Housing and Planning Bill

Written evidence submitted by London Councils (HPB 102)

1.1. Background

London Councils is committed to fighting for more resources for the capital and getting the best possible deal for London’s 33 local authorities.  We lobby key stakeholders, develop policy and do all we can to help our boroughs improve the services they deliver.  We also run a range of services ourselves, all designed to make life better for Londoners.

1.1.1. The housing crisis is Londoners’ number one issue. London Councils recognises the government’s ambition – outlined in the Housing and Planning Bill – to boost home ownership. However, our test of any housing legislation is whether it addresses London’s housing crisis – does it cut the gap between supply and demand?

2. Starter Homes

2.1. Affordability

2.1.1. House prices in London in recent years have been over 14 times average salaries [1] and therefore out of reach for the majority of Londoners. However, starter homes will not be the best product to boost home ownership in all areas of London, where in many cases shared ownership could be more affordable and would therefore help more people on to the housing ladder.

2.1.2. At prices of up to £450,000 (inclusive of 20% discount) starter homes are likely still to only be affordable to those on significant household incomes. Shelter’s analysis shows that a London household would need an income of around £77,000 and a £98,000 deposit to afford an average starter home.

2.1.3. The government should work with London boroughs to ensure that this product does not erode boroughs’ ability to meet the assessed housing need with the right mix of tenures that maximises home ownership without increasing homelessness.

2.1.4. The government should allow for a degree of flexibility so that local authorities can seek the right level of starter home affordability for their area.

2.2. Planning Permission and ‘Duty to Promote’

2.2.1. Starter homes will be exempt from S/106 and Community Infrastructure Levy (CIL) requirements. These exemptions are likely to reduce the amount of affordable homes for rent or shared ownership that boroughs can secure, as well as increasing pressure on local infrastructure. The government should ensure that local authorities are provided with appropriate funding for infrastructure and local amenity costs - so as to make up the funding cap that will arise from the CIL exemption on starter homes.

2.2.2. It appears that Starter homes will have first call on development viability through the new statutory ‘duty to promote’ placed on local authorities as set out in the HPB. This too is likely to reduce the amount of affordable homes for rent and shared ownership products that boroughs can secure whenever there are viability concerns, and could halt permissions already in process which developers may wish to renegotiate to account for the starter homes requirement.

2.2.3. The government have said that starter homes are intended to be delivered alongside other affordable housing and other intermediate products, and that the ‘mix of tenures, among other things, will continue to be a negotiation between the developer and the local authority’. To safeguard the ability of local authorities to address their local housing needs, there should be greater flexibility within the regulations to allow for councils to marry their new starter home statutory obligations with their responsibility to shape the supply of a wider spectrum of housing products to meet local needs – in line with their local plan and the National Planning Policy Framework (NPPF).

2.3. Deliverability

2.3.1. It is likely that the £450,000 (inclusive of 20% discount) London cap for starter homes will make delivery very difficult in some areas of central London where the average new build house price is far higher than this.

2.3.2. Where starter homes can be feasibly delivered within the cap, there are concerns about how the policy may impact on maintaining diversity and mix within the capital - unless boroughs can continue to deliver affordable rental homes alongside their starter homes requirement. Given the huge pressure London faces with over 49,000 households in temporary accommodation, it will be critical that boroughs can still secure homes in a range of tenures to meet housing needs across the income spectrum in order to avoid a rise in housing benefit where households otherwise remain in the private rented sector or expensive temporary accommodation.

3. Right to Buy

3.1. The government has stated that the right to buy will in future be available to all 1.3 million housing association tenants, including 500,000 who are not currently eligible for the preserved right to buy. This policy is due to be funded by the sale of high value council stock sales.

3.2. It is crucial that the effect of this voluntary right to buy deal (struck by the government and housing associations) on the supply of affordable housing in London is properly understood. London Councils has concerns that if housing associations have the freedom to replace homes sold in London in other parts of the country, and freedom over tenure, there is a strong chance that the supply of affordable homes in London will be negatively affected, which could in turn increase the use of costly temporary accommodation.

3.3. What is needed to address London’s housing crisis is an increase in the supply of housing (including affordable housing) in the capital. To combat the potential impacts this policy could have on affordable housing and temporary accommodation, a key priority for the government must be to ensure that the policy ultimately increases the supply of housing by safeguarding that revenue generated through housing sales in London is used to support the delivery of new homes in London. The government should therefore direct housing associations to use receipts from Right to Buy sales within London to re-provide affordable properties to meet London’s housing needs.

