Written evidence from the Federation of
Master Builders (ARSS 140)
INTRODUCTION
We are writing in response to the Communities and
Local Government Committee Announcement No.2, Announcement of
Inquiry and Call for evidence; abolition of regional spatial strategies
of Wednesday, 28 July 2010. The Federation of Master Builders
(FMB) is the largest employers' body for small and medium sized
firms in the construction industry, and with 11,000 members is
the recognised voice of small and medium sized builders. FMB is
committed to promoting excellent standards in craftsmanship and
assisting builders to improve levels of building performance and
customer service. Within its membership, the FMB has around 2000
firms which engage in house building, either as their primary
function, or as part for the suite of building services they provide.
The remainder of this submission is divided into
four sections as follows:
1. Executive Summary and Recommendations.
2. The Effects of Abolition of Regional Spatial
Strategies (RSS) on House building.
3. Can Incentives Deliver?
4. Policy Requirements to ensure an adequate
long-term supply of housing.
EXECUTIVE SUMMARY
AND RECOMMENDATIONS
1. The immediate effect of the abolition of RSS
has been to dramatically increase levels of uncertainty and delay
in a system already notorious for its slowness and unpredictability.
2. A study undertaken by the National Housing
Federation has concluded that plans for over 100,000 homes have
been shelved by local authorities since the revocation of RSS,
despite it being widely recognised that the UK needs more homes,
not fewer.
3. While incentives are welcome housing delivery
is too complex to be susceptible to a single policy solution,
and while abolition of RSS is unhelpful, it is far from being
the only factor inhibiting delivery of housing in the kinds of
quantities needed to satisfy demand.
4. Development viability is the single most important
factor influencing housing delivery: Ensuring viability requires
and acceptance by policy makers that a development can only support
a finite amount of taxation and regulatory burden before it becomes
unviable and the entire public benefit is lost.
5. The FMB calls on the Government to ensure
that local authorities undertake any planned reviews of housing
delivery within defined time scales, within a back stop time limit,
and based on robust, independent assessment of housing requirements.
6. The FMB calls on the Government must ensure
that an effective system for regional and sub regional integrated
planning solutions is quickly implemented to replace RSS.
THE EFFECTS
OF ABOLITION
OF REGIONAL
SPATIAL STRATEGIES
(RSS) ON HOUSE
BUILDING
7. The immediate effect of the abolition of RSS
has been to dramatically increase levels of uncertainty and delay
in a system already notorious for its slowness and unpredictability.
This section discusses the reaction of local authorities to the
abolition of RSS and the immediate implications for house builders.
LOCAL AUTHORITY
REACTION
8. Since formal revocation on 6 July, local authorities
have acted quickly. Based on evidence from the House Builders
Association and others it is clear that, while some authorities
have retained their Core Strategies, others have suspended them
pending revision, or pending further direction from the Minister.
This has often been done without any indication of next steps
or time frames.
9. The variety of responses reflect the variety
of attitudes towards house building and development, and the FMB
has received anecdotal evidence to suggest that many have used
the opportunity afforded by the revocation of RSS and their house
building targets to reduce planned numbers, issue blanket refusals
on a wide range of current applications, and or delay taking decisions
on controversial applications.
10. The impact of abolishing housing targets
on planned future delivery could be substantial. A study undertaken
by the National Housing Federation has concluded that plans for
over 100,000 homes have been shelved by local authorities since
the revocation of RSS, despite it being widely recognised that
the UK needs more homes, not fewer.
SPECIFIC IMPLICATIONS
FOR HOUSING
DELIVERY
11. In the short term, many smaller projects
currently under consideration will be lost or delayed as a consequence
of blanket refusals and reduced targets.
12. In the medium term, the overall effect from
the developers' perspective is a considerable thickening of the
fog surrounding the future of many project proposals as they no
longer have a planning framework on which to base their applications.
13. Given that planning applications for housing
projects typically cost hundreds of thousands of pounds to prepare
and may take years to achieve an implementable permission, it
is likely that many applications will not be brought forward as
the additional uncertainty will make the risk too great to warrant
an application.
