225.Housing constitutes the principal footprint of the built environment and, as such, housing policy is closely linked with built environment policy at a national level. No initiatives for the improvement of the built environment are complete without an understanding of how they relate to housebuilding and the maintenance of existing housing. Without adequate housing provision to meet the full range of social needs, there is little chance of any other built environment policy objectives being fulfilled.
226.The Government has recently given particular focus to the need to increase housing supply. We heard a firm consensus to the effect that delivery of additional new homes has not kept pace with demand for a number of years, and that this undersupply has had a range of negative impacts, most notably on the affordability of housing across tenures.
227.Some reports indicate that the UK’s population will pass 70 million in the next 12 years, while ONS data indicates that the number of single-person households has increased by 11% since the early 1970s, placing further pressure on existing housing stock. It therefore seems clear that housing affordability for both renters and buyers will continue to worsen over time unless there is a step change in new housing supply.
228.Most recent figures from the Department for Communities and Local Government indicate that a total of 124,490 new homes were completed in England in the financial year 2014/15. While this figure represents the highest annual completion rate since 2008/09, it remains significantly lower than the generally agreed figure for additional annual housing need in England, which submissions to the committee indicated stood at between 240,000 and 250,000.
229.Almost all new housing supply comes from one of three sources: private sector housebuilders; non-profit and charitable organisations such as housing associations; and local authorities. Forty years ago local authorities contributed over 40% of all new housebuilding and were often completing over 100,000 new homes per year alone. Following changes to government policy from the 1980s onwards, local authority housebuilding progressively declined, reaching a low point of just 60 new homes across England in both 1999–00 and 2001–02. Following further reforms to support a revival of council housebuilding, there has been a small increase in these figures, with 1,360 council homes having been built in 2014/15.
230.Figure One (see Chapter Two) set out post-war performance in housing completions, and illustrated the sharp decrease in local authority housebuilding over recent decades. Further details are provided in Tables One and Two, below.
New dwellings completed
New local authority dwellings
231.Statistics confirm that the private sector has not made up the shortfall created by the effective removal of local authorities from direct provision of new homes. There has been an absolute reduction in the number of homes built by the private sector over the same period (from 121,490 in 1974/75 to 96,120 in 2014/15). Housing associations are now a much more significant contributor to housebuilding (building 27,020 homes in 2014/15) but are unlikely to reach the capacity to match the completion rates of local authorities at their peak.
232.This generational reduction in new housing supply has also had an impact on the type and tenure of housing available. Local authorities mostly built low-cost rented housing, a tenure form that has been marginalised in new build over the years with reductions in subsidies for affordable homes and the lack of replacements for homes sold through policies such as the Right to Buy.
233.We heard a large amount of evidence that ‘mixed communities’ (where people on different incomes, different tenures and of different backgrounds live in close proximity) were more successful and desirable places to live. We are concerned that recent policy measures, as well as some provisions in the Housing and Planning Bill, will further marginalise low cost rented housing in many areas and thus further undermine mixed communities.
234.While there is little dispute that the current rate of delivery of new housing falls short of need across tenures, there is less consensus as to the nature of the policy measures needed to remedy this shortfall, and of the capacity of the private, housing association and local authority sectors to increase delivery. In particular, there are a range of differing views as to where reform attempts should be focused and on where resources should be directed.
235.As discussed in Chapter Two, the Government has, since 2010, sought to increase housing supply through reforms to planning policy. This was most clearly manifested by the National Planning Policy Framework (NPPF), adopted in 2012. Among other measures, this introduced a “presumption in favour of sustainable development” which obliges local authorities to “positively seek opportunities to meet the development needs of their area” in plan-making, and to grant permission for development proposals unless any adverse impacts of doing so would “significantly and demonstrably outweigh” their benefits.
236.The Government indicated that it would continue to focus on planning reform as a means of increasing housing supply, including ensuring up-to-date Local Plans are in place by 2017; by introducing a “permission in principle” for new housing development; and supporting home ownership through the delivery of 200,000 discounted “starter homes” for first time buyers through the planning system.
237.The Government has also signified its intent to direct resources towards promoting home ownership over and above rented products which have historically been the larger recipient of public investment through grants to local authorities and housing associations. Extending the opportunity for home ownership through policies such as starter homes has been a particular focus of the Government’s Housing and Planning Bill.
