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

Written evidence from the Residential Landlords Association (RLA) (ARSS 64)


1.  The RLA is a direct membership national landlords association representing landlords in the private rented sector ("PRS") throughout England and Wales. We have some 8,000 subscribers representing a membership of 15,000. Along with the British Property Federation and the National Landlords Association we are one of the three national representative bodies for landlords. Our members rent out in all the sub-sectors of the PRS including families, working people, students, the elderly and benefit customers. Members acquire new properties to rent out and specialise in providing new accommodation by way of conversions.


2.  This submission sets out the RLA's views on the abolition of regional spatial strategies, and the possible successors, in relation to housing provision. We start from the view point of there being a series of shortage of housing in England and Wales.


3.  Since the implementation of the Housing Act 1988 PRS has grown from 9% of overall housing provision to just over 14% (source CLG English Survey of Housing). The social sector which has contracted (particularly due to buy to let sales) now represents around 18% with some 68% being owner occupied. The last Government set an ambitious target to increase the number of new units built each year to 240,000 up to 2,020. Not least because of the recession/credit crunch there are no prospects of this objective being achieved any time soon.

4.  The social sector faces waiting lists of 4.5 million, although not all of these are active. At the moment there seems no realistic prospect of significant extra funding being available for new social housing.

5.  So far as owner occupation is concerned difficulties in accessing mortgage funding coupled with the need for greater deposits means that more and more people struggle to get on to the property ladder. Often properties are out of the reach of first time buyers, even if they could find the funding. More are choosing to rent but because of this situation and also because it is a lifestyle choice.

6.  Historically, average house prices have been at around four times average earnings. They went as high as over six times at the height of the boom before the credit crunch impacted. We are still down at around 5%. First time buyers cannot generally afford a purchase price of more than £130,000 but with average house prices at around £150,000 one can immediately see why we need more housing. Rents in the PRS have gone up by around 63% over the last 10 years or so whereas average earnings have bone up by around 47% over the same period. Complaints are made against landlords regarding supposedly high rents. However, the cost of housing provision has escalated and this inevitably reflects through in higher rents, exacerbated by the shortage of water.

7.  The result is that there is more and more pressure on the expanding PRS. PRS landlords, in turn, are finding it much harder to raise the necessary funding. There are now only 260 or so buy to let products available (Source Northern Rock). There were two to three thousand before the credit crunch. Nevertheless, there are signs of improvement in that loan to value ratios as required by lenders are coming down. Historically, as the Rugg Review shows the PRS is relatively lowly geared. Obviously, if funding could be raised there is a huge opportunity out there for PRS landlords to buy new build/newly converted properties. Over time the available stock needs to be increased. In the UK we face a rising population with the population projected to grow to around 70 million. At the same time households are becoming smaller. There is therefore huge demographic pressure to increase the housing supply. This is needed also for economic reasons to try to smooth out the problem of inflated house prices followed by busts that we have been experiencing since owner/occupation became so popular after the Second World War. Housing boom and bust is a significant factor in the economic downturns we have experienced and tends to be the trigger for these.

8.  Attached in Appendix 1 is an analysis for three northern regions undertaken by King Sturge. We believe that this is representative nationally and demonstrates the pressing need for increased housing provision. Whilst, at this stage of the economic cycle, we are "bumping along the bottom" as the economy improves over time it is of fundamental importance that we increase the supply of housing including additional provision for the PRS as it is an expanding sector. We believe that the PRS has an increasingly important role to play to provide "intermediate" housing for those who cannot access social housing and who cannot afford/choose not to purchase their own properties.


9.  The National House Builders Federation has estimated that the regulatory costs attached to providing a new unit of housing are in the order of £40-£45,000 per unit. A key element making up this figure is the time trouble and cost associated with obtaining planning permission and related regulatory approvals. Complex submissions are required including design and access statements, plans, models, traffic analysis and so on. The list is endless, particularly for larger developments. Even smaller scale conversions have to be accompanied by detailed design and access statements. Significant fees are payable.


10.  It is, however, not just a matter of the regulatory cost and the effort involved. Invariably, there are objections from neighbours to any development, even small scale development. The UK is a nation of Nimbys. No one seems to want change in their neighbourhood. This is even more so when a green field site is involved.

11.  The RLA does wonder if sometimes objectors even pause and think for a moment. Once upon a time their own house was a green field site. If their neighbours objected at the time (and they probably did) had this objection been upheld they would not be living where they were now so as to be in a position to object!

