Written evidence from the Construction
Industry Council (ARSS 97)
In a densely populated country, balancing local interests
with wider needs is always going to be difficult. A finely tuned
co-ordination exercise is needed, with a clear programme of consultation
taking into account consideration of local impacts matched against
long term needs in relation to housing, infrastructure, transportation
and waste while safeguarding wider environmental concerns and
sustainability.
Taking into account the brief of CLG Select Committee,
this submission from the Construction Industry Council (CIC) will
examine the question of the abolition of regional spatial planning
principally in relation to housing.
SUMMARY
In a time of economic uncertainty and widespread
public spending cuts, there will be a need to encourage private
funding to meet immediate needs particularly in relation to housing
and infrastructure. A future planning regime must endeavour to
create a framework of predictable decision making within a reasonable,
and cost effective time frame. Investors need certainty.
There are currently severe problems of congestion,
imbalance and shortages in many areas which need to be addressed
quickly.
The Planning system at several levels is in disarray
at present. The stated intention to dismantle spatial planning
at a regional level has to be seen in the context of proposals
for: a National Infrastructure Plan which will appear shortly;
the suggested National Planning Framework for England; the development
of the existing system of National Policy Statements and the uncertainties
of what "localism" will mean pending publication of
the new Decentralisation and Localism Bill.
CIC welcomes the proposal for a National Planning
Framework for England but it is not clear whether this means.
Will it just bring together all national planning
policies (PPSs and PPGs) or will it as the
coalition agreement states incorporate national economic and environmental
priorities. The nature of the National Infrastructure Plan to
be produced by Infrastructure UK is also very vague.
Maintaining a "localist" style within the
context of national goals is always going to require compromise.
Nowhere can this be seen better than in relation to new housing
development or renewable energy. There are innovative ideas within
the Conservative Party Green Paper on Planning published in February
2010 (not least of which is the presumption in favour of sustainable
development) but these ideas need to be further developed before
meaningful discussion can take. It is hoped therefore that there
will be reference to the National Planning Framework for England
in the Localism Bill expected in November.
THE HOUSING
SITUATION
The principal characteristics of the housing situation
at present are:
There is a shortage of housing accompanied by growing
demand (with regional variations) led by a rising population.
A continuing growth in the total number of households.
Particularly strong demand for affordable housing.
A mismatch in supply in recent years with large numbers
of flats being built.
Constraints on mortgage availability with requirements
for high deposits particularly affecting first time buyers.
The numbers of houses under construction has fallen
to record lows in the recession.
Population trends and structure
The population of the UK according to figures released
by the Office of National Statistics (ONS) in August 2009 grew
by 408,000 in 2008 to reach 61 million people. The population
is now growing by 0.7% per year more than double the rate of the
1990s and three times the rate of the 1980s. The demographic picture
is also changing in that there are now a record 1.3 million people
over 85. This reflects an ageing population. The ONS state that
"the proportion of people aged 65 and over is projected to
increase from 16% in 2008 to 23% by 2033".
These trends all affect the total number as well
as the type and location of homes needed in future.
Housing numbers
As far back as 2004, the economist Kate Barker (Barker
Review of Housing Supply 2004) pointed out that even at that time,
there was a shortage in the number of houses being built. She
wanted the number of houses increased from the 2005 levels of
170,000 by a further 120,000. Since then due to the credit crunch
and the recession housing starts have slumped and may be low for
several years to come. Housing starts in 2009 were estimated at
around 80,000 in the private sector and 25,000 in the public sector
by the Construction Products Association. This adds up to less
than half of the Barker figure suggested five years ago. This
shortage in new homes, particularly in affordable new homes, is
propping up house prices.
This housing shortage (which in turn creates affordability
problems) reinforces the need to use the stock we have to maximum
advantage. Bearing in mind the large number of empty homes (over
700,000 were identified in the Barker review), the prevalence
of second homes and the pressure on housing in areas of buoyant
employment, there is a need for a housing strategy particularly
targeted at those with low incomes.
Housing Demand
Despite the recession, the long term demands for
housing have not changed and the latest household projections
suggest that the number of new households created each year is
more than double the number of housing starts per year. Yet the
key issues of affordability in the short term and the availability
of land in areas of high demand in the medium term still remain
unresolved and may hinder growth within the sector. In spite of
these concerns, the level of house building in 2009 was so low
that even with considerable growth anticipated in the next five
years, this still means that even in 2014, housing starts are
expected to be 18% lower than during the peak in 2007.
Despite short term changes in the economic environment,
the long term driver of housing construction is the number of
households created per year. The Joseph Rowntree Foundation reported
in 2005 that "since 1971, the number of households in Great
Britain has risen by 35%, from 18.5 million to 25 million in 2005.
Over the same period the population rose from approximately 54.5
million to 58.5 million." Divorce rates, increasing longevity,
the increase in single person households all underlie these trends.
The latest household projections from ONS state that
260,000 households will be created each year for England alone.
This equates to around 295,000 homes needed each year or the equivalent
of the number of homes estimated to be built in 2009, 2010 and
2011 combined.
Types of home
Despite a large oversupply of flats in urban centres
in the north of England, demand still outweighs supply in key
areas such as Greater London and the South East. As a consequence,
house prices have not fallen significantly overall. House builders
appear to be concentrating on building on land in these key areas
of demand and also moving swiftly away from building flats to
houses.
