Housing and Planning Bill

Written evidence submitted by the Chartered Institute of Housing (HPB 49)

1. Summary

1.1 CIH welcomes this opportunity to present our views on the proposals outlined in the Housing and Planning Bill 2015.

1.2 The government’s focus on building new homes is a positive step. In England we are currently building fewer than half the homes we need each year and millions of people are struggling to find a decent home at a price they can afford. We support the ambition to improve access to home ownership for those who can afford it and housing professionals across the country are ready to help people achieve that aspiration.

1.3 However, we are deeply concerned that the government’s focus on starter homes as the only form of new affordable supply ignores the need for a range of options including shared ownership, private and social rent so that people on lower incomes are not priced out of finding a suitable home. This is even more worrying in the context of our modelling which shows an estimated projected loss of 405,000 existing social rented homes from 2012 to 2020 due to a combination of existing and proposed housing policies. We therefore urge the government to recognise the need for more new affordable homes for rent and to explore the options available to achieve this.

1.4 CIH broadly supports the proposals to tackle rogue landlords and letting agents. Too many people living in the private rented sector are forced to put up with substandard homes or mistreatment by a minority of bad landlords, so the Bill’s proposals to deal with the worst parts of the sector are very welcome. Our principal concern lies with the significant ‘up front’ resource implications for local authorities – a key issue that the impact assessment for the Bill fails to identify or address.

1.5 Our analysis of the assumptions underpinning the right to buy extension and the sale of vacant high value local authority housing to fund the compensation indicates that there are number of flaws. If no extra funding is provided by the government, rather than delivering one for one replacement as promised, almost 7,000 council homes could be lost each year at a time when an increasing number of people are struggling to find an affordable home.

1.6 We are concerned that the implementation of the policy relating to high income social tenants will lead to a range of perverse outcomes which run counter to government’s wider ambitions to deregulate housing providers, incentivise people into work and reduce the welfare bill. The income thresholds proposed are too low and will tip many households into housing benefit entitlement. The complexity of implementation and ongoing administration will place a significant bureaucratic burden on social landlords. If this policy proposal is enacted we urge the government to allow landlords to implement it in a way that takes account of local income thresholds, local market rents and household composition.

1.7 CIH understands that the government is keen to speed up the planning system so that much needed homes are delivered. However, the Bill gives the Secretary of State such broad powers to intervene that local accountability may be jeopardised. We are also concerned that local planning and development teams lack the resources needed to rise to the challenge set out in the Bill.

2. Starter homes

2.1 CIH welcomes the government’s recognition of the serious housing supply problem that our country faces. While net supply increased by around 170,000 homes in 2014/15, it still falls short of the minimum of 200,000 new homes we need each year.

2.2 We share the government’s aspiration to increase access to home ownership. With millions of younger people desperate to take their first step on the housing ladder but unable to do so because of the cost of buying a home, it is positive that the government is looking at ways to help first-time buyers through starter homes.

2.3 However, we have doubts about how affordable starter homes will be in practice. We understand that they will be subject to an overall price cap of £450,000 in London and £250,000 elsewhere. However, even with a 20 per cent discount, starter homes are unlikely to be affordable for many. Analysis by Savills shows that, while most areas north of the Midlands would be affordable, a couple on a median income would struggle to afford a starter home in 48 per cent of local authority areas and in only 10 per cent of local authority areas in London and the south east.

2.4 Of serious concern for CIH is how the housing needs of those on lower incomes who cannot afford to buy, even with a 20 per cent discount, will be met. More affordable housing to rent is critical if we are going to solve the housing crisis, but the starter home initiative could result in a significant reduction in new supply. The Bill enables the Secretary of State to make it a legal requirement that any residential developments above a certain size must include a proportion of starter homes which will be counted as ‘affordable housing’ in planning obligation agreements. For larger developments, starter homes will not be an ‘affordable’ option, but an automatic condition of planning. Details of how this will work in practice are not yet available but we are worried about the impact of these proposals on the delivery of what currently counts as affordable housing – both for rent and shared ownership. The seriousness of this is highlighted by the Joseph Rowntree Foundation’s analysis that 37 per cent of all affordable homes in England were completed through section 106 agreements in 2013-14.

2.5 A reduction in new affordable homes for rent is even more alarming when considered in the context of the declining numbers of existing social rented homes. CIH’s modelling shows that, due to a combination of factors including no new social rented homes built under the Affordable Homes Programme from 2015; conversion of social rents to Affordable Rents; the Right to Buy for council and housing association tenants; and the sale of high value council stock, we can expect an estimated projected loss of 405,000 existing social rented homes over the period from 2012 to 2020.

2.6 We therefore urge the government to recognise the need for more new affordable homes for rent and to explore the options available to achieve this.

3. Rogue landlords and letting agents

3.1. CIH broadly supports the proposals to tackle rogue landlords and letting agents. We believe that too many people living in the private rented sector are forced to put up with substandard homes or mistreatment by a minority of bad landlords, so we welcome the Bill’s proposals to deal with the worst parts of the sector.

