Housing and Planning Bill

Written evidence submitted by the Federation of Small Businesses (FSB) (HPB 153)

Summary

1. The Federation of Small Businesses (FSB) welcomes the opportunity to provide evidence on the Housing and Planning bill, and is broadly supportive of its aims and objectives.

2. If we are to address the shortage of housing, it is clear that we must also reverse the decline in house building by small firms.

3. In order to maintain the viability of smaller developments, planners and policy makers will need to take the higher build costs of small developments into account.

4. Overall the cost of starter homes will need to be balanced against competing priorities as the quantum of public policy that can be supported by development is finite, and is lower for the smaller sites that are needed to address the wider housing supply problem.

5. Planning applications are time consuming and expensive to produce. Even modest developments may require tens of thousands of pounds to be spent on the fees, designs, and technical reports required for a planning application. As such we welcome the introduction of permissions in principle through the bill.

6. The FSB supports the Government’s proposal to introduce a register of brown field land.

7. The FSB strongly supports the extension of the planning performance regime to smaller developments. Poor performance in processing applications is no more acceptable for small sites than it is for large ones.

Evidence

8. The Federation of Small Businesses (FSB) welcomes the opportunity to provide evidence on the Housing and Planning bill, and is broadly supportive of its aims and objectives.

9. The FSB is the UK’s leading business organisation. It exists to protect and promote the interests of the self-employed and all those who run their own business. The FSB is non-party political, and with 200,000 members, it is also the largest organisation representing small and medium sized businesses in the UK.

10. Small businesses make up 99.3 per cent of all businesses in the UK, and make a huge contribution to the UK economy. They contribute 51 per cent of the GDP and employ 58 per cent of the private sector workforce.

11. Few would deny the existence of a chronic housing shortage in England, or the social and economic importance of effective action to address the problem.

12. Inability to access housing undermines community cohesion by forcing those that cannot find appropriate housing to leave in search of somewhere to live. It also undermines local economies as businesses cannot meet their workforce needs if willing and appropriately skilled workers cannot access appropriate properties in the local area.

13. This issue looks set to continue unless a way is found to increase and maintain the rate of delivery of new homes. The Office for National Statistics’ most recent projections [1] forecast annual average household growth of 210,000 per year between 2012 and 2037. In 2014, we only completed 117, 720 new homes in England [2] .

14. To address this there is no escape from the need to significantly increase the delivery of new homes.

15. In the current market led system there has been a heavy reliance on the major house builders. In 2010 the 38 firms on the NHBC Register that registered over 500 units accounted for 67% of new home registrations, and the 9 building over 2000 units per annum accounted for nearly half (45%) [3] .

16. By contrast, house building by small firms has been in long-term decline. An analysis of NHBC statistics by the Federation of Master Builders suggests that, between 1982 and 2010, the proportion of new homes delivered by smaller builders has declined from around two thirds, to a third, and that the number of smaller house builders decreased by 69% [4] .

17. If we are to address the shortage of housing, it is therefore clear that we must also reverse the decline in house building by small firms.

18. House building by small firms has many advantages: Small firms tend to build on small urban infill sites that are unsuited to development by larger house builders, and in doing so reduce pressure on green field sites; they compete on quality and therefore drive up the standard of new homes; their developments often help support existing community assets such as schools and businesses where population changes have brought pressure to close; and small sites can be delivered more quickly than large strategic ones can.

19. The Government has clearly recognised the need to support house building by small firms, and this is reflected in the Housing and Planning Bill as well as other areas of policy. As such the FSB welcomes this bill and is broadly supportive of its aims and objectives.

20. The remainder of this submission will focus on the details of Part 1: New Homes in England, and Part 6: Planning in England.

Part 1: New Homes in England

21. Chapter 1: Starter homes. The FSB is supportive of the aims and objectives of the starter homes initiative but would urge caution regarding implementation. The bill anticipates implementation through regulations and via planning obligations under section 106 of the Town and Country Planning Act 1990. While this is not problematic in of itself, the Government and local planning authorities must be mindful of the cumulative value of policy that development can support.

22. The economics of site development are complex but can be broadly discussed in terms of the financial viability of a project.

23. The National Planning Policy Framework (NPPF) explicitly recognises the importance of maintaining site viability as an essential component of any successful market led housing delivery plan. Paragraph 173, Ensuring viability and deliverability, states:

24. Pursuing sustainable development requires careful attention to viability and costs in plan-making and decision-taking. Plans should be deliverable. Therefore, the sites and the scale of development identified in the plan should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened. To ensure viability, the costs of any requirements likely to be applied to development, such as requirements for affordable housing, standards, infrastructure contributions or other requirements should, when taking account of the normal cost of development and mitigation, provide competitive returns to a willing land owner and willing developer to enable the development to be deliverable.

25. Ensuring viability will be essential to the success of the starter homes initiative, and to ensuring that it does not inhibit the wider objective of increasing housing supply.

26. As such the Government will need to pay particular attention to the interaction between starter homes, wider contributions sought through section 106 agreements, and the Community Infrastructure Levy (CIL).

27. In order to maintain the viability of smaller developments, planners and policy makers will need to take the higher build costs of small developments into account.

28. Earlier this year, the FSB asked the Building Cost Information Service (BCIS) of the Royal Institution of Chartered Surveyors (RICS) to research whether costs are higher for small developments than large ones, and to see if any difference has been taken into account in a sample of recent viability reports.