During the fourth quarter of 2009, flats accounted
for 37% of homes started in Great Britain compared to 52% just
over one year earlier and this trend would be expected to continue.
Yet this raises a further issue of land availability. Per unit,
house construction requires a greater amount of land than flat
construction. While levels of starts are low enough that this
should not be an issue in the near term, it is possible that in
the medium term, land availability in key demand areas may become
the key issue in house building. The Construction Products Association
forecasts that housing starts in Great Britain during 2010 will
grow 15%, yet this still represents only 97,000 starts. Further
growth of 16% is anticipated in 2011 before growth of 14% in 2012
leaves starts in Great Britain at 128,000. Growth in private housing
starts of 9% and 7% in subsequent years are expected to lead to
149,000 starts in Great Britain, 77% higher than in 2009 but still
18% lower than at 2007's peak.
IDEAS IN
THE CONSERVATIVE
PARTY GREEN
PAPER
It is difficult to comment on many aspects of the
new system as there is little detail on how the system will work.
Proposals for change are progressing simultaneously on several
fronts. In tandem with the stated intention to dismantle spatial
planning at a regional level, proposals for a National Infrastructure
Plan will appear shortly. There is a National Planning Framework
for England suggested to match those in the devolved regions but
details are unclear. The existing system of National Policy Statements
is to retained subject to parliamentary approval and there are
uncertainties of what "localism" will mean pending publication
of the new Decentralisation and Localism Bill. The scope of the
new system of Local Enterprise Partnerships and the mechanisms
by which they will operate is not yet clear.
The crucial issue of how these elements interact
has yet to be sorted out. There is also a similar vagueness on
the definition of what "local areas" and "neighbourhoods"
actually are. In attempting to answer the Select Committee question
on the "likely effectiveness of the Government's plan to
incentivise local communities to accept new housing development"
one has to go back to ideas put forward (principally by the Conservatives)
prior to the election.
Ideas for stimulating house building in the absence
of targets, are contained in the Conservative Party Green Paper—Open
Source Planning published in February 2010. One of the ideas put
forward is that when a local community builds more homes, central
government will match pound-for-pound the extra money that an
area gets through council tax for six years. The incentive is
increased in relation to affordable housing. There is also a commitment
to allowing "neighbourhoods" to keep some of the money
contributed by developers to councils at the time when planning
approval is given. Whether in practice, this will mean that developers
will take council tax incentives into account when negotiating
their schemes and reduce their contribution remains to be seen.
One has to wonder whether in reality, more expensive
neighbourhoods will simply forego the financial incentives to
preserve their exclusivity. At the other end of the scale, building
social houses is not always a vote winner at local level. One
can only hope that the policy does not result in communities using
such a system to "price out undesireables". The suggestion
that developers might reach a "voluntary agreement to compensate
nearby householders" if there are objections is an idea fraught
with difficulty.
Some of these ideas are coming to fruition. The "community
right to build" in relation to small scale developments is
an example. While designed to speed up development, the proposal
for a community to grant itself planning permission if 90% of
people back a proposal may mean in practice that 10% of voters
in a local referendum can block development without the need to
justify their objections.
In translating the Green Paper ideas into reality,
the "New Homes Bonus" scheme announced on 9 August,
to match the council tax raised on each new house for six years,
indicates the intention to deliver incentives to encourage house-building.
However, the consultation paper accompanying this announcement
will only follow the Comprehensive Spending Review. One preliminary
observation in relation to this idea is the regional impact. As
a far higher proportion of properties in the North are in Council
Tax Band A and B, these local authorities can expect to get less
cash per house they grant pernission for, in comparison to an
authority in the south.
When translated into actual money avaiable, it is
questionable whether the prospect of £10-15,000 per dwelling
would provide enough incentive to an authority facing local opposition
to any new housing development. It might be better for those supporting
growth if this money was invested in improvements to existing
or to new facilities directly.
Overall the major risk in changing the system radically
from a top-down target system to a bottom up incentive one, is
that there will be a long hiatus during which local authorities
may delay granting planning permission until the shape of the
new system is more obvious.
THE WIDER
PICTURE
The ideas sketched out so far by the Coalition Government
in relation to planning have a huge impact on many Government
Departments in addition to CLG. In particular the Department of
Energy and Climate Change must be carefully consulted in relation
to plans for energy generation and the drive to cut carbon emissions
within buildings.
If localism is the way forward, local groups need
access to clear information compiled to common standards. There
is considerable weight to the argument that the planning system
as it operated was "over-engineered" and over-centralised
but "wider than local" is too important an issue to
tackle in an "ad hoc" fashion. The first LEPS are not
yet in place. It is too soon to say how they will operate.
THE CONSTRUCTION
INDUSTRY
With cuts to public spending inevitable, construction
has to be considered as one of the best ways of stimulating economic
activity—not just for the sector but across the economy
as a whole, especially in the manufacturing sector. As the levels
of imports are low in this sector, the stimulus stays within the
national economy.
It is also a good sector for stimulating employment
as the sector is active throughout the country and provides employment
and training opportunities for lower skilled and young workers
who have relatively few alternative opportunities. Investment
in construction also provides significant long-term economic and
social benefits. This point was underlined in a report from the
economic consultants LEK for the UK Contractors Group which shows
that every £1 spent on construction output generates £2.84
in total economic activity.
September 2010
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