3.2. Our principal concern lies with the significant ‘up front’ resource implications for local authorities – a key issue that the impact assessment for the Bill fails to identify or address despite a detailed analysis of the costs for landlords.

3.3. Given the very limited and declining staff resources for private rented sector (PRS) enforcement work, it is vital to ensure that new resources are available from the outset if there is to be sea change in securing better conditions in the sector. This could be done in three ways: through central government funding initiatives, through local authority General Funds, and by self-financing arrangements designed into any new enforcement arrangements.

3.4. Through their General Funds, councils spend only £40m annually on PRS enforcement work by environmental health officers (EHOs), or less than £10 per tenanted household per year. Unknown but probably very small proportions of LA housing and planning resources are also dedicated to work in the PRS. However, all the feedback suggests that councils are already struggling to cope, especially as resources have declined over a period in which the PRS has doubled in size.

3.5. The new proposals will add to the duties of EHOs and other enforcement staff, as will the introduction of immigration checks in the PRS if the Right to Rent scheme is rolled out nationally by the Home Secretary as planned. CIH believes that the only way these can be successfully implemented is if they become increasingly self-financing, through fees and penalties.

3.6. We therefore welcome the government’s proposals but believe that they need to go much further, their potential impact on councils should be comprehensively assessed beforehand and government should recognise that there will be a time lag before the measures proposed generate new resources.

4. A right to buy for housing association tenants and sale of vacant high value local authority housing

4.1. The Secretary of State has committed to compensating housing associations fully for the homes they sell at a discount under the proposed right to buy extension. This will be essential if they are to be able to build more affordable homes for people who cannot afford to buy.

4.2. However, our analysis of the assumptions underpinning the extension and the sale of vacant high value local authority housing to fund the compensation indicates that there are number of flaws. If no extra funding is provided by the government, rather than delivering one for one replacement as promised, almost 7,000 council homes could be lost each year at a time when an increasing number of people are struggling to find an affordable home. Our report, Selling off the stock [1] , indicates that:

· Between 2,100 and 6,800 ‘high-value’ council homes are likely to become empty and be sold each year – compared to the government’s estimate of 15,000

· Those sales would generate between £1.2 billion and £2.2 billion a year – compared to the government’s estimate of £4.5 billion

· Around 1.45 million housing association tenants would be eligible for right to buy during the first five years of the policy, with around 10 per cent (145,000) likely to take it up

· £1.2 billion would be around half the amount needed to compensate housing associations for homes sold under the scheme – housing associations would need almost all of the higher £2.2 billion estimate, leaving virtually nothing for councils to replace the homes they have sold or for the brownfield regeneration fund.

· There will be a significant time lag between homes being sold and new homes being built to replace them, especially at the beginning of the policy.

4.3. CIH urges the government to examine how to close this funding gap so that both housing associations and local authorities are able to replace the homes they sell with new affordable homes to rent. Options could include offering smaller discounts than those currently proposed or increasing the qualifying period from three to five years. The government should also consider how to mitigate the impact in London, where this scheme will have a disproportionate effect because of the high numbers of high-value council homes.

4.4. Keeping pace [2] , our joint report with the Local Government Association and the National Federation of ALMOs, drew attention to the government’s failure to deliver on its promise of one for one replacement made when the right to buy for council tenants was enhanced in 2012. When our report was published in March 2015, 32,288 homes had been sold since April 2012, while only 3,644 had been started or acquired to replace them. Government may yet formally meet the terms of its promise for the first year of sales under the enhanced scheme as they set a time limit for homes to be replaced within three years. The 3,644 acquired or started to date suggests that by the end of this financial year authorities may yet manage to replace the 5,944 homes sold in the first year of the scheme just before the end of three year period. However, in the following year sales jumped to 11,261 and we see little evidence that replacement is ramping up at the same rate.

4.5. More importantly CIH holds the view that all, not just some, of the home sold under right to buy as a whole should be replaced, not just those additionally sold as the result of the increased discounts. On current figures this is nowhere near to being achieved.

4.6. We believe that there are lessons to be learned from this and it should not be taken for granted that all housing association homes sold under the voluntary right to buy extension and the council homes sold to fund housing associations’ compensation will be replaced.

