Housing and Planning Bill

Written evidence submitted by the National Housing Federation (HPB 105)

1. Introduction

The National Housing Federation (NHF) is the voice of affordable housing. Our members – housing associations – provide two and a half million homes to more than five million people and invest in a diverse range of neighbourhood projects that help create strong, vibrant communities.

The Housing and Planning Bill represents a bold step from the Government towards ending the housing crisis, a commitment every political party made before the general election. Housing associations want to work with government to achieve this. They already build 50,000 homes a year and have an ambition to build 120,000 homes a year by 2033 - half of the homes that the nation needs. This would add £8.1bn to the economy and create 170,000 new jobs.

The Bill provides an important opportunity to help housing associations scale up the number of homes they deliver, so they can help the Government meet its ambition of building one million homes over the lifetime of this Parliament.

This submission highlights parts of the Bill we feel will be especially important in helping housing associations to deliver more, and also some areas where we consider the Bill needs to be clarified or strengthened. These include making sure:

· Starter Homes don’t compromise the supply of new homes at sub-market rents

· The clauses implementing the Right to Buy agreement deliver the full receipt to housing associations

· The regulation of housing associations is made more proportionate

· Pay to Stay remains voluntary

· Full up-to-date local plans are put in place and further clarity given on measures to introduce planning permission in principle and the brownfield fund.

2. Part 1, Chapter 1: Starter Homes

We welcome and share the Government’s ambition to find innovative ways to increase house building and help people into home ownership. Starter Homes will play an important role in certain markets, helping young people to take their first step on the property ladder.

However, we think there are a number of points which need to be addressed regarding the delivery of Starter Homes as currently outlined in the Bill, including the need for:

· Starter Homes to be delivered in addition to, not at the expense of, traditional affordable housing

· Local authorities to retain the discretion to plan to meet local housing need

· Starter Homes to be delivered in a way that’s compatible with housing associations’ charitable purpose

2.1 Ensuring that Starter Homes are delivered in a way that is compatible with housing associations’ pursuit of their charitable purpose (Clause 2)

Whilst the full detail around Starter Homes has yet to be fully defined, it will be important for the Government to identify how they can be delivered in a way that is commensurate with housing associations’ pursuit of their charitable purpose. This is important because the 20% discount means Starter Homes are unlikely to generate the commercial return needed to cross-subsidise other forms of home ownership, such as shared ownership or rent to buy. Doing so would also help Starter Homes be better targeted at households in housing need who are otherwise unable to purchase a property suitable to meet their needs on the open market. One way do to this could be to adopt a national household income threshold as part of the eligibility.

Clause 2 of the Bill also needs to be amended to ensure that Starter Homes are better targeted at first-time buyers who are currently priced out of the market, sales are additional to those that would otherwise have happened and they are affordable in the long-term. Recent research from Shelter [1] and Savills [2] has illustrated how Starter Homes will be unaffordable for many low-to-middle income households.  It is also unclear whether Starter Homes will extend the opportunity of home ownership to those whose needs aren’t already met by shared ownership or Help to Buy.

2.2 Making sure Starter Homes are delivered in addition to affordable housing (Clause 4)

One of the key changes which the Government has outlined in this bill is the new power for developers to deliver Starter Homes as part of their Section 106 affordable housing contributions. This is set out in Clause 4, which also imposes a specific duty on local authorities relating to decision making on planning applications. This means that planning permission may only be granted where a particular number or proportion of Starter Homes are being provided.

We would like to see Starter Homes delivered in addition to, not at the expense of, traditional affordable housing for sub-market rent and shared ownership. We are concerned that the current wording of the Bill could lead to Starter Homes, a new and untested product, crowding out the number of homes built for sub-market rent and shared ownership, for which there is need and demand.

Section 106 has traditionally played a critical role of delivering affordable housing. In 2013/14, some 37% (or 16,193) of affordable homes were delivered through section 106. And in the ten years to 2013/14, a total of 234,279 (or 52%) of all affordable housing was provided through section 106. Of course, section 106 has not only been an important mechanism for securing delivery, but lower delivery costs help stretch housing associations’ capacity to invest in affordable housing on other sites. Section 106 agreements also benefit house builders as the upfront sales of affordable housing to housing associations provide them with a predictable cash flow.

2.3 Letting local authorities plan to meet local housing need in their area (Clause 4)

Clause 4 of the Bill sets out a duty for local authorities to deliver a proportion of Starter Homes on all ‘reasonably sized’ sites. We understand the intention of this duty: to deliver the 200,000 Starter Homes the Government is looking for by 2020. However, we are concerned that it fails to account for local housing market circumstances or subsequent negotiation. It also runs counter to the aims of the Localism Act 2011, to facilitate the devolution of decision-making powers from central government control to individuals and communities, and the premise of the National Planning Policy Framework, which is intended to strengthen local decision-making.

We would like to see the Bill amended so that local authorities retain the discretion and freedom to plan to meet objectively assessed local housing need in their area, as required by the National Planning Policy Framework.

