it has been necessary for Planning
Authorities to demonstrate a need for additional affordable housing.
Typically, this was done by means of a Housing Needs Survey. The
publication of PPS3 in 2006 made it clear that Housing Needs Surveys
should be replaced with Strategic Housing Market Assessments and
Strategic Housing Land Availability Assessments. It also established
the need for affordable housing policy to have regard to the economics
of development. Even so, it was not until the decision in the
case of Blyth Valley that this was universally acknowledged to
necessitate a District wide assessment of the financial viability
of sites in the Borough. Then, in February 2010, the emergence
of CIL and the regulations which govern its use made it clear
that Planning Authorities would need to draw up a schedule of
all the infrastructure required in their area and then assess
the impact on viability. This has added further to the confusion,
which has, in turn, created further delay in the adoption of policy
Where policies have already been designed to seek
an ambitious level of affordable housing, the impact of a potential
CIL has been confusing. It is not clear whether new studies of
viability are required or how relative priority should be ascribed
to different forms of planning gain sought through different mechanisms.
For example, many districts consider affordable housing to be
their top priority and that some of the items on the charging
schedule prepared for the CIL are of far less importance. However,
CIL cannot be reduced on a case by case basis in order to account
for scheme viability, but affordable housing can. In effect, this
gives all the items paid for through CIL a priority over affordable
housing.
Clear guidance on this matter would be welcomed by
both planning authorities and developers and would help local
people to get involved in consultations.
At present, assessments of viability tend to take
the form of a single study conducted at a late point in the policy
development process, when policy is largely fixed. If the assessment
then reveals the policies to be unrealistic (especially in the
short term) it can be very difficult to change direction.
In our view, greater stress should be given to questions
of financial viability from far earlier in the process. This would
allow it to be assessed iteratively and would prevent unrealistic
expectations from becoming entrenched. As matters became known
their impact on the appraisal could be included and tested, developers
seeking to challenge specific assumptions could do so and land
owners would be less likely to form unrealistic expectations about
the "hope value" of their land.
We recognise that few local authorities are starting
with a blank sheet of paper in respect of their planning policies.
Nonetheless, for the sake of simplicity, we would suggest that
the following would be an appropriate sequence for evidence gathering.
Identify the overall need for housing of all tenures—drawn
from demographic data and identifying a range.
Identify the sites available to deliver the housing
requirements through the SHLAA as at present.
Identify the overall infrastructure requirement including
any "triggers" for single large items (so many additional
homes in settlement X would require a new school, Y new homes
would require an additional bus route etc)
Distinguish necessary infrastructure (such as water
mains and sewerage) from desirable infrastructure (such as improvements
to town centre).
Carry out an initial assessment of the ability of
development to provide affordable housing and infrastructure.
Having carried out an assessment of the viability
of developments it will then be possible to show not only what
level of contribution towards infrastructure and affordable housing
will be delivered by all of the planned development but also what
levels would be delivered by higher or lower levels. This form
of consultation is currently all but absent from policy formation.
This approach would also allow local authorities
to test strategic decisions like the balance of greenfield/brownfield
allocations. It is often argued that, since greenfield sites should
be cheaper to acquire, they should be able to deliver more infrastructure
and affordable housing. In practice, the balance between greenfield
and brownfield sites is often set as much by guidance as by a
consideration of their relative merits. Moreover, the presumption
against greenfield allocations creates an artificial scarcity
which may push land values higher than otherwise.
Funding
To advocate more consultation and more research at
a time when planning departments face financial pressures is,
of course, difficult. However, whilst both can be expensive, we
do not consider it a given that such a finance based approach
would be more expensive.
First, many of the elements of the research (including
research into the number of homes required) are already being
carried out at present—the problem is that they are isolated
from one another. The cost of bringing the studies together may
be marginal. Second, although such appraisals might seem to be
more complex than those undertaken at present, this may be misleading.
Because such appraisals are currently carried out at a single
point, a large part of their cost is scenario or sensitivity testing.
However, if they were carried out iteratively, the number of options
tested would tend to fall as stakeholders were able to submit
their own data and improve estimates.
Finally, it is possible that the Local Planning Authority
would not need to shoulder all these costs itself—developers
currently spend considerable sums of money in making representations
to local planning policy—if a mechanism could be found for
those resources be directed at the development of the evidence
base rather than at the identification of its flaws then the cost
of the evidence base would be reduced and its robustness increased
at the same time.
Such a mechanism may vary from place to place: an
area where development is characterised by a large number of small
developments will need to adopt a different approach to developer
engagement than one where the majority of development will fall
on a single large site or indeed one where there are several large
sites in competition. Moreover, as we have acknowledged, few local
planning authorities would respond to a new approach with a blank
slate. The route forward for each authority will depend on the
nature and robustness of the evidence already available to them.
Whatever the situation, it is clear that where developers have
a say in both the volume of development and the distribution of
affordable housing and infrastructure burdens amongst that development,
they have far greater incentive to engage constructively than
when they are simply competing for inclusion among a limited set
of allocations.
Another reason why it will not be possible to suggest
a single, prescriptive formula for the manner in which local authorities
should develop their evidence base in respect of overall development
volumes is the range of different relationships between different
authorities. Housing and employment markets do not necessarily
follow local authority boundaries and this has been reflected
in a variety of different approaches to the co-ordination of policy
in at the local level. It is entirely right groups of authorites
which consider themselves to constitute a single housing or employment
market should wish to co-operate more closely with one another
than those which consider themselves to be more self-contained.
This fact is reflected in the range of cross border initiatives
and, in some cases, joint working and commissioning arrangements.
Such arrangements would not be encouraged by the adoption of a
single blanket approach and the imposition of one could lead to
aborted work.
Whilst we do not consider it appropriate to define
the nature of the relationship that local authorities should have
with their neighbours, it is essential that all planning authorities
should consider their immediate context when developing policy.
It would certainly be disastrous if all the local authorities
which made up a particular employment market were to assume that
their neighbours would make provision for all the housing required.
Local Authorities should be encouraged to collaborate
and innovate in order to find ways of involving those with an
interest in securing new development whether they are developers,
landowners, or members of the public keen to secure the benefit
new development brings. Such innovation may be the development
of methodologies to which all developers can contribute data—thus
reducing its cost, it may involve the acceptance of discrete elements
of research from the developers themselves or it could even be
that the local authority and its major stakeholders commission
work jointly and agree to abide by the findings. Whatever approach
is adopted, it is clear that, when setting the overall volume
of development, consideration should be given to the simple fact
that where desirable benefits are delivered from new development,
more development brings greater benefit.
5. EXISTING DIFFICULTIES
Local Authorities are enjoined to seek early engagement
from developers but developers find it difficult to respond early
where the evidence upon which they are being consulted is fragmented
or non-existent until a late stage in the adoption process. Moreover,
developers who are in competition with one another to see their
sites adopted have little incentive to point out that infrastructure
or affordable housing burdens are unrealistically high for fear
that they may lose their allocation.
Whilst the decision to consider housing and other
development targets at the same local level and at the same time
as infrastructure and affordable housing requirements undoubtedly
presents a challenge, it also presents an opportunity to resolve
this dilemma.
September 2010
147 Assuming match funding of 100% of average UK Council
tax receipt for six years. (£1,100 x 6) Back
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