14. This in turn will have an impact on the supply
of land in the planning pipeline for future building which could
result in a shortage of supply in future years with the possible
impact of restraining house building recovery and inflation of
prices for land with implementable permissions.
15. There is also the more serious problem that,
in the absence of clearer transitional arrangements, local authorities
may choose to continue the suspension of local plans until the
new planning system comes into force April 2012. This would result
in four years of planning paralysis in the affected areas as any
new plan would take a further two years before becoming operational.
With housing delivery already far behind the rate required the
housing crisis can only deepen if four years of planning indecision
are added to the plethora of other existing problems constraining
supply.
CAN INCENTIVES
DELIVER?
16. Current Government policy is based on the
assumption that the removal of housing targets will not result
in decreased housing delivery as incentives will create support
for increased housing output. In order to determine whether the
proposed government incentives are likely to deliver new housing
the in the numbers required, it is first necessary to understand
what will need to be delivered.
DEMAND AND
SUPPLY
17. The need for more housing is clear. In its
July 2007 green paper, Homes for the future: more affordable,
more sustainable, the Department for Communities and Local
Government set "a new housing target for 2016 of 240,000
additional homes a year to meet the growing demand and address
affordability issues."[171]
18. In August 2009 the Government's own housing
adviser the National Housing and Planning Advice Unit (NHPAU)
stated that at least 237,800 new homes are needed every year between
now and 2031. In September 2009 the Smith Institute et al published
Mind the Gap—Housing Supply in a Cold Climate, which
stated that we "need to build at the rate of at least 250,000
new homes a year to match annual population growth"[172]
and cited Town and Country Planning Association projections of
between 275,000 and 280,000.[173]
It also noted that housing completions for 2009 were likely to
be below 100,000 and that this would lead to a shortfall equivalent
in size to the city of Nottingham.[174]
In order to restrain long term price rises and address affordability
issues, it cited an NHPAU estimate of 300,000 new homes being
required annually.[175]
19. According to the House Builders Federation,
just 123,000 homes were built in 2009-10, the lowest number since
1923.
20. The outlook for supply suggests that the
industry will not come close to delivering these numbers in the
near future. In terms of the house building industry, the medium
term forecast from Experian for the ConstructionSkills Network
expects housing output to remain well down on its 2005-07 peak
in 2014.
21. Even optimistic estimates are not encouraging:
"On a best-case scenario at 10% growth each and every year
it would take seven years to get back to the 2007 completion levels.
Of course, this ignores the accumulating backlog, which could
well reach 1 million by the end of 2010".[176]
INCENTIVES
22. How the incentives are to work is not yet
fully clear as the details have not been published at the time
of writing. However, what is known is that the intention is to
allow local authorities to keep council tax revenues from new
homes, and to match fund them for six years.
23. Using Chelmsford as a random example, the
town has 65, 472 dwellings, an average council tax of £2,100
per dwelling and at peak output was delivering around 700 dwellings
per annum. On this basis, we can assume that, if the local authority
delivered 700 new homes every year for six years, and the Government
allowed the retention of additional council tax receipts, the
policy would result in a total of £30.87 million in additional
council tax revenues over the period. This would be doubled to
£61.74 million by match funding each additional home's council
tax receipts for each of six years.
24. In this contexts the policy assumes that
the £61.74 million of additional income over six years, combined
with section 106 contributions and other benefits of development,
can be used to convince local people and local authorities to
accept the addition of 4,200 new homes over the period. This means
an increase in the size of the town by around 6.4%, and an additional
eight to ten thousand inhabitants when the general perception
is that it is reaching the limits of its capacity. In the absence
of further detail it would be unwise to speculate any further
on this example but what is clear is that delivery will still
require drive and leadership within local authorities, and that
pro development authorities will still face a formidable communications
challenge in areas with significant anti development sentiment.
25. Overall, while incentives are welcome housing
delivery is too complex to be susceptible to a single policy solution,
and while abolition of RSS is unhelpful, it is far from being
the only factor inhibiting delivery of housing in the kinds of
quantities needed to satisfy demand.