Local authorities need to be able to specify the proportion of affordable housing to be delivered in their area, though not on specific sites, in a way which most accurately meets objectively assessed local housing need. This should include the ability to plan for Starter Homes, shared ownership and rented housing (market and sub-market), based on the evidence in their Strategic Housing Market Area Assessment. This would ensure that Starter Homes are built, but the balance between Starter Homes and other forms of affordable housing would vary according to what best meets the needs of local people.

3. Part 4, Chapter 1: Extending the Right to Buy to housing association tenants

Housing associations share the Government’s objective of helping their tenants to buy their own home. However, the sector has always been clear: we want to help people into home ownership, but not at the expense of our ability to build more homes of all tenure, including affordable homes, or our independence.

The agreement between the Government and housing associations to deliver the Right to Buy to tenants on a voluntary basis does this. Under this agreement, housing associations can both enable home ownership and continue to build the new homes the country needs.

As part of this process, the sector agreed with government a clear set of parameters and principles on which the sector’s participation depends. Unfortunately, the clauses in the Bill enabling the delivery of the sector’s agreement with government do not accurately reflect the principles agreed. We have every expectation that the terms will be upheld; however housing associations’ need to see the agreed principles being accurately reflected in the wording of the Bill and operating in practice. The changes we have outlined below would achieve this.

3.1 Making sure housing associations receive the full receipt for the homes they sell (Clause 56-57)

The main principle on which the agreement between housing associations and government was made was on the basis that housing associations will receive the full receipt for every home they sell to spend on delivering a new, replacement home. In many cases, housing associations believe they will be able to use this money to build more than one home to replace that which has been sold, adding to the country’s overall housing stock and maintaining the level of affordable housing.

Under the agreement housing associations will also be able to protect and retain affordable housing in areas where it would be difficult to replace – for example, in rural areas where land for new affordable homes is hard to come by. Tenants living in those areas who wish to buy a home will have access to a portable discount.

Clauses 56 and 57 state that the Secretary of State and the Greater London Authority ‘may’ make ‘grants’ in respect of right to buy discounts. As stated above, the agreement was made on the basis that the Government would compensate housing associations for the full value of the discount. We would therefore like to see the wording changed to clearly state that housing associations must be fully compensated for every home sold through the Right to Buy scheme, so that the sector can deliver on the agreement and provide much needed one-for-one replacements.

The use of the word ‘grant’ is at odds with the agreement and should be replaced with the word ‘compensation’. The word compensation is neutral and, unlike grant, gives no indication of subsequent government control or conditions.

The use of the word ‘may’ means the obligation to pay the discount is discretionary not mandatory, which is also not what was intended by the agreement. ‘May’ should be replaced with ‘must.

4. Part 4, Chapter 3: Reduced regulation for housing associations

The NHF was disappointed that shortly after this Bill’s publication, the Office for National Statistics decided to reclassify housing associations as public non-financial corporations. Adopting the public accounting rules of reclassification could mean that fewer new homes are built at a time of a national housing crisis.

We therefore welcome the Government’s commitment to take the necessary steps through deregulatory measures in the Housing and Planning Bill to address the issues raised in this decision. We welcome the Government’s commitment to develop a package of de-regulatory measures, which will lead to less red tape and more proportionate regulation of financial viability and governance for housing associations.

4.1 Making the regulation of housing associations more proportionate (Clause 73)

This welcome clause offers the scope to propose measures that will enable housing associations to be moved back into the private sector swiftly and for the long-term. It will also prompt a broader discussion about de-regulatory measures to help the sector fully realise its ambition to build 120,000 homes a year by 2033 - half of the homes that the nation needs.

The regulatory environment within which housing associations operate must reflect their position as independent, mature and customer-focused businesses.

The NHF will be suggesting measures to include in clause 73 that:

· Removes unnecessary red tape, so housing associations can work their assets harder and run their businesses more effectively

· Maintains the regulator’s important role in ensuring proportionate governance, protecting the interests of tenants and keeping an eye on housing associations’ financial viability.

We would be keen to ensure that the Government’s package of de-regulatory measures results in the following outcomes:

· Housing associations have control over the disposal of their own assets, subject to safeguarding the position of tenants and the taxpayer’s investment in the sector

· The regulatory system respects housing associations’ control over the size, shape and focus of their business, ensuring that the regulator’s intervention powers are defined so as to focus on problem cases

· Housing associations have control over whom they house and what rent they charge

· Housing associations have greater flexibility over how they reinvest grant.

5. Part 4, Chapter 4: Pay to Stay

With regards to the measures in the Bill for social tenants on higher incomes, we support the principle that those with higher incomes who can afford to pay more for their rent should do so. We also welcome the opportunity for housing associations to raise extra money which they would be able to put towards delivering new homes.

However, we would like to see the Pay to Stay scheme stay voluntary. Housing association boards are best placed to set rents dependent upon the tenants and the market in which they operate. The Bill should be amended to provide housing associations with the freedom to implement the policy when it is cost-positive and supports their business plans.

The scheme as currently proposed doesn’t account for different housing markets and would be very complex and difficult to administer. For some housing associations, the additional administrative costs would outweigh any additional income that they could receive through the policy. The final policy needs to be carefully designed to overcome the practical and administrative barriers to implementation, to make the policy cost effective and to ensure it does not create disincentives to work.