12.  Unfortunately this pattern of wholesale objection adds up on a site by site basis. One of the major victims of the current recession has been the construction industry. Our manufacturing base has been decimated so where do these objectors think the jobs are going to come from. The construction industry has traditionally of late provided a large number of jobs including those for young people, especially apprentices and trainees. If objections to new developments are to prevail then there will be no construction industry jobs and in turn even more unemployment.


13.  One of the consequences of recent policies has been the drive for higher densities. This has been target driven and is clearly one of the downsides of the target culture. In particular, there have been too many flat developments. This is an area where private landlords have tended to concentrate their investment activities. It is well recognised that the PRS has helped fund these developments through off plan purchases. Landlord investors were happy to provide deposits and to buy in bulk which has helped ensure the necessary funding was in place. At least for the time being and probably for a long time to come this phenomenon is at an end. It is, however, indicative of the importance of the PRS's role in facilitating new development.

14.  Whilst the RLA wants to see quality development, as already pointed out in the regulatory context, there are significant costs which mean that new development is not financially worthwhile. Increased building standards e.g. heat and noise insulation, Section 106 payments and the provision of affordable housing mean that a huge financial burden is placed on the developer over and above the cost of land, the cost of services and the cost of building (as well as leaving a profit for the developer).

15.  One of the particular niches for the PRS has been conversions. However, the yardstick at the moment for the cost of a conversion taking into account much increased regulatory requirements and retro fitting is £100 per square foot. Increasingly, members who have undertaken conversions are telling us that this is simply no longer economically viable. The fear now is that more and more new building will also cease to be economically viable because of all of these various costs.


16.  Like many others, the RLA has been concerned about the growth of the use of targets. We have already mentioned the adverse consequences of targets in terms of densities. Nevertheless, we do believe that targets can have a role to play in certain circumstances. Planning of any kind means that you do have to set objectives. Clearly, for all the reasons we have already outlined increasing the number of new housing (including conversions) must be a high national priority. We need more housing even to stand still as the population grows and households become smaller. The proposed substitution of agreement and co-operation between neighbouring authorities will not, in our view, work effectively. They will frequently be different perspectives from different local authorities which will make agreement difficult if not impossible.

17.  The Coalition Government have decided to embark on a programme of "localism". This includes returning decision making closer to local communities. The abolition of regional spatial strategies is seen as a part of this process. Alongside this is the intention to take away the power of the planning inspectorate when examining Local Development Framework Plans to override local decision making.

18.  This means that the strategic power to determine the number of new dwelling units will ultimately be in the hands of the local planning authority and local politicians. As one would expect, local politicians react to the views of their local electorates; no bad thing one might way. Unfortunately, whilst there is a wish to return power to local communities what is meant by community? Is it the narrow neighbourhood which is opposing a local housing development or is it the wider city or town which needs to promote economic growth, create jobs, provide housing which supports employment and so on. With a local politician with an election around the corner will he or she see the bigger picture or listen to the objectors. It is also common experience that frequently the local objectors are articulate members of the middle class who have time and ability to mount protests which can talk down the wider longer term interests of the wider community.

19.  Landlords in the PRS have been particular targets of Nimbyism. The recent changes to the Use Classes Order introduced by the previous Government, although now mitigated to a limited extent by the new measures introduced by the Coalition Government from 1st October, is an example of this. Young people such as students, young working people and young professionals need accommodation usually in shared houses. Much of the enormous educational expansion over the last three or four decades has taken place without any provision for where students are to live. The private sector has stepped into the breach and provided the necessary accommodation. This is not something the social sector provides for in any case. In an increasingly globally competitive world it is vital that we have an educated workforce. Our economy has become much more knowledge based. Notwithstanding, articulate campaigning groups such as the HMO Lobby have protested vigorously and it is the narrow interests of local residents, who simply do not want students on their doorsteps, against the wider interest.

20.  Even if local authorities can be persuaded to review matters strategically and provide the necessary new housing units, whether locally or in co-operation with neighbouring authorities, there is then the problem of opposition on a case by case basis as individual planning applications are made subsequently. These can delay and change proposals.

21.  The fundamental problem that we face is how micro decision making (which will frequently be against development) influences the macro/strategic approach which clearly demands new development. As an analogy, if we were to allow such a process of plan making to determine where new power stations, particularly nuclear power stations were built, the lights would start going out around 2017.