5. Higher rents for high income social tenants

5.1. We have considered carefully the government’s proposals requiring social housing tenants on higher incomes to pay market level rents. In our view the implementation of this policy will lead to a range of perverse outcomes which run counter to government’s wider ambitions to deregulate housing providers, incentivise people into work and reduce the welfare bill. This includes:

· Tipping households on the margins into housing benefit entitlement

· Discouraging tenants from finding work or increasing their earnings

· Undermining landlords’ work to create balanced communities as low to middle income tenants may move out of social housing

· Placing a significant bureaucratic burden on social landlords as the policy will be very complex to implement and administer. This includes establishing local market rents for differing property types (often in multiple areas); dealing with disputes; establishing and tracking tenants’ income and adjusting their rent accordingly; varying tenancy agreements (for housing associations); and increased arrears and void loss. The impact assessment for the Bill fails to identify or address the financial impact of implementing this policy for local authority landlords

· An increased risk of tenancy-related fraud

5.2. The income thresholds proposed - £30,000 outside London and £40,000 in London – are too low. In more expensive parts of the country, households with an income of £30,000 will be eligible for housing benefit even on a social rent. Recent modelling by Sovereign Housing Association [3] shows a typical household (2 adults and 2 children in a 3 bedroom home) earning £30,000 would still be eligible for housing benefit in 53 per cent of the local authorities where they work. This rises to 96 per cent for residents paying an Affordable Rent, and hits 100 per cent for those paying market rent.

5.3. In addition we are concerned that this policy represents precisely the kind of detailed interference in the running of a private organisation that prompted the Office for National Statistics decision to reclassify housing associations as part of the public sector for accounting purposes. Given its stated desire to see associations once more classified as private bodies we believe government should urgently review this proposed policy.

5.4. If this policy proposal is enacted we urge government to allow landlords to implement it in a way that takes account of local income thresholds, local market rents and household composition. The impact on a single person earning £30,000 paying market rent will be very different compared to a couple with four children.

5.5. Finally, the policy proposals allow housing associations to keep the money raised through increased rents to invest in new homes. However, money raised by local authorities will need to be returned to the Treasury. We would argue that local authorities should also be allowed to keep any money raised to reinvest in new housing.

6. Speeding up the planning system

6.1. CIH supports the government’s ambition to achieve a step up in the delivery of the new homes we need. We recognise Bill’s ambition to address that through achieving greater speed in planning permissions and reducing the perceived risks for developers by using planning permission in principle through development orders, local plans and the register of brownfield land.

6.2. However, we are concerned that the focus on the planning system itself is not necessarily the sole route to increased speed of delivery. RTPI have demonstrated that, in the last year, planning permissions increased to 216,000; house completions over several years have remained significantly below the 240,000 a year needed, and only 131,060 were delivered in the year to June 2015. Clearly there are other issues in building out homes following planning permission that remain and that the Bill does not address.

6.3. The use of permission in principle through several routes set out in the Bill (development orders, local plans and brownfield land) may initially increase the complexity for local planning authorities, developers and the public. Any additional complexity is likely to add to rather than address delays, and increase costs at a time when the planning and development function of local authorities has been significantly reduced. The National Audit Office report of November 2014, The impact of funding reductions on local authorities [4] , identified a 46 per cent reduction in spending on planning and development services from 2010 to 2015. A survey of North West planning authorities by RTPI revealed a one third reduction in planning staff since 2010, including 37 per cent of staff developing planning policy and 27 per cent of development management staff. The Bill is requiring action within timeframes that the service may struggle to deliver in the light of these reductions. CIH would argue that ensuring the planning system delivers as we need it to will require greater prioritisation and funding nationally and locally.

6.4. The Bill gives the Secretary of State powers to intervene where the local planning authority is perceived as failing or delaying in its functions. Large areas of policy are also delegated to regulations. The extent and impact of these powers on local areas is hard to evaluate at this stage as the detail is not available yet. However, as with the priority given to starter homes, we are concerned that these may limit the capacity of local planning authorities to plan strategically for the homes that the local area and community requires currently and in the future. The local planning authority is responsible for undertaking robust assessments of what its local population needs in terms of housing types and tenures, and engaging its local communities in that process. CIH is concerned that the measures in the Bill may significantly undermine its ability to follow through and deliver those homes.

6.5. The Bill sets out the framework for the requirement on local planning authorities to establish a register of brownfield land. Again the detail of this measure will be set out in regulations. We welcome measures that identify potential sites but again there should be local discretion of what land is included. This is needed to enable a strategic and joined up approach locally across housing, employment and transport development to ensure that all developments are sustainable in the long term.

6.6. However, the establishment of brownfield land registers is another measure to be funded through the sale of high value council homes. The funding gap revealed by our analysis (cited above) indicates that the proceeds from one high value sale will be insufficient to fund the replacement of two homes and the creation of a brownfield land register. Given the loss of funding already experienced by local planning authorities, meeting this additional requirement without more resources is likely to impact on the delivery of local plans and development orders, and may therefore trigger greater intervention by the Secretary of State.

November 2015


[1] http://www.cih.org/publication-free/display/vpathDCR/templatedata/cih/publication-free/data/Selling_off_the_stock

[2] http://www.cih.org/publication-free/display/vpathDCR/templatedata/cih/publication-free/data/Keeping_pace_replacing_right_to_buy_sales

[3] http://blog.sovereign.org.uk/what-can-families-really-afford-to-pay/

[4] https://www.nao.org.uk/report/the-impact-funding-reductions-local-authorities/

Prepared 17th November 2015