4. High Value compulsory asset sales

4.1. To help fund the discounts offered under the extended right to buy, the Housing Bill will also require councils to sell their most expensive housing when it falls vacant. Whilst the government have stated that receipts from high value stock sales will be used to provide new affordable homes in the same area (and the surplus used to fund right to buy), London Councils remains concerned that this policy could further reduce the supply of affordable homes in the capital and impact on London’s social mix.

4.2. It is also likely that the loss of affordable housing within boroughs could result in costly increased pressure placed on temporary accommodation services. Around a fifth of new local authority lettings currently go to households moving on from temporary accommodation. Four north London boroughs commissioned an analysis by Liverpool Economics, which found that around 3,500 new homes may be sold across the boroughs of Camden, Haringey and Islington in the first five years of this new policy if the high value thresholds published alongside the Conservative manifesto were implemented, and that there was ‘a strong likelihood’ it would result in an increased in the requirement of temporary accommodation. The government should assess the impact this policy could have on the increased requirement for temporary accommodation and provide safeguards in the bill to assist local authorities with addressing this increased requirement.

4.3. If this model is to be adopted it is also important that a range of properties are excluded, so as to avoid perverse outcomes and an overall reduction in housing supply. London Councils believes the list of properties that should be excluded from both sale and secretary of state payment orders should include: sheltered, supported and adapted housing; units supported with S/106 funds to remain affordable in perpetuity; properties set aside for transfer or succession; properties with potential to aid local regeneration; and new build properties so as to reduce disincentives to invest in replacement affordable homes.

5. Self-Build and Custom House Building

5.1 Custom builders tend to be under-capitalised and can’t compete effectively with speculative builders who can access finance more easily to acquire land. This leads to custom builders being priced out of the market even though there may be a growing demand for this form of house building. London Councils therefore shares the government’s commitment to enabling more small scale and self-build housebuilders to build more homes where appropriate.

5.2 Boroughs are interested in finding innovative solutions to tackling the housing crisis in London, and having the flexibility to enable a mix of affordable housing products (including self-build) to meet local need. Self-Build products can give tenants a sense of ownership and influence that is rarely achieved in conventional social housing. For example, self-build schemes in boroughs such as Lewisham will allow tenants to be involved in the design and construction from the outset, with guidance from architects and tradespeople. Tenants are able to get to know their neighbours before they move in, and undertake collective management and maintenance.

5.3 The government says that they hope for this policy to ‘increase the routes into home ownership’ and provide ‘choice within the market’. Allowing local authorities greater flexibility to be able to deliver alternative kinds of housing products such as self-build may bring some much needed choice into the market for tenants, however the issue with many of these alternative types of housing products is one of scale. Whilst self-build developments should have a place, they are generally small scale developments that cannot be seen as a realistic mechanism to drastically increase supply within the market.

5.4 There are additional pressures on plots of land in London and on planning departments in planning for a range of housing types, and to reflect this London Councils believes the government should not set requirements on boroughs to provide sites to meet self-build demand where this is unrealistic or will unduly impact delivery of other housing schemes.

6. Rogue Landlords and letting agents

6.1 Banning Orders

6.1.1 London Councils welcomes the government’s commitment to finding a quicker and easier way for local authorities to tackle rogue landlords. However, the proposed banning orders imposed by a first tier tribunal accompanied by fines of up to £5K are inadequate to be a sufficient deterrent against rogue landlords.

6.1.2 Many London rogue Landlords receive hundreds of thousands of pounds in rent each year, and in these circumstances a £5k fine is an irritant, or ‘business expense’ rather than a sanction that will make any significant difference to their operations. London Councils believes that fines imposed on rogue landlords need to either be greater or the government must consider alternative penalties.

6.1.3 The most effective measure to stop rogue landlords from operating is stopping their income. The government should therefore enable local authorities with the legislative power to be able to stop paying over housing benefit to identified rogue landlords.

6.2 Database on rogue landlords and letting agents

6.2.1 Through new legislation, councils will have the responsibility to update and reference a rogue landlord and letting agents database. Local authorities will have the responsibility of updating the contents of the database as it relates to their local authority, but the database will not be made public.

6.2.2 This database is a step in the right direction but it will need to be properly resourced. The government should also ensure flexibility and resources for local authorities to work together in identifying and tackling rogue landlords who may own and rent properties across multiple boroughs.

7. High Income social tenants: mandatory rents or ‘Pay to stay’

7.1 Meeting Demand

7.1.1 This policy will ensure that social rents are more closely linked to income by requiring social rented tenant households with an income of £40K in London, to pay market, or near market rate.

