Building more social housing Contents

5 Changes to the planning system

First Homes

95.In February 2020, the Secretary of State announced proposals for First Homes, which would offer a discount of 30 per cent on market rates to local first-time buyers, with discounts locked into the property in perpetuity.215 The design of the scheme went out for consultation until 1 May.216 The primary mechanism proffered by the Government to fund First Homes was via developer contributions from section 106 agreements, suggesting 40, 60 or 80 per cent as minimum percentages to ensure their delivery.217 As we noted earlier, Section 106 agreements delivered 49 per cent of all affordable homes in 2018–19, and 57 per cent of all social rent homes.218

96.The design of First Homes is not dissimilar to Starter Homes, which launched in 2014 with the intention to offer homes at a 20 per cent discount for young first-time buyers. In 2015, the Government pledged £2.3 billion to support the delivery of 60,000 Starter Homes; by October 2019, none had been built and the money was reallocated into more general budgets.219 In the original consultation for Starter Homes—like in the consultation for First Homes—the Government sought views on a minimum percentage requirement through section 106 agreements.220 After 78 per cent of respondents wanted such requirements to be decided at a local level, the Government withdrew its suggestion of a national threshold, and said it would support local authorities delivering Starter Homes as part of the usual “mixed package of affordable housing that can respond to local needs and local markets”.221 Nonetheless, the Government suggested an even higher minimum requirement during the First Homes consultation.

97.We heard that First Homes would have a negative effect on the delivery on social housing. The National Housing Federation expressed concerns that, while First Homes could make an important contribution to increasing home ownership, the policy “will significantly reduce the supply of social and affordable homes to rent in areas of high need […] it would cost approximately £1 billion in additional social housing grant per year to replace them.”222 Councillor Rachel Blake from the London Borough of Tower Hamlets told us her council was concerned about the relationship between First Homes and section 106, given that Tower Hamlets expect 70 per cent of all affordable housing obligations to be “genuinely affordable rented accommodation”, because a centrally directed scheme would not respect local decisions about affordable housing need.223 Nick Walkley, chief executive of Homes England, agreed that a potential impact of the First Homes programme would be a reduction in the number of social homes.224

98.When we put these concerns to the Minister, he said First Homes were key for helping first-time buyers put a foot on the housing ladder, citing the British Social Attitudes Survey that found 88 per cent wanted to buy their own home, especially as Help to Buy was wound down.225 We do not disagree; we are supportive of efforts to increase access to homeownership, but not at the expense of delivering social rent homes. Section 106 agreements remain a substantial contributor to social rent delivery, and should continue to do so going forward. When we followed up on our concerns through correspondence, the Minister wrote in response:

The Government is mindful of the trade-off between the level of ambitions for First Homes, funded through developer contributions, and the supply of other affordable housing tenures. There are many factors that will affect this trade off beyond the level of First Homes delivery through section 106 […] We therefore do not consider it appropriate to make predictions [on the impact on other tenures] until these factors are better understood through our response to the consultation, which we hope to publish soon.226

Subsequent to our exchanges with the Minister, the Government revealed that a 1,500 unit pilot for First Homes would be included in the 2021–26 Affordable Homes Programme.227

99.We are concerned the Government is letting history repeat itself, rather than learning its lessons from Starter Homes consultation. The Government has not conducted an analysis of the impact of implementing First Homes on the delivery of social housing through section 106 agreements. First Homes should be added as an affordable housing scheme under Annex 2 of the National Planning Policy Framework, so that local planning authorities can set out polices for which affordable tenures, including First Homes, best meet the needs of their local communities. The current proposals have the potential to negatively impact on social housing delivery. Furthermore, significant regional variations in the value of planning obligations, which are especially low in the North of England, would mean on some development sites, First Homes might squeeze out all other tenures or by itself make the development unviable.

