Housing and Planning Bill

Written evidence submitted by the London Chamber of Commerce and Industry (HPB 26)

Housing and Planning Bill 2015-16

1. London Chamber of Commerce and Industry (LCCI) is the largest capital-focused business advocacy organisation representing the interests of over 3,000 companies from small and medium-sized enterprises through to large, multi-national corporates. Our member companies operate within a wide range of sectors across all 33 London local authority areas – genuinely reflecting the broad spectrum of London business opinion.

2. In 2014, LCCI published Getting our house in order: The impact of housing undersupply on London businesses, which found that the lack of affordable housing led to businesses suffering from a number of problems, with 42% of London firms experiencing problems recruiting and retaining skilled workers. The report concluded that overcoming the capital’s housing challenge means building not only more affordable homes to buy but also more affordable homes to rent [1] .

3. We welcomed in February 2015 the creation of the London Land Commission, charged with compiling a list of all publicly owned brownfield land and identifying opportunities for future housing growth [2] - one of our report’s key recommendations.

4. More however needs to be done to tackle the chronic undersupply of housing in London, which is impacting upon both businesses and their employees. For example, rising housing costs mean employers face both difficulty with recruitment and retention of employees as well as pressure to increase wages (59%) [3] . The shortage of affordable homes near to workplaces also impacts upon employee punctuality and productivity, according to 33% of London businesses [4] .

5. The housing undersupply presents a wider threat to the UK’s economy. London’s status as a global city attracts skilled workers from across the world who make a valuable contribution to the UK’s economy. For the UK to be able to compete for highly skilled migrants and for the capital to continue to recruit, and retain, the workers needed to drive forward the UK’s economy, London needs to offer affordable, and flexible, housing. Across Europe, the housing needs of capital cities are increasingly met by the rented sector. A thriving, affordable rented sector is critical to ensuring that London is able to compete for the skills it needs.

6. Whilst the aims of the Housing and Planning Bill 2015-16 - to increase housing supply - are laudable, LCCI is concerned about the potential impact that a focus on delivering specific types of homes to own – rather than other tenures – may have on the overall availability of genuinely affordable housing.

Starter Homes

7. The bill places an obligation on local authorities to promote Starter Homes, which will be exclusively available for first-time buyers on median incomes. The cost of Starter Homes in London, where property prices already soar high above the rest of the country, will be capped at £450,000. Whilst LCCI welcomes measures to increase the supply of homes to own for the section of society for which demand most outweighs supply, we question whether these homes will truly be affordable for the majority of Londoners.

8. Although Starter Homes will be sold at an 80% discounted market rate, they will be unaffordable for families earning median wages in 58% of local authorities across the UK [5] . In addition to the high cost, first-time buyers, who the scheme will exclusively target, are likely to be required to provide large deposits.

9. The obligation for local authorities to promote Starter Homes and to allow developers to meet their affordable housing quota through Starter risks the loss of other, much-needed types of housing, including homes to rent, which may through choice – or necessity – be the better option for many workers. The absence of section 106 affordable housing requirements for Starter Homes and the exemption from Community Infrastructure Levy payments will make Starter Homes a more commercially desirable option for developers. As a result, affordable homes to rent, the preferred choice for many Londoners given their circumstances, and shared ownership properties which provide a more affordable route to home ownership, could be squeezed out of the market place.

10. In order to prevent the supply of affordable homes to rent being negatively impacted, the bill should stipulate that such properties constitute a proportion of a developer’s affordable housing quota on suitable sites.

Implementing the Right to Buy on a voluntary basis and vacant high value local authority housing

11. Although the agreement with the National Housing Federation will allow housing associations to implement Right to Buy on a voluntary basis, the bill does not permit local authorities a choice over whether to dispose of their high value properties to raise funds for the scheme.

12. Consequently, extending Right to Buy risks decreasing the supply of social housing properties in two ways: firstly, via the homes that will be purchased by housing association tenants, therefore making them unavailable for future tenants in the rented sector. Although the National Housing Federation estimates that only 15-35% of current housing association tenants will be able to afford to purchase their own, this would still equate to 221,000 properties being removed from circulation within the rented sector.

13. Furthermore, given the rules regarding the sale of a home purchased under Right to Buy that require that the original buyer would have to repay part or all of their discount should they re-sell their property within five years, extending the scheme, regardless of how many tenants choose to accept the offer, is likely to take a large number of rented homes out of circulation for several years, if not indefinitely.

14. Secondly, local authorities will be required to sell high value properties that were previously available to tenants in the rented sector. Councils will be required to use the profits from sales to invest in homes to replace those sold under Right to Buy, and the surplus amount must be used to cover the cost of the discounted sales price. A number of housing associations, however, have commented that disposing of high value properties will not raise sufficient revenue to replace housing stock let alone to cover the cost of the Right to Buy discount.

Permission in principle and the requirement for local authorities to keep a register of land

15. Provisions within the bill for local planning authorities to grant automatic permission in principle for development on certain types of land is a positive move towards improving lengthy and burdensome planning rules. Putting available land into the hands of those who are willing and able to develop it is the key to solving the housing crisis. Facilitating the release of public land by simplifying the planning process will enable this to happen and will be particularly helpful for small developers, who typically lack the experience and financial resource to easily navigate the planning system.

16. In addition, the requirement for local planning authorities to maintain and publish a register of brownfield land available for development will expedite the release of public land to developers who are ready to build, as well as identify future areas for housing growth. LCCI’s 2014 report, Getting our house in order, recommended that the Mayor of London establish such a register on a city-wide level – a criteria which has been filled by the creation of the London Land Commission. However, the requirement for boroughs to produce their own registers will provide a direct opportunity for local authorities to close the gaps in their own knowledge of their land assets and allow communities to assess their future needs.

Summary

17. LCCI supports the bill’s motive - to increase housing supply and provide hundreds of thousands of people with the opportunity to own their own home. However, LCCI has two concerns: firstly, we question whether the types of homes promoted by the Housing and Planning Bill will be affordable for the majority of people who do not already possess the financial capacity to purchase a home and ; secondly that an onus on home ownership risks squeezing other types of potentially more suitable housing namely affordable homes to rent and shared ownership homes - out of the market , exacerbating the affordability crisis that already grips the capital today .

November 2015


[1] LCCI (2014): Getting our house in order: The impact of housing undersupply on London businesses

[2] Greater London Authority, London Land Commission https://www.london.gov.uk/priorities/housing-land/land-assets/london-land-commission

[3] LCCI (2014): Getting our house in order: The impact of housing undersupply on London businesses, Figure 2

[4] LCCI (2014): Getting our house in order: The impact of housing undersupply on London businesses, Figure 2

[5] Shelter: Starter Homes – will they be affordable https://england.shelter.org.uk/professional_resources/policy_and_research/policy_library/policy_library_folder/research_starter_homes-_will_they_be_affordable

Prepared 10th November 2015