7.1.2 London Councils does not agree that the additional income the councils will generate from this policy should be returned to the Treasury, rather than allowing councils to use the money to invest in much-needed housing. To address this concern the government should allow for local authorities to keep the income delivered from the rental uplift, so as to enable them to be on par with housing associations who are allowed to retain the funds to invest in new housing. We believe that boroughs will make best use of the funding to counter the impact of the 1% rent cut, which we estimate will cost boroughs over £800 million over four years from April 2016 and is likely to result in a reduction in investment in new and existing homes.

7.1.3 This new policy will transform the council relationship with its tenants by requiring councils to inquire into personal income. This has obvious implications for the quality of the relationship with tenants. It also vastly complicates a rent collection system that is now both simple and efficient.

7.1.4 Greater clarity is needed about how the pay to stay policy will operate in relation to other sub market products, such as intermediate rent schemes which aim to bridge the gap between social and market rents. London Councils believes that intermediate rental products should be excluded from pay to stay to ensure that boroughs can continue to offer these products at intermediate rents.

7.2 Income threshold

7.2.1 London Councils understands the government’s belief that households with a sufficiently high income do not require a housing subsidy. However, market rental prices in some inner London boroughs will be significantly higher than in other areas, and given that this policy will require boroughs to ensure their tenants on higher incomes pay market or close to market rent, this policy should allow for greater flexibility to avoid work disincentives and increasing hardship for those living in high-value areas.

7.2.2 Government data shows an average council weekly rent in 2013/14 to be £101.45 per week and an average weekly market rent across all categories in the private rented sector to be over three times as much. London’s social housing tenants also currently are able to live in mixed communities across a range of income levels in close proximity. Local authorities should be given the flexibility to set the income threshold themselves for this new requirement, so as to allow for councils to achieve the right balance of affordability within local markets, and to encourage mixed communities that support London’s functioning economy.

7.2.3 More people than ever today are in insecure, flexible and temporary work – including agency and contracting work which may mean that there are instances when people move briefly over the threshold (due to a temporary increase in hours). London Councils would supports implementing a ‘buffer’ period which would allow tenants who are newly over the threshold to embed in their better paid work, so as to account for the flexible nature of the labour market.

7.3 New challenges for boroughs and cost effectiveness

7.3.1 The Housing Benefit system is complex and difficult to understand and predicated on a number of factors relating to individual circumstances, which are subject to behavioural change. It is therefore important to examine how the pay to stay policy will interact with the housing benefit system and in terms of mitigating work disincentives.

7.3.2 London Councils believes that it is important that all tenants currently receiving housing benefit, or who may need housing benefit if their rent were to increase, should be automatically exempt from pay to stay – to ensure this policy does not result in further increases in the welfare bill.

7.3.3 Currently boroughs do not routinely collect income information from all of their tenants – but only do so for housing benefit tenants. A whole new systems approach would be required with the adoption of new mechanisms to manage this process. This new system should require a new burdens assessment to be carried out to accurately assess the likely financial and administrative impact on boroughs to be able to deliver the policy. Given that that government intends to implement pay to stay from April 2017, London Councils suggests that boroughs are given adequate amount of time to implement new systems and to give notice to tenants who may be affected.

7.3.4 The role of HMRC will be essential in order to verify tenants’ income levels. As HMRC will be relied upon to supply up to date information in a timely fashion, the government should provide more details on how this new relationships will be defined under the policy, and clarify the data protection and information sharing protocols which will be established to ensure that information shared is protected.

8. Planning

8.1. The Bill introduces new powers of intervention for The Mayor of London and the Secretary of State. We don’t believe that paving the way for more centralisation in the planning process within London is the best route to a more effective planning regime. On the one hand these new powers risk overwhelming the capacity of the GLA’s planning function and emphasising operational planning at the expense of its strategic role. Secondly it fails to address the underlying challenge of planning for a fast growing city and at the same time responding to local concerns. That is better addressed through more resources in planning departments, funded through fees, to ensure an effective planning service.

8.2. The Government should support boroughs that commit to boost the supply of housing by reforming the planning fees regime to localise fee setting in order to guarantee a more effective, swifter and consistent planning service: development control in London has currently seen an estimated net shortfall of around £37-£45 million annually between 2012-13 and 2014-15.

8.3. The Bill introduces new powers for the Secretary of State to intervene in the local plan making process, and to grant permission in principle to land that is allocated for development in a qualifying document. London Councils believes it is crucial that plans are developed with the full involvement of local authorities. The government should therefore ensure that the permission in principle policy does not work to undermine local authority planning controls that exist to ensure developments are of benefit to local communities and local development needs.

November 2015

[1] National Housing Federation, Home Truths, 2014/15

Prepared 3rd December 2015