238.The Confederation of British Industry (CBI) told us that planning reform was necessary to deliver a step change in housing supply. The CBI welcomed the NPPF and other national reforms but stated that “maintaining progress on planning will require these reforms to embed to create political stability and certainty for business” and noted that “sustaining planning reform will also require improvements in performance”.
239.Others, however, suggested that planning policy was far from the only constraint on the ability of built environment professionals to support an increase in housing supply and identified, for example, land banking, skills and finance shortages, development viability constraints, restrictions on direct local authority housebuilding, and a lack of support for the delivery of other forms of affordable housing.
240.We now consider each of these obstacles in turn and recommend changes to national policy which may help to address the shortfall between housing need and new housing delivery in England.
241.We believe that, in addition to measures to support increased private sector housing development, and to encourage home ownership, there should be renewed focus on how built environment policy can support mixed communities including through the provision of long-term affordable rented housing.
243.We did not take detailed evidence on the circumstances or state of the housing stock in the private rented sector. We note, however, that this is one of the key areas of focus for the current inquiry of the Economic Affairs Committee of the House of Lords.
244.As discussed above, local authorities are no longer a major direct contributor to new housebuilding in England, though recent years have seen a modest revival.
245.The first increase in council housebuilding came in response to the extension of social housing grant to local authorities through the Local Authority New Build initiative of 2008 to 2010. Subsequently, the introduction of the housing “self-financing” settlement in 2012 enabled councils to retain any surplus generated from rental income to reinvest in existing and new housing, rather than paying it back to the Treasury as had previously been the case. At 1,360 new homes in 2014/15, however, local authority housebuilding remains low in historical terms.
246.To understand better the ability of councils to deliver sustainable new housing development through direct building, we visited new homes constructed by the Birmingham Municipal Housing Trust (BMHT). This initiative was launched by Birmingham City Council in 2009 in response to the then Government’s Local Authority New Build initiative.
247.BMHT has delivered over 1,400 homes (either completed or under construction) since 2009, working with the private sector on construction and Capita on project management. The homes are provided across a range of housing tenures including market rent and private sale, the latter of which helps to subsidise the delivery of new homes at council rented levels.
248.The BMHT model is a good example of the ability of local authorities to deliver new housing. Councils often control significant amounts of developable land in their areas—avoiding the risk that land costs will make affordable housing unviable—and are also able to identify and plan for new housing need through their planning function. The multi-tenure model exemplified by Birmingham and pursued by other local authorities also helps to support sustainable mixed communities.
249.However, the ability of local authorities to fulfil their housebuilding potential is subject to a range of constraints, most notably on their capacity to borrow against future rental income. Borrowing through the Housing Revenue Account is capped at a fixed level by the Treasury in every local authority. We were told by Arun District Council that this acts as an arbitrary limit on their housebuilding ambitions.
250.We were also told by Arun District Council that provisions in the Welfare Reform and Work Bill to reduce all social rents by 1% for four years had led to the council stopping its building programme, following estimates that the policy would cost it around £4 million in lost housing income.
251.We were impressed by the potential of initiatives such as BMHT, which we believe can provide a considerable increment to overall housing supply as well as supporting new affordable housing. Historic housing completion figures clearly indicate that, while the private and housing association sectors have made significant contributions to new housebuilding, overall delivery rates have never recovered from the withdrawal of local authorities from the sector. While councils may never return to the scale of housing delivery they were able to achieve in the 1970s and earlier, we believe that policies such as borrowing caps and social rent cuts which prevent them from exploring their housebuilding potential represent a considerable wasted opportunity.
252.Local authorities can play an important role in meeting the need for housing, but in recent decades have largely lost their ability to contribute to new supply. While there has been a minor revival of council housebuilding in recent years, borrowing restrictions limit their development capacity, and proposed social rent cuts may threaten the viability of new schemes altogether.
253.In recognition that housing need has rarely been met in England without a significant direct contribution from councils, the Government should take steps to ensure that local authorities are able to fulfil their potential as direct builders of new mixed tenure housing. This should include reviewing the impact of borrowing restrictions and proposed social rent reductions.
254.In addition to measures to support local authority housebuilding, we heard a considerable range of evidence on the need to take steps to increase housing development in the private sector.
