14.To create new homes and places for people to live, the supporting infrastructure such as public and private transport, healthcare and schools must be in place. To pay for infrastructure for 200,000 new homes a year the Department estimates that around £12 billion should come from the public purse and the rest from developers, although this is a rough estimate. The Department told us that ensuring the capital funds from other government departments is aligned with house building is essential. Local authorities set out the need for infrastructure in their local plans but these plans cover a longer period than the government’s spending review and government departments are not required to align their investment strategies with local plans. This can create uncertainty for local authorities. The Department told us that it was working to achieve better alignment, for example by working more closely with the Department for Transport on investment decisions on projects that are important to housing development. The Department has also set up the Housing Infrastructure Fund, which will provide £5.5 billion in total between 2018–19 and 2023–24, to help local authorities pay for new infrastructure and provide new homes.
15.The Department, through the planning system, has provided local authorities with tools to get developers to contribute to the rest of the cost of infrastructure: section 106; and the Community Infrastructure Levy. We noted how frustrating it is for local communities when necessary infrastructure is delayed or not provided at all for new developments because local authorities have not been able to get contributions from developers through section 106 or the Community Infrastructure Levy. For example, the National Audit Office found that only 47% of local authorities had implemented the Community Infrastructure Levy as of January 2019. It also found that in some instances, developers can renegotiate their initially agreed contribution on the grounds of financial viability, local authorities may lack the skills to negotiate contributions from developers through section 106 agreements and there is little transparency of these negotiations and in how much developers contribute through section 106. The Department said it had heard that local authorities found the Community Infrastructure Levy too costly and complicated to implement and that in areas of low land values, local authorities found it was not worth the effort. It pointed out that the Community Infrastructure Levy tends to be introduced in areas with high land values.
16.We pressed the Department on what it is doing to improve section 106 and the Community Infrastructure Levy, in particularly what it is doing to help local authorities have the skills to negotiate effectively with developers. The Department was clear that it was for the individual local authority to decide whether it wants to implement the Community Infrastructure Levy. However, it told us that it was introducing and consulting on several reforms which aim to simplify the process and bring more transparency. These reforms included: getting local authorities to be clearer in their local plans about what they need from developers through section 106; creating a standard methodology for how viability is calculated to help prevent developers reducing contributing using viability arguments particularly after the Section 106 agreement is signed by both parties; and requiring local authorities to publish the benefits from section 106. However, the National Audit Office found that it will take several years for these reforms to take effect in full.
17.Communities need housing with a mixture of tenures and that includes affordable housing. The Department told us that affordable housing was an important component of the target of 300,000 new homes a year. It acknowledged that it will need to sustain and increase the numbers of affordable housing built to help it achieve the target. While it emphasised the importance of affordable homes in achieving the target, it was not able to give us an expected number and told us it would need to consider this in the spending review. We asked whether the Department should have a social housing policy which would run parallel to the house building strategy. The Department responded that it had the affordable homes programme, which gives grants to housing associations to build more affordable housing.
18.We asked the Department what it was doing to help make affordable housing genuinely affordable, particularly in London where social housing is key. The Department acknowledged problems of affordability and told us of several ways it is encouraging more affordable housing, for example, through the Affordable Homes Programme. Its reforms to the planning system aim to deliver more homes in areas of high unaffordability, such as London and the South East. It expected 50% of the affordable housing programme to be spent in London, compared with past figures of more like 40%. It also told us how it had lifted the Housing Revenue Accounts cap to enable local authorities to come forward with housing.
19.At local level, local authorities detail the numbers of types of affordable housing needed in their local plans including social housing, affordable rent, built to rent, and that provided by Housing Associations. However, these planned numbers can be undermined as developers renegotiate section 106 agreements to provide less affordable housing than originally agreed with local authorities. The Department noted that its reforms to section 106 agreements would help the provision of affordable homes.
20.We were concerned about poor quality in the building of new homes and of office accommodation converted into residential accommodation through permitted development rights. The Department stressed that it was critical that quality was good enough. It agreed that there are issues—particularly when dealing with large office blocks—that the number of homes created out of that office block can be too high, with inadequate space standards and build quality. The Department told us that it has committed to a review of permitted development rights which turn commercial properties into residential accommodation. This review will look at the quality of those homes and what should be built.
21.In terms of new builds, the Department acknowledged that it did not have a specific programme to address concerns about the quality of new builds. The Department told us that, instead, it is focusing on the quality and safety of high-rise residential buildings after the Grenfell fire. It pointed to some initiatives which aim to improve the quality of design of new homes, including revising the Department’s design guide, although these do not address the quality of the final build.
20 C&AG’s Report, paras 2.13, 2.16
21 Q 127
22 C&AG’s Report, paras 2.13, 2.15
23 Q 127; C&AG’s Report, para 2.17
24 Q 125
25 C&AG’s Report, para 2.18, Figure 12
26 Q 126, C&AG’s Report, Figure 12
27 Qq 36, 125-126, 128; C&AG’s Report, paras 2.22-2.23
28 Q16; C&AG’s Report, para 2.23
29 Q 13
30 Qq 13-15
31 Q 20
32 Qq 25, 34
34 C&AG’s Report, para 1.8 and figure 5
35 Qq 115-116
36 Q 109-112
Published: 26 June 2019