Housing and Planning Bill

Written evidence submitted by the North East Chamber of Commerce (HPB 150)

The North East Chamber of Commerce (NECC) welcomes the opportunity to respond to this consultation. NECC is the North East’s leading business membership organisation and one of the largest Chambers of Commerce in the country. We represent approximately 4,000 businesses located in Tyne and Wear, Northumberland, Tees Valley and Durham, covering both local enterprise partnership areas in the North East. Our members are drawn from businesses of all sizes and sectors, and employ around 30% of the region’s workforce.

It is a nationwide priority to deliver more homes and we welcome the emphasis the Government has placed on housebuilding and its role in boosting the UK’s productivity. With the North East’s unique and distinctive development potential, it is critical that our region plays a leading role in addressing the housing crisis and capitalises on the economic benefits of doing so.

Housing is an engine of economic growth. Every house built in the North East equates to an additional contribution of £80,532 to the regional economy and the creation of 1.9 jobs. This represents a £1.3bn contribution to the region’s economic output. At first glance, this can appear to be an impressive set of figures. However, when we consider that the North East’s housing market has typified the national trend of underperformance, and last year only built half the number of homes needed, it becomes a matter of how much economic output are we failing to capitalise on and why?

This is the question we sought to answer over the course of a year-long housing project looking at how we can unlock the barriers to greater levels of housebuilding in the North East. Overseen by an expert Task Group of NECC members from across the planning, construction and housing sectors, we identified three priority areas: access to finance for development; a pro-development and well-resourced planning system; and making better use of our existing housing stock. Our findings were outlined in Solving the Housing Conundrum – our report in partnership with Watson Burton LLP and enclosed with this submission.

Informed by the work of our housing Task Group, our Development Group of 50 NECC members from the planning and construction sectors, and our wider membership, we make the following recommendations to the Housing and Planning Bill, and how government policy can help deliver much needed housing.

Starter Homes

Starter Homes are a welcome initiative and will help a number of people take their first step onto the housing ladder; they are not, however, a universal solution to homeownership. Traditional affordable rented housing remains very much needed in the North East where demand for social housing is relatively high.

It is important to remember that Starter Homes will not meet everybody’s housing needs, and for some, constrained mortgage finance, difficulties saving for a deposit or a 20% discount simply being insufficient to make a property affordable, means affordable housing

provision is crucial.

While we recognise and understand the Government’s desire to boost low-cost homeownership, this will not be achieved with a one-size-fits all approach to increasing homeownership. In areas where Starter Homes are not appropriate, government should support housing providers to deliver more appropriate low-cost homeownership products, such as shared ownership models. Furthermore, authorities and housing associations should have the freedom to define what type of housing and house prices accommodate low-cost homeownership in their areas.

Furthermore, we are concerned by the decision to encourage developers to provide Starter Homes instead of traditional affordable housing to satisfy Section 106 planning agreements. A Joseph Rowntree Foundation report published earlier this year identified that 37% of affordable housing is built because of s106 agreements, meaning if Starter Homes were built to satisfy s106 instead, there could be a significant decline in affordable housebuilding levels. Government should recognise that the building of affordable housing and Starter Homes must not be an either-or situation, and instead should support the delivery of all housing types.

A focus on homeownership alone will not solve the housing crisis. We need to see the delivery of housing of all types and tenures if government is to satisfy demand of all kinds.

Social Housing

Right to Buy

Our initial concern that the extension of Right to Buy would mean the loss of much needed affordable housing as a result of homes not being replaced on a one-for-one basis, has been somewhat addressed by the voluntary deal between government and housing associations.

It is crucial that housing associations receive full market value compensation so that they are able to replace homes on a like-for-like basis with housing of the same tenure and cost in areas where there is demand. It is important that we now see this deal codified in legislation and the Government uphold its end of the bargain, as well as offer additional support to housing associations to replace housing where necessary.

We are concerned by the decision to require local authorities to make advanced payments for the expected sale of high-value vacant properties to fund the extension. For instance, advanced payments may not match the actual sale value due to volatility in housing markets. Likewise, authorities have different proportions of high-value housing stock, meaning some authorities potentially will lose a significant amount of social housing to fund replacements. Local authorities are already facing a number of financial challenges as a result of government policy – to add another financial burden is irresponsible and may be unworkable for some authorities.