255.In particular, we were told that there is scope for policymakers to provide greater support for development on smaller sites, which could provide a significant increment to housing supply. Within local authorities, Strategic Housing Land Availability Assessments are used to identify sites for housing construction. The Federation of Master Builders told us that these assessments failed to identify sites which would provide fewer than 10 housing units, resulting in difficulties bringing them forward into the planning system.
256.There are currently no specific policies in either the NPPF or the accompanying National Planning Practice Guidance (NPPG) in relation to small sites and how they should be dealt with in the planning system.
257.We believe there is a case for a stronger national planning policy focus on the development potential of small sites. The Government should consider amendments either to the NPPF or NPPG to clarify the need for local authorities to promote the delivery of small sites.
258.We heard evidence in favour of a more proactive local authority approach to developing such sites, including supporting SME builders who may be best placed to build on them, as well as supplementary guidance for small sites to encourage their swift delivery through the planning system.
259.Following the recession, many small and medium sized housebuilders went out of business and have yet to re-enter the market in volume. Lord Best advised us that most private sector housebuilding was in the hands of “half a dozen to a dozen” firms. Chris Carr, of the Federation of Master Builders, told us that SME builders were building around two-thirds of all new homes 25 years ago, but are now building only one-third. John Slaughter, of the Home Builders’ Federation, noted that there had been a 75% reduction in the number of SME housebuilders over the last 25 to 30 years.
260.By promoting small sites, local authorities could help deliver not just a direct increase to housing delivery, but could help increase development by supporting the aspirations of SME builders to re-enter the market. Such a policy would therefore help to resolve the dual problems of sites with development potential lying unbuilt, and of the current lack of diversity in the housebuilding industry which has led to the dominance of larger firms, particularly since the financial crisis of 2008.
261.We believe that smaller housebuilding companies can play a bigger part in addressing the housing shortage. The Government should review the NPPF and NPPG with a view to encouraging local authorities to identify and facilitate development on smaller sites. The Government and local authorities should encourage and enable SME builders to use these sites where appropriate, in order to support diversity in the housebuilding market and to help increase housing supply.
262.Restrictions on finance were also identified as a key constraint on increasing housing supply from the SME sector. The Federation of Master Builders told us:
“The biggest problem is still finance. The SME sector is still struggling to access finance through the traditional banking system, and having to look at alternatives—we have been with our bank for at least 80 years and we are now deemed as a risky project for no other reason than we are an SME housebuilder”.
263.The Government has taken some measures to support smaller housebuilders. These include:
264.The Department for Communities and Local Government indicated that the Housing Growth Partnership aims to support around 50 investments and around 2,000 additional homes. It informed us that “demand has been strong with a number of deals in the pipeline”. It also noted that the Builders’ Finance Fund would be expanded and merged with the Custom Build Serviced Plots fund, renamed as the Housing Development Fund. The fund would provide £1 billion of loan finance for up to five years to support the delivery of 26,500 homes up to 2024/25.
265.The Federation of Master Builders welcomed the Builders’ Finance Fund, but informed us that, according to surveys, “access to finance challenges remain severest for those developing the very smallest sites, and for small contractors and other new entrants seeking to access finance to bring forward their own developments—these firms invariably find themselves refused because of their lack of ‘track record’”. It also stated that “until the lending positions of major banks change, it seems unlikely that the sector will receive finance on the scale and on the terms it needs to drive a real transformation in the output of SME housebuilders”.
266.We recommend that the Government should identify the barriers to access now facing SME builders and review how access to finance for this sector could be improved. The Government should also continue to review the progress of existing initiatives to support small builders, including the Housing Growth Partnership and Housing Development Fund.
267.Many larger development sites lie in the sole control of large housebuilders. We heard that this means that they have sole control over the pace of delivery, which is dictated both by the construction capacity of the firm in question and by their desire to phase development in a manner that optimises their return on investment.
268.This issue was noted by the Housing and Planning Minister, who told us that:
“One of our challenges is that private developers’ business model means that they will tend to build out, on average, 48 homes a year on any given site, so if there is a site of 900 homes with one developer it will take 15 years. If you have three developers building 300 each, they will do it in five years. Therefore, local authorities need to look at that. I visited Didcot last week. That is a site where over 400 homes were built out in a year, but it has four developers on the site competing with each other to build in a high demand area, so it can be done”.