Permitted development rights

100.Permitted development rights (PDRs) are rights to make particular changes to buildings without the usual need to apply for planning permission. PDRs cover a range of activities, including home extensions and change of use of buildings. They are relevant to social housing supply because, by being outside of the normal planning system, developers using PDRs are not obligated to provide affordable housing. Office to residential change of use PDRs have delivered an extra 60,000 flats, but critics point out examples of cramped, poor quality accommodation, and the lost contributions to affordable housing.228 Shelter estimated that an extra 10,000 affordable homes might have been delivered between 2015 and 2018 if PDRs were subject to the usual obligations.229 The Government is cognizant of the criticism of PDRs; the former Secretary of State, Rt Hon James Brokenshire, announced a review of PDRs “in respect of the quality of standard of homes delivered”.230

101.Our evidence was critical of permitted development rights for residential conversions because of the impact on social housing delivery. The LGA called for such PDRs to be abolished, noting that most of the lost affordable housing contributions were in areas with high affordability pressures, and expressed concern that the Government was planning on extending PDRs even further.231 Ipswich Borough Council called for the conversions to be stopped because the exemptions from affordable housing obligations denied them “vital income towards the provision of much needed social and affordable housing”.232 George Clarke explained that there was a great opportunity to use abandoned commercial space, but not through PDRs:

If commercial space is sitting there empty and abandoned and there is no use for it, it would be fantastic to bring it into residential use. I made The Restoration Man for 10 years for Channel 4, and it was all about repurposing old buildings, but it needs to be done properly.

[…] [The problem] is the permitted development issue because, in effect, standards then drop and councils cannot take any planning fees, and you cannot impose any section 106s, which would otherwise make provision for the community through those houses being built. It is all happening under the radar.233

102.The Government, as part of its recent announcements on reforming the planning system, said it would introduce in September new rules to allow existing commercial properties—including vacant shops—to be converted into residential housing more easily. This included changes to allow a wider range of commercial buildings to convert to residential use through PDRs, and a new PDR to allow the demolition of vacant residential and commercial buildings “if they are rebuilt as homes”.234 The Affordable Housing Commission warned that “any extension of PDRS […] will lead to even fewer affordable homes.”235 We asked the Minister why the Government was planning to extend permitted development rights without first publishing its review. The Minister said the Department had carried out a review and hoped to publish it soon, and said there was an opportunity to provide new homes through PDRs, learning the lessons from the consultation.236 Professor Ben Clifford, who conducted the review on behalf of the Government, said that, without proper safeguards, continued and extended uses of PDRs could lead to “slums of the future”.237 He urged the Government to publish his report, which was submitted in January, because the evidence would help inform the wider debate.238

103.Permitted development rights can be a route to provide fast and cost-effective housing, but given that the Government is aware of concerns around their use, it should publish its review as soon as possible. We remain concerned about the lack of affordable housing obligations and lack of safeguards for quality. Without reforms, it is likely the planned expansion will further reduce the delivery of social housing through the planning system.

Capacity of planning departments

104.We heard that capacity issues affected social housing supply in two main ways. One, for local authorities to once again build at scale, they would need to have better resourced planning departments, as well as improving wider development skills to once again have the necessary expertise to deliver housing. Shelter said capacity was one of four key ingredients in delivering more social housing., alongside land, money and a clear strategy.239 Unite feared that local authorities would be unable to deliver pre-1979 housebuilding levels without the right resources or skills.240 Action with Communities in Rural England (ACRE) said that this was of particular concern in rural areas, where councils often have a planning team of just three people.241

105.Second, under-resourced planning departments find it more difficult to hold private developers to account in negotiations. Canterbury City Council said it devoted “a great deal of time and resource” to ensuring developers meet its affordable housing requirement of 30 per cent, comprising arguments, pressure negotiations, loophole exploitation, persuasion and continual viability testing.242 The Royal Town Planning Institute told us that a major cause of delays in planning was negotiations around developer contributions. Such negotiations forced councils to spend lots of money and time on consultants, surveyors and lawyers, which was troublesome due to the resource imbalances between councils and developers.243 It is important that local planning authorities have the muscle to take on private developers who attempt to reduce affordable housing contributions, claiming that the development would otherwise be unviable. Greg Beales of Shelter said that Government reforms to the viability process were beneficial, but the next step was to ensure councils had the necessary resources:

The challenge now is equipping local authorities to be tough with the developers. If they are not tough at the outset and not prepared to fight the developers through the process, and if they roll over too quickly, commitments to 30% affordable building are downgraded to 15% or 10%.244