Pay to Stay

According to the Office for National Statistics (2014), the average annual gross pay for a full-time worker in the North East is £24,960, while 90% of social housing tenants earn less than £30,000 a year. Therefore, there is little economic justification or evidence to demonstrate a need for this policy in the North East.

These figures suggest that very few social housing tenants in the region will be earning above the income threshold, meaning that even when the top two incomes of a social housing household are combined, the additional rental income likely to be generated is minimal.

Indeed, it is possible that with so few tenants liable to pay more rent, the costs of administering this policy could exceed additional income generation, suggesting the costs incurred by social housing providers may not be covered. Accordingly, we urge clarity on whether there would be compensation for local authorities and housing associations from government if this were to be the case, as providers cannot be expected to absorb losses?

The ‘Pay to Stay’ policy is in conflict with the 1% reduction in social rents for the next four years and raises questions about how the policies will work together. For instance, would households above the income threshold be ineligible for the rent cut, or would they have their rent reduced by one policy, only for it to be increased by another? Clarity on this issue is required.

Local authorities and housing associations have a very good understanding of the areas they serve, local housing markets and housing needs. Consequently, it is best that local authorities and housing associations are able to manage their housing and set rents as they see most appropriate for the communities they operate in, as well as continue to build affordable housing essential to the North East.

Planning

Local Plans

It is encouraging that the Government continues to support a plan-led system and we agree whole-heartedly with the importance of having up-to-date local plans in place across the North East.

While we welcome plans to streamline the local plan process, we are cautious of proposals for government to intervene and have local plans drafted if they are not in place by early 2017. Instead we urge greater attention to the reasons behind slow progress, including a tendency to target planning departments disproportionately for deep budget cuts, and the consequent lack of capacity in planning teams. Without addressing such issues we will not see the production of timely local plans or a regional planning system with the capacity to take local plan developments forward.

Government should look to guide authorities on how to deliver robust and sensible local plans in line with government objectives, while still allowing local authorities and the businesses and communities within them control over the future of their area.

Neighbourhood planning

The Localism Agenda is essential to getting sites to planning without meeting significant local opposition. Thus, having up-to-date development plans that have gone through the consultation process locally is an important part of taking forward more housing sites in the North East.

However, given the relatively high number of applications for Neighbourhood Areas to be designated in our region, it seems unnecessary to require local authorities to satisfy specific actions in a timeframe dictated by government. Local authorities already work closely with neighbourhood planning groups and provide a great deal of guidance to ensure neighbourhood plans are used to plan positively and complement wider strategic objectives.

With the prevalence of neighbourhood planning increasing, we believe it is important that local planning authorities have a strong voice in these processes and can intervene where necessary; therefore we are against proposals to curtail the interventions available to local planning authorities, particularly as neighbourhood plans are not subject to the same rigour and tests of soundness as local plans. Indeed, we would welcome further guidance on the relationship between neighbourhood and local plans, specifically around questions of precedence when the former precedes the latter.

Brownfield land

The proposals to bring forward more brownfield sites are a welcome first step towards delivering more homes on such sites. However, many of the proposals focus on planning permission, which is often not the hurdle to getting brownfield sites off the ground, given there is often significant local and political support for brownfield developments. We would like to see greater resource directed to making more sites viable, such as funding for high remediation costs.

Furthermore, brownfield sites tend not to be located in areas where demand for housing is high, meaning the productivity effects of redevelopment are limited.

A key underlying driver behind these proposals is a government desire to protect the Green Belt, but there is simply not enough capacity in brownfield sites to meet housing demand. Exploiting brownfield land while protecting the Green Belt will not enable the delivery of the 240,000 new homes needed each year. Brownfield sites only have the capacity to deliver one million homes – we need three million homes in the next 15 years. There must be a sensible and evidence-based approach to green field and Green Belt release, rather than being based on political grounds.

I hope the above comments are helpful.

December 2015

Prepared 14th December 2015