269.We also heard evidence that complex land ownership can create obstacles to rapid development. Steve Melligan of the Crown Estate told us that “one of the many drawbacks of the planning system is site delivery, and when you have multiple land ownerships that is often the biggest constraint to getting sites delivered quickly and efficiently”.
270.Local authorities retain the power to initiate a compulsory purchase process to help support land assembly on major sites. The consensus is that compulsory purchase is best used as a mechanism of last resort and as a way to promote agreement between landowners and local authorities, but views differ as to how it should be administered. The power is little used in practice and has regularly been the subject of reform proposals, including in the current Government’s Housing and Planning Bill.
271.The bill proposes a range of reforms to compulsory purchase procedures, which are largely administrative in nature, including increased rights to enter land, new means for resolving compensation claims, dispute resolution and the power to override easements.
272.While we welcome any reforms to improve the simplicity and fairness of compulsory purchase procedures, we were told that the Government’s reforms do not go far enough. In particular, in focusing on relatively minor administrative reforms, it was suggested that they fail to incorporate a wider vision of the potential use of compulsory purchase in facilitating development on large sites.
273.The Town and Country Planning Association (TCPA) suggested that:
“Development Corporations have the power through compulsory purchase to deliver comprehensive land assembly. Compulsory purchase powers are a vital part of this effectiveness but changes to the compensation code in the 1960s have meant there is no longer a fair balance between the needs of landowners and taxpayers. This issue is not being addressed by the Government’s forthcoming changes to compulsory purchase which focus on technical issues”.
274.The TCPA elaborated on this point in noting that, following the passage of the Land Compensation Act 1961, compensation rules for land subject to compulsory purchase are based on market value including “hope value” for speculative future uses such as housing. The TCPA argued that this means “the landowner is in effect asking not simply for the best current use market value, plus all normal allowances for disturbance, but also for a speculative value based on the future actions of a public authority. They are asking for compensation for development rights which they do not own for betterment values for which they have no logical right”.
275.This view was echoed by URBED, who argued for revisions to the 1961 Act to require the price paid for land to be related to its existing use, rather than its possible future use (known as ‘hope value’). The latter often has the effect of requiring substantial payments to the landowner to reflect the increase in value of a site when it receives planning permission for new housing.
276.Toby Lloyd, Director of Policy at housing and homelessness charity Shelter, argued that compulsory purchase “has fallen into terrible disuse” and that prices paid to landowners did not usually include the costs of policies such as infrastructure and affordable housing, which are then entirely borne by the developer.
277.This view was partially echoed by Dame Kate Barker, who argued that “this is such a regulated market that the public sector sets the price to some extent” and, while opposing valuation based on simple agricultural value of greenfield sites, argued that “the full price” would be too high in the context of new town developments.
278.The evidence is clear that the matter of compensation for landowners is contentious, and raises a number of technical and legal considerations together with the questions of fair compensation and development viability.
279.At present, a landowner receives the current market value of their land including hope value, though this excludes any value attributable to the specific scheme which forms the basis of the compulsory purchase. Any proposal for lesser compensation raises legal questions upon which we do not offer a view.
280.Separate from the specific issue of compulsory purchase, there is a history of taxation of development gains. In such cases it is for the Government to determine the level of taxation and the level of financial support for development projects. Such taxation must also be borne in mind in considering reforms to compulsory purchase.
281.In the absence of consensus as to how compensation might be calculated in a way which ensures fairness to landowners while also aiding the viability of development, we do not make a specific recommendation on how compulsory purchase may be reformed. We do, however, support the case for a wider review of compulsory purchase to ensure that compulsory purchase operates in a way which facilitates sustainable growth, improves places according to the community’s needs and provides fair (but not disproportionate) compensation to landowners.
282.In addition, the Government should promote the use of partnerships and other similar arrangements, with the aim of minimising the need to resort to compulsory purchase and bringing forward development for which planning permission has been granted.
283.We believe the Government should expand its review of compulsory purchase procedure set out in the Housing and Planning Bill to incorporate a wider review of the functioning of compulsory purchase and its role in supporting development. The review should focus on seeking the most appropriate balance between improving neighbourhoods, securing necessary development and ensuring the landowner receives fair compensation.