106.The planning profession is facing unprecedented capacity challenges. In 2019, the NAO found that total spending by local authorities on planning functions fell 14.6 per cent in real terms between 2010–11 and 2017–18, at a time of increased workload for planning departments: residential planning applications rose from 5,244 in 2012–13 to 7,997 in 2017–18.245 Furthermore, between 2006 and 2016, planning staff numbers in local government fell by 15 per cent. The NAO recommended that the Department needed to work with industry bodies to assess skills gaps in local authorities’ planning teams. Our predecessor Committee’s report into local government finance found that councils’ net expenditure on planning was down more than 50 per cent, and that planning departments would face a £700 million deficit between 2017–18 and 2021–22.246 The Department legislated to allow local authorities to increase planning fees by 20 per cent from early 2018, following the LGA outlining evidence that local taxpayers were subsidising £150 million a year because of planning fee shortfalls.247

107.We heard that one of the best ways to fix resourcing issues was to allow local authorities to set their own planning fees. The London Borough of Camden said the recent 20 per cent planning fee increase was welcome, but the only way to enable full cost recovery for planning expenditure was to let councils determine their own planning fees.248 Victor da Cunha explained that, from a housing association perspective, they would be willing to support increases to ensure the best quality planning services were available.249 Philip Glanville, representing LGA, explained further reform on fees was needed:

We want to see further reform. We have started to see a movement towards full cost recovery, but the costs of complex planning applications will vary across the country. The scale that district councils are being asked to deliver on in their local plans, often in quite small local authorities, means we need the full freedoms to charge what local authorities believe is a fee that will cover their costs, and that will differ all the way across the country. The missing part of the system at the moment is allowing local authorities to dictate that.250

108.On 12 March, the Secretary of State made a statement on planning for the future, following the Budget. He announced the Government’s intention to speed up the planning system. Part of the announcement was a commitment to reform planning fees “to create a world-class planning service”:

we will introduce a new planning fee structure to ensure that planning authorities are properly resourced to improve the speed and quality of their decisions. This will be linked to a new performance framework to ensure performance improvements across the planning service for all users.251

109.It is right that the Government has identified the importance of reforming planning fees to support the capacity and skills of planning departments. It is imperative that local planning authorities have the right resources to deliver the social housing this country needs, and to ensure private developers deliver sufficient social housing on new developments. We recommend that the setting of planning fees should be devolved to local authorities, with a national minimum rate.

110.We are mindful that the Government expects to implement substantial changes to the planning system in the near future. We will continue to monitor the impact of these changes on social housing supply, as well as scrutinising the reforms more generally.

216 MHCLG, First Homes consultation, 7 February 2020

218 MHCLG, Affordable housing supply: April 2018 to March 2019, England, 20 November 2019

219 NAO, Investigation into Starter Homes, 5 November 2019

222 National Housing Federation (DSH 026)

227 Prime Minister’s Office, PM: A New Deal for Britain, 30 June 2020

228 House of Commons Library, Planning: change of use, CBP 1301, 23 April 2020, section 5: What has been the impact of office to residential change of use?

229 Shelter (SAH 052)

230 HC Deb, 13 March 2019, col 30WS

231 LGA (SAH 024), para 3.4.3

232 Ipswich Borough Council (SAH 009), para 3.3.3

234 Prime Minister’s Office, PM: A New Deal for Britain, 30 June 2020

235 Affordable Housing Commission (DSH 019)

238 Ibid

239 Shelter (SAH 052)

240 Unite (SAH 021), para 5.2

241 ACRE (SAH 033), para 16

242 Canterbury City Council (SAH 066)

243 RTPI (SAH 020), para 11

244 Q29 (Session 2017–19)

245 NAO, Planning for new homes, 8 February 2019

246 Housing, Communities and Local Government Committee, Eighteenth Report of Session 2017—19, Local government finance and the 2019 Spending Review, HC 2036, paras 19 & 76

248 London Borough of Camden (SAH 063)

249 Q163 (Session 2017–19)

251 MHCLG, Planning for the future, 12 March 2020, para 13

Published: 20 July 2020