29. The research found that the build cost per square meter for all residential schemes of less than 10 units is on average 6% higher than on large developments, and that there is no evidence that this is being taken into account when assessing the viability of developer contributions sought through CIL or section 106 agreements.

30. On a typical 1-10 unit development of houses, the extra base construction cost would amount to over £100,000.

31. The government has recognised the higher build costs of small developments through the right to vary CIL by development size, but has thus far been thwarted in its attempts to do so in relation to section 106 agreements by the recent High Court decision against its contributions threshold.

32. The recent ruling by the High Court that overturns the Government’s policy of exempting small sites from affordable housing contributions under Section 106 agreements is deeply unhelpful in respect of trying to increase housing supply by encouraging small firms back into the market. The FSB strongly supports this policy and would encourage the Government to use the housing bill to amend the law if that is what is required to see this particular proposal through to implementation.

33. Overall the cost of starter homes will need to be balanced against competing priorities as the quantum of public policy that can be supported by development is finite, and is lower for the smaller sites that are needed to address the wider housing supply problem.

34. Chapter 2: Self-Build and Custom House building: Self build and custom build can also make a valuable contribution to increasing housing supply. With this in mind, we suggest that any Clause 10 exemptions from the duty on local authorities to grant sufficient suitable development permissions on serviced plots of land to meet the demand for self build and custom house building in their area be as tightly defined as possible. We would also suggest that close attention is paid to prevention of minor variation of standard house types being technically considerable as falling under the definition of custom build.

Part 6: Planning in England

35. Clause 102: Permission in principle for development of land: Clause 102 amends the Town and Country Planning Act to enable permission in principle to be granted for development of land in England. Applications for technical details consent will need to be determined in accordance with this permission in principle. The result would be the grant of full planning permission.

36. The FSB strongly supports this proposal and its passage into law would be warmly welcomed by small house builders nationwide.

37. Planning applications are time consuming and expensive to produce. Even modest developments may require tens of thousands of pounds to be spent on the fees, designs, and technical reports required for a planning application.

38. With opposition to development commonplace, there is no guarantee of applications being granted, and this deters many small businesses from bringing forward development proposals. The permission in principle, if properly implemented, will address this by allowing developers to quickly and inexpensively test the concept of their development proposal. If the permission is granted, this will give the developer the confidence to proceed with the additional investment required to bring forwards a more detailed application for consent.

39. This is a positive proposal which should reduce the risk associated with planning applications without undermining local democratic accountability.

40. We further support the provision in Clause 102 to enable the Secretary of State to issue a development order to grant permission in principle to land allocated in the Brownfield Register, Development Plan Documents and Neighbourhood Plans.

41. However, in drafting the regulations setting out the detail of this proposal, the Secretary of State will need to consider how to balance the interests of the applicant and the interests of the community when considering matters of detail.

42. Clause 103: Local planning authority to keep register of particular kinds of land: This clause will enable the Secretary of State to make regulations requiring a local planning authority in England to compile and maintain a register of particular kinds of land either wholly or partly within that authority’s area. The Secretary of State intends to use the power to require local planning authorities which are responsible for deciding applications for housing development, usually the district council, to each compile a register of previously developed land in their area, commonly known as "brownfield land", which is suitable for housing development.

43. The FSB supports the Government’s proposal to introduce a register of brown field land. Further, we would encourage the Secretary of State to make allowance for the inclusion of sites of below the five unit threshold. The results of the 2015 House builder’s survey by the Federation of Master Builders found that "lack of available and viable land" was the most commonly cited barrier to increasing output. This was an issue for 68% of respondents.

44. Small firms engaged in house building are often looking for sites which are too small to be allocated for housing in local development plans. This proposal to keep a register of brownfield sites, and to grant permission in principle to them, is strongly supported as it will help to address this issue. We would further like to draw the committees attention to the provisions which would enable the inclusion of land for 4 or fewer units. This would also be of assistance to small firms and the self-build/custom build sector, and we would encourage its use following passage of the bill.

45. Clause 105: Planning applications that may be made directly to Secretary of State: The FSB strongly supports the extension of the planning performance regime to smaller developments. Poor performance in processing applications is no more acceptable for small sites than it is for large ones. The need to make the culture of planning departments more "business like" has long been a call from applicants, and this is a helpful step in the right direction towards such change. Planning applications should be dealt with in a fast, effective and professional manner.

46. Clause 106: Local Planning Authorities: information about financial benefits: Clause 106 inserts a new section 75A into the Town and Country Planning Act 1990 to ensure that potential financial benefits of certain development proposals are made public when a local planning authority is considering whether to grant planning permission. The FSB supports this proposal. Development contributes a wide range of benefits to the community in which it is delivered. Explicit recognition of this in the planning process should be of assistance in encouraging communities to accept new housing.

December 2015


[1] The Office for National Statistics, "2012-based Household Projections: England, 2012-2037", 27th February 2015, p1.

[2] Department for Communities and Local Government, "Table 244 House building: permanent dwellings started and completed, by tenure, England, historical calendar series." Statistical data set: Live tables on house building.

[3] Federation of Master Builders, "Tackling the Housing Crisis: A policy review and recommendations" November 2011, p7

[4] Federation of Master Builders, "Tackling the Housing Crisis: A policy review and recommendations" November 2011, p6

Prepared 14th December 2015