284.It has been the policy of successive governments to promote development on brownfield sites as a priority over and above greenfield development. This used to be embodied in a national “brownfield first” policy. Though the NPPF does not contain such a policy it does encourage local authorities to consider a “locally appropriate target” for the reuse of brownfield land, and states that planning policies and decisions should encourage the effective use of land by re-using such sites.
285.We have observed a general consensus that brownfield land can make a positive contribution to the nation’s housing need, and that it should be utilised first where possible, a position to which we are sympathetic. There is less consensus, however, over specific policies to promote brownfield development.
286.The Government has undertaken a range of initiatives to support brownfield development including introducing a £1 billion “brownfield fund” to help cover site remediation costs. The introduction of permission in principle and a brownfield register to identify sites which are suitable for new housing development, as proposed in the Housing and Planning Bill, is intended to expedite the granting of planning permission on brownfield sites. It is, as yet, unclear how matters such as public consultation arrangements and scheme details such as resilience measures will be dealt with through the permission in principle route.
287.We recognise that there is a continuing debate as to which specific locations are most suitable for large-scale new housing; garden cities, urban extensions or inner city redevelopment, for example. It is apparent, however, that brownfield land alone will not resolve England’s housing shortage. Even the most optimistic assessments of brownfield land availability would still require some greenfield housing development to meet demand. A question arises, then, as to how best to identify greenfield sites which may be most sustainable and how to ensure that cheaper and more profitable greenfield developments do not undermine the delivery of housing on brownfield land and encourage unsustainable sprawl.
288.The Green Belt remains popular as a means of containing urban sprawl. We received a considerable amount of evidence as to how Green Belt policy operates in practice, including from government and local authorities, and its continuing importance to the English planning system. We were consistently told that, on balance, the Green Belt had achieved its aims.
289.It is important to separate rhetoric from reality in addressing Green Belt policy. There is no absolute restriction per se either on building within the Green Belt or on redrawing Green Belt boundaries to accommodate future development needs. The NPPF states that Green Belt boundaries should only be altered in “exceptional circumstances”. Local authorities, including Birmingham City Council and Bath and North East Somerset Council, told us how this test can be met and Green Belt boundaries be successfully redrawn.
290.We support the principle of the Green Belt as a means of containing urban sprawl and recognise its importance in ensuring that development is directed to the right areas. There are, however, circumstances (such as those in Birmingham and Bath) in which it may be prudent to review Green Belt boundaries where they do not meet the specified purposes in the NPPF of preventing sprawl, preventing the merger of neighbouring towns, preventing encroachment into the countryside, preserving the character of historic towns and assisting in urban regeneration. In such cases, it is reasonable for land which does not meet Green Belt purposes to be reviewed for its suitability to meet housing need, if there are no other suitable locations outside the Green Belt.
291.While the “exceptional circumstances” test is clearly expressed in the NPPF, its interpretation by both the Government and planning inspectors is less clear. We were told that Green Belt boundaries could only be revisited through the local plan process as part of a much wider assessment of future growth and housing need, meaning that no local authority is likely to redraw local Green Belt unless they see it as absolutely necessary.
292.We heard evidence from across the spectrum that the “exceptional circumstances” test should be made clearer, to provide more certainty as to when Green Belt boundary reviews may or may not be appropriate. The Campaign to Protect Rural England told us that “the Government should largely maintain existing policy, but they need to be clearer when exceptions to policy are and are not acceptable”.
293.Gateshead Council echoed this view, telling us that there was a case for stronger guidance on the conduct of Green Belt reviews:
“ … there is no national guidance, so everybody adopts their own opinion as to how that should happen, which is probably why it sometimes takes an awfully long time: because it has to be justified so much in the local area. If we had national guidance about how to do it, or best practice, that might be helpful”.
294.The protections afforded to the Green Belt are important; current NPPF policy on the Green Belt should remain. We recommend, however, that the Government should publish clearer guidance on the definition of the “exceptional circumstances” in which Green Belt boundaries may be revised.
296.A fundamental component of the “plan-led” system in England is the power of local authorities to determine individual planning applications, testing proposals against relevant local development plan policies and, where these are absent, the National Planning Policy Framework. This is known as the development management function of the local authority.
