Disposal of public land for new homes Contents

1 Judging the success of the programme

1.On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department of Communities and Local Government (the Department) and the Homes and Communities Agency on the disposal of public land for new homes.1

2.The programme of disposing surplus government land emerged from the Plan for Growth in the March 2011 Budget. Government believed that releasing surplus land for housebuilding would promote growth and reduce the deficit while providing homes and jobs. It stated that 40% of all land that could be developed sat within public sector land banks, and committed to accelerate the release of surplus public sector land to encourage development.2

3.On June 8 2011 the Housing Minister announced that government planned to “release enough public land to build as many as 100,000 new, much needed, homes and support as many as 25,000 jobs by 2015.” The Department held policy responsibility for the target, with individual government departments responsible for identifying surplus land, estimating the number of dwellings it could support, and disposing of it. The Homes and Communities Agency performed an administration role for the Department, including collation of data and reporting it to monitoring boards, and also acted as a land disposal agent on its behalf.3

4.By the end of March 2015, government had disposed of land with capacity for an estimated 109,590 homes, nearly 10,000 above its target, across 942 sites. The biggest contributors were the Ministry of Defence (38,778 homes, 35% of the total), the Homes and Communities Agency (20,930, 19%) and the Department of Health (15,185, 14%).4 The Department told us that, while it promoted affordable homes through other means and quite a lot of the sites in this programme were being developed with a strong affordable homes element, there was no specific target within the 100,000 for how many of these homes should be affordable.5

5.We noted that the Department did not know how many of the 109,950 ‘potential’ homes had actually been built or whether the land had been sold at the right price, and invited it to comment in response to the NAO report. The Department commented that it had found the NAO report very helpful, and that it contained lots of useful guidance and recommendations for it to take into account. It described the programme as “very successful”, having set out to achieve land disposals towards new housing on a scale that had not been achieved before, having exceeded that target, and having had a rigorous process to check how many houses were likely to be built on the land released.6

6.We challenged the Department further on its claims for the success of the programme. We stressed that the ultimate purpose of the programme was to facilitate the building of 100,000 homes, and it was therefore vital to know how many homes had actually been built or were under construction. The Department told us that its accountability was for the overall target of releasing land towards 100,000 homes and that it was just the oversight of the release of land, not the housebuilding, that it had been tasked with–“The target was not to build homes; it was to release land”. In its view, the target to release land was “a very different thing from having a target to actually build those homes.” It did acknowledge that building homes was ultimately why it wanted to release the land and that land release was one of the big constraints in the housing market in England.7

7.The Department said it was clearly important that it did not sell sites without any understanding of whether or not homes were actually going to be built, and that it had a robust process of measuring and checking, at the time of disposal, how many homes it should score against the disposal. It said that it had sought assurances that there was a strong chance that homes would be built on the land in question, and had looked at, for example, whether planning permission had been sought, whether it was in a local plan, or whether the land was included in a strategic housing land assessment. The Department told us that no figure was included in its final outcome numbers for the potential number of new homes unless the Homes and Communities Agency had signed it off. The Department also stressed that in some cases it might take 20 years for sites to actually be built on.8

8.We questioned the Department on whether the actual building of homes–rather than the notional building of homes–was a criterion for the value for money of the programme. After much prevarication, and reiterating that its target was to release land, not to build homes, the Department stated that “Building houses wasn’t a criterion for the programme, so how could it be a criterion for value for money?”. The Department added, however, that “Clearly the overall aim was to boost the housing market and eventually build homes”.9

9.The Department told us that it was a conscious decision not to collect information on the number of actual homes built, and it had neither asked individual departments to collect that information, nor done so itself at programme level. It said it had decided not to “because we were really worried about putting a burden on developers and basically making public sector land some sort of bureaucratic problem for them in a way that private sector land was not”. It stood by its decision not to collect the information despite us pointing out that these were public assets being sold, and how easy it is in any case to find out the progress of individual developments. The Department did say it it was going to look at this point, on which the NAO had also made a recommendation, for the new programme.10 The Department also said that, since the NAO report was published, it had begun to check house building on certain sites.11