22.  The RLA has strong reservation about the abolition of regional spatial strategies. Whilst we share widespread concerns about top down targets imposed from above and the target culture that has permeated Government over the last 10 years or so, we do not believe leaving matters to local planning authorities and hoping that incentives based on Council Tax will suffice. Unfortunately, we face deep rooted objections at local level to housing development generally. Objectors do not seem to make any connection between the success of their objections and the fact that their children are having to stay at home much longer and cannot afford to move out and buy a property, if they want to.

23.  It is useful sometimes to look at the lessons of history. Since the end of the First World War we have essentially had three perhaps visionary movements to expand housing. In the inter war years there was the pressing need to replace appalling slums and we had widespread municipal housing built by local authorities. This movement was assisted by funding being made available by Central Government at the time particularly through the Public Works Loans Board. In the aftermath of the Second World War the then Government under Harold Macmillan, as Minister of Housing and Local Government responded to the overwhelming need of new housing as a result of bombing by adopting a targeted approach, primarily providing municipal housing. Alongside this in the 50s and 60s we saw the implementation of the new towns policy, with a mixture of private and public housing.

24.  Subsequently, essentially demand led rather than planned, we have had the explosion of owner/occupation fuelled by greater prosperity and we have also had this peculiar British attitude that a house or a flat is not just one's home but an investment. The three movements we have identified took place in times when local authorities assisted and encouraged by national government had a rather more visionary approach. We might not always have liked the results and the architectural design and quality of the building in the 1960s is an example of this. On the other hand, it did produce the necessary increase in the number of dwelling units. At the moment we seemed to lack this vision and resources to implement it, even though for rather different reasons, the need is precisely the same.

25.  The RLA believes that without setting objectives for housing provision even though this is urgently required it is not going to be met. We need the carrot and stick approach. We also need sensible planning policies in relation to densities. However, we are running out of brown field sites that are viable. You can only squeeze so much of a quart into a pint pot. The reality is that with a growing population and greater affluence we do have to look more and more at green field sites. Surveys have shown that England in particular is one of the, if not the most, densely populated countries in the world but we still have to remember that only six or 7% of the land area is urbanised, to put it into context.

26.  We are not sure what impact the new National Planning Framework referred to in the Coalition Agreement will have and how far this will address this particular issue. However, in our view housing needs to be planned at least in general terms at a regional and sub-regional level to ensure that there is adequate provision going forward.

27.  The problem at the moment with finding meaningful financial incentives to local authorities is the need to reduce the deficit and get the public finances back into order. The current proposal to give local authorities a sum equivalent to six years Council Tax for newly provided housing stock is, we feel, an insufficient carrot.

28.  In our view individual local authorities have to be given a positive mission to find the necessary land, to determine locations, to shape design, to shape house types, densities and so on. They have to respond to local demand for particular types of housing, for example. At the same time, it has to be remembered that the providers, be they house builders, landlords in the PRS or whoever have to make economic decisions in the interests of their business. We consider that this has to be done strategically in line with the national need for housing but planned on a regional and sub-regional basis. We consider that local authorities have to be given a mission in terms of overall numbers required in their area in the national interest.

29.  We are coming out of a period where there has been excessive targeting. The danger is that when a new policy is introduced such as localism it is that we swing far too much in the opposite direction. Rather, we should be looking at a middle ground to mix the best of both approaches and housing provision is a key example where this kind of approach is needed. There also needs to be rewards/extra revenue to local authorities for implementing what is needed from them is a welcome approach and experience shows that it usually works.

30.  Local planning can play a very important part in the overall process. For example, one of the current needs is more bungalow provision to meet the needs of an increasingly elderly population. This is something that definitely does need to be dealt with at a local level. However, the RLA still feels that the overall plan needs to be set on a regional/sub-regional basis and a national level. This is important to ensure that overall we have an adequate number of houses/flats provided to meet the ongoing increasing demand.


31.  Landlords in the PRS have a vital interest in ensuring that there is a sufficient supply of housing. The current problems being experienced by owner/occupiers more as a result of the credit crunch and the recession mean that there is likely to be little growth in this sector in real terms in the short to medium term. We believe that with the relatively low gearing of the PRS there is significant opportunity for landlords in the PRS to invest and expand their portfolios to meet the increasing need. This is likely to happen more rapidly than a revival of the owner/occupier sector. However, by leaving matters simply to local authorities because of the strength of local opposition we believe that so far as housing provision is concerned the abolition of the regional spatial strategies will in time be seen to have been a mistake.

September 2010

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Prepared 31 March 2011