297.As detailed in Chapter Two, local authorities are the ultimate decision-making body on the vast majority of planning applications, though unsuccessful applicants may appeal to the Planning Inspectorate for reconsideration of a decision. The Secretary of State for Communities and Local Government also has the power to “call in” both planning applications and appeal decisions for his own determination where they meet particular criteria.
298.Local authorities are expected to abide by statutory time limits for the determination of applications. These are 13 weeks for major development (meaning developments of 10 or more homes, or over 1,000 square metres) and eight weeks for all other types of development. If a local authority fails to meet these timeframes, the applicant has the right to appeal to the Secretary of State on the basis of ‘non-determination’.
299.If a local planning authority persistently fails to make planning decisions on time, the Secretary of State has the power to “designate” the local authority as underperforming. In these cases, applicants for major developments may make applications directly to the Secretary of State for so long as the designation remains in place.
300.Recent governments have taken legislative steps with the intention of increasing the speed of planning decision-making, including changing the definition of an “underperforming” planning authority to incorporate any authority which makes 40% or less of its decisions on time.
301.We were told by the Government that the time taken to determine planning applications, and the bureaucracy involved, was a constraint on the ability of the planning and development industry to deliver growth successfully, including new housing. Jones Lang LaSalle suggested that planning applications were often hindered by requirements for superfluous information, and told us that “there needs to be a tightening up on what a planning application comprises and what is truly necessary”. CBRE suggested that local authorities could provide clearer planning advice at an earlier stage, and that in some cases “one leaves without any clear steer as to whether or not we are engaging in a scheme that has a prospect of going forward and if so, what the key issues are on which we need to engage”.
302.The Crown Estate also argued that the quality of decision-making in local authority planning departments was variable, describing it as “broadly speaking a lot better than it was” although there were still problems with some local authorities in securing detailed planning permission and agreement to planning conditions, which must be approved before building can begin.
303.The Housing and Planning Minister expressed the view that it might be untenable for smaller districts to continue to run stand-alone planning departments. He told us:
“I would be the first to say that it is untenable for small district councils to have stand-alone planning departments for a couple of reasons, not only financial and what it costs to run, but in an area such as Norfolk where there are a number of small local authorities, it seems to be much more logical to bring them together in one or two single units where you get a couple of benefits. The first is a cost saving, because we are finding across the country that shared management arrangements save up to 18% on average… equally, you have a better career offer for your planners”.
305.We heard evidence regarding the Development Corporation model, as has been introduced at Ebbsfleet and at the Olympic Park and Old Oak Common in London. Development Corporations have historically been introduced in locations such as the London Docklands area and the post-war new towns which had been prioritised by the government for new development.
306.In these areas, the Corporation takes over planning decision-making powers from the local authority with a mandate to deliver major development to a clear timetable. In some cases (such as at the Olympic Park) the Corporation takes on plan-making powers, though in other cases these remain with the local authority. They also often take on powers of compulsory purchase.
307.While Development Corporations are not suitable for every circumstance, there are cases—particularly on large scale projects such as new garden city locations or major brownfield redevelopment—where they have proven to be a successful model. Michael Cassidy CBE, Chairman of Ebbsfleet Development Corporation, set out some of its attributes:
“The biggest advantage is that Development Corporations operate across boundaries, so you can put them in place where there is more than one local authority involved, and they can prevail because planning powers pass to the corporation … it has to be carefully chosen, holistic, and, as we are, one complete site rather than fragmented, and it has to be in co-operation with existing authorities”.
308.Michael Cassidy CBE also noted that the Ebbsfleet site had been prioritised for growth by successive governments for many years, but that very little construction had taken place. He noted that since the inception of the Development Corporation in April 2015, masterplanning work had already commenced and a business plan had been submitted to government, demonstrating the ability of Development Corporations to act swiftly to accelerate the development process.
309.Evidence received from the Greater London Authority set out the benefits of establishing a Development Corporation at Old Oak Common, a major brownfield regeneration site in West London. They told us:
“As a Mayoral Development Corporation, the OPDC brings together local decision making into one co-ordinated authority, with borough leaders serving alongside transport agencies, business leaders, local representation and education, planning and regeneration experts on a publicly accountable Board to work cohesively together with the shared ambition to capitalise on the opportunity for homes