POLICY REQUIREMENTS
TO ENSURE
AN ADEQUATE
LONG-TERM
SUPPLY OF
HOUSING
26. To deliver an adequate long term supply of
housing the Government will need a wide range of policy mechanisms
and will have to take some very difficult decisions.
27. The ultimate issue it will need to address
is that of development viability. Unless a housing development
is viable, it cannot be delivered by house builders even if both
the local authority and the local community are in favour. Ensuring
viability requires and acceptance by policy makers that a development
can only support a finite amount of taxation and regulatory burden
before it becomes unviable, and the entire public benefit is lost.
Many local authorities have recognised this and scaled back section
106 agreements since the onset of the recession in order to maintain
the viability of sites and keep essential developments coming
forward, but this needs to be accepted at strategic level and
policies must be prioritised and coordinated. Ultimately ministers
need to make a decision on where the balance between standards
and supply lies as all increases in standards have costs, and
all costs have implications for delivery.
28. The government will also have to decide policy
based on who will pay for new housing. If it is assumed that this
must increasingly be the private sector as a result of the state
of the public finances, then the issue of finance availability
to private sector developers and their clients must be addressed.
While planning issues remain a constant factor the lack of access
to credit is currently the single most important factor constraining
supply. Put simply, the industry is struggling to build homes
at a price people can afford because policy makes them more expensive
to build but credit availability has been reined in making them
affordable to fewer people. To ensure a long term supply of housing
based on private finance, availability of private finance and
cost of public burdens must be balanced.
29. Decision makers need to abandon the idea
that land values can be harvested indefinitely to fund policy
initiatives. The reality is that land owners have an expectation
of land value and are often prepared to wait for land values to
improve before selling as they are not usually under any pressure
to sell and can take a long term view as they wish to maximise
the realisation of its value. If policy drives the price a developer
can offer a land owner below the land owner's expectations, or
the price offered by a firm operating in another industry, the
land does not come forward for housing delivery.
30. In relation to the scrapping of RSS the Government
must ensure that local authorities undertake any planned reviews
within defined time scales, and within a back stop time limit.
Delivery requires clarity and certainty so that risks can be assessed
and viabilities calculated.
31. The Government must also ensure that any
revisions to local authority housing delivery plans are evidence
driven based on the satisfaction of need. This should be achieved
through robust, independent assessments of housing requirements.
32. Finally the Government must ensure that an
effective system for regional and sub regional integrated planning
solutions is quickly implemented to replace RSS. Regional Spatial
Strategies provided a degree of coordination, particularly for
housing supply and infrastructure which is essential for economic
growth. Not all decisions are best taken locally and the Government
will have to resolve the inherent tension between localism and
the wider benefit which often surfaces in planning, particularly
when housing and infrastructure are concerned.
September 2010
171 Department for Communities and Local Government,
"Homes for the future: more affordable," July 2007,
p7. Back
172
David Pretty & Paul Hackett (The Smith Institute, The Town
and Country Planning Association, PricewaterhouseCoopers) "Mind
the Gap-Housing Supply in a Cold Climate," September 2009,
p4. Back
173
David Pretty & Paul Hackett (The Smith Institute, The Town
and Country Planning Association, PricewaterhouseCoopers) "Mind
the Gap-Housing Supply in a Cold Climate," September 2009,
p9 Back
174
David Pretty & Paul Hackett (The Smith Institute, The Town
and Country Planning Association, PricewaterhouseCoopers) "Mind
the Gap-Housing Supply in a Cold Climate," September 2009,
p4. Back
175
David Pretty & Paul Hackett (The Smith Institute, The Town
and Country Planning Association, PricewaterhouseCoopers) "Mind
the Gap-Housing Supply in a Cold Climate," September 2009,
p9 Back
176
David Pretty & Paul Hackett (The Smith Institute, The Town
and Country Planning Association, PricewaterhouseCoopers) "Mind
the Gap-Housing Supply in a Cold Climate," September 2009,
p11 Back
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