For the longer-term, there is a strong case for housing associations, as independent organisations and experts in the communities they serve, to have the flexibility to set their own rents, within an overall rent envelope, set by the Secretary of State.  Currently rents are fixed by government, at either a percentage of the local private rent or at the lower social rent level.  Because private rents vary hugely around the country and do not rise and fall in proportion to local wages, this means that housing association homes are much less affordable for customers in some places than in others. Pay to Stay, imposed on a mandatory basis, will create yet a further level of complexity within housing association rents.

To solve this problem, we believe that government should withdraw from rent setting, and give housing associations the ability to set rents that reflect local market conditions and customer circumstances.  Housing associations are in the best position to do this; they know the neighbourhoods and communities where they work and are able to set rents (sometimes higher, sometimes lower) to reflect the needs of these customers and places and support their tenants’ aspirations. As regulated organisations, they are also accountable for the rents they set to their customers and to the public via the regulator.

Under our proposal, rents would be set within an overall envelope, with some going up and some down to offer genuinely affordable rents whilst creating the most effective income stream.  This would enable associations to provide a wide range of rents that meet local housing need and respond to different markets, whilst also maintaining some control over the housing benefit bill.  All of this would be backed up with clear, transparent, published rent policies. Granting housing associations freedom over how they set their rents would be a more effective solution to achieving the intention behind Pay to Stay.

We are also concerned about the wider implications of a mandatory scheme given the recent Office for National Statistics’ decision to class housing associations as Public Non-Financial Corporations. We welcome the Government’s commitments on deregulation and do not believe that further control over housing associations in the form of a mandatory Pay to Stay policy is conducive to achieving the desired reclassification of housing associations as private bodies.

6. Part 6: Planning reforms

The availability and affordability of land is one of the key barriers to delivering new homes, particularly affordable homes, and the Government is right to introduce measures to address this in the Bill. The Bill introduces a wide ranging package of planning reforms which, if implemented appropriately, have the potential to accelerate housing supply and allow housing associations to build many more homes.

6.1 Making sure Local Authorities have an up-to-date local plan in place (Clauses 96-100)

Clauses 96 to 100, in relation to local plan making, give the Secretary of State enhanced powers to intervene in the process, and mobilise the Government’s priority to ensure full coverage of up to date adopted local plans by 2017. This is a welcome move, but needs to go further to ensure that local authorities plan to meet housing need in full.

Getting more up-to-date local plans in place is fundamental to a plan-led system. Targeted and more flexible intervention would be the most productive way to intervene as some authorities may only be held up on certain policy areas of a plan – most commonly on planning to meet objectively assessed need in full and also the duty to co-operate.

Government suggests that 82% of local authorities already have a published local plan, with 65% having adopted a local plan. However, this (and their 2017 target) is based on plans that were adopted after the 2004 Planning & Compulsory Purchase Act, rather than after the publication of the NPPF. The NPPF introduced key policy tests to ensure that authorities are planning to meet objectively assessed housing need and ensure there is no gap between housing need and local plan targets.

Having met its immediate priority, government needs to ensure local authorities have a post-NPPF local plan in place. We believe that the trigger for intervention will be the absence of a Local Plan post-2004. Currently, over 50% of local authorities have no post-NPPF plan in place. The gap is greatest in the Green Belt authorities around London.

6.2 Further clarity on the register of land and permission in principle (Clauses 102-103)

Clauses 102 and 103 introduce a duty on local authorities to hold a register of land and introduce a new power for the Secretary of State and local authorities to grant permission in principle for development. These are both welcome measures, but we would be grateful for further clarity to be provided through the Bill and subsequent guidance on the information contained within each to ensure they accelerate housing delivery.

The register of land could be a helpful way of improving transparency in our land market, but it will be important for the Government to provide greater clarity on how the register aligns with and works alongside site allocations and the Strategic Housing Land Availability Assessment to avoid unnecessary duplication.

For the register to be most beneficial to housing associations, we believe it needs to contain information on deliverability, previous use, contamination, density expectations, transport and infrastructure requirements and the terms of any section 106.

Similarly, the ability to grant permission in principle for development has the potential to increase planning certainty and speed up planning decisions. It is important that the Government publishes more detail on the split between what is decided through permission in principle and what is left to technical detail consent.

We believe that permission in principle should be broadly comparable with outline permission. So, for it to be granted, there will need to be clarity over the number of homes to be delivered, the tenure mix, the house type, the density and other permitted uses. We agree that the benefits of this approach, and the permission in principle, should be time-bound to incentivise delivery.

7. Suggested amendments

The NHF is currently in the process of drafting amendments to the Bill which would implement the ideas and suggested changes outlined in this briefing.

December 2015

[1] https://england.shelter.org.uk/__data/assets/pdf_file/0011/1183790/Starter_Homes_FINAL_w_Appendix_v2.pdf

[2] http://m.insidehousing.co.uk/couples-will-struggle-to-buy-starter-homes/7012173.article

Prepared 3rd December 2015