10.On the question of whether individual sales and releases of land were done in accordance with value for money tests, the Department stressed to us that it was up to the individual selling departments to make the sales and ensure that each was done on a value for money basis. The Department had not sought to “second-guess” the value for money of individual sales.12

11.The Department referred us to the text in the case studies in the NAO report to explain how individual departments would have secured value for money from individual sales. For example, the Department for Transport, in Case Study 10, going through an auction process and putting in place clawback provisions.13 However, we noted that the case studies also recorded that some sellers could not produce basic information for the NAO about the sales - for example copies of contracts - and that in some cases sales proceeds were not recorded for reasons of ‘commercial confidentiality’; casting doubt on the rigour with which value for money tests could have been applied.14

12.This Committee has also reported before on how, too frequently, individual government departments lack the commercial skills to negotiate contracts with the private sector which protect the public purse.15 When the Royal Mail was privatised in 2013, we saw, for example, how the sale did not take proper account of the market value of surplus property.16

13.We also questioned the Department on whether the obligation to release enough land to meet a target by the end of the programme had presented a risk to achieving value for money. The target to achieve sales in a fixed timescale may have introduced an element of compulsion, whereas The Royal Institute of Chartered Surveyors (RICS) definition of market value is “the estimated amount for which an asset or liability should exchange … where the parties had each acted knowledgeably, prudently and without compulsion.”. We pushed the Department for a specific example of where a site had not been sold because the seller had concerns that a quicker sale would affect value for money. The Department could not think of such an example. It told us it was not aware of any department raising concerns that its value for money process would be affected by an inappropriate deadline, and was confident that such concerns would have been raised.17 However, the Department acknowledged that departments “felt under pressure to sell land and to think about their estate management strategy in a way they had not before.”18 As we set out in Part 2 of this report, the programme also got off to a slow start, and there was increased pressure to dispose of land in the second half of the programme through to March 2015.

14.We also asked the Department about the validity of scoring figures for Royal Mail and British Waterways in its claims for exceeding the programme target. The total of 109,950 includes 10,783 potential homes on land categorised as sold when it was transferred outside the public sector. The sites in question belong to Royal Mail, which was privatised in 2013 (land with a capacity for 2,584 potential homes) and British Waterways, which was converted to a charitable trust in 2012 (land with a capacity for 8,199 potential homes).19

15.The Department argued that Defra and the Shareholder Executive had done a lot of work, with British Waterways and Royal Mail respectively, to get some sites ready for disposal, and that it was therefore legitimate to include them. For figures to count towards the target, the Department relied on having assurance at the point of release that the land was going to be built on–at the point of release into the private sector in these cases, as opposed to at the point of sale. The Department told us that for “more than 90%” of the Royal Mail and British Waterways sites in question, it still had that assurance.20

16.The total of 109,590 potential homes from land released under the programme also includes 15,740 on land that the public sector disposed of before the target was set. We noted that the figure actually included potential homes on land sold as far back as 1997. The Department defended the inclusion of these figures on the basis that one of the objectives of the programme was to release sites that had stalled since the earlier sale. However, we note the apparent inconsistency with the Department including all land sold during the programme in its total of 109,950, regardless of how far into the future the actual construction of homes might be expected.21

17.On the number of jobs created we challenged the Department on whether it had tracked whether the programme had, as announced when it was launched, supported the creation of 25,000 jobs by 2015. We also asked why its later ‘Build Now, Pay Later’ document had referred to 200,000 new jobs. In evidence provided after the session, the Department explained that it had based its estimates on previous English Partnerships guidance and industry studies suggesting that each new home supports up to two additional jobs for one year. It had therefore estimated that, in total, the programme would support some 200,000 jobs as all homes are built out over time, and that it would have supported 25,000 by 2015. The Department could not, however, be specific on how much employment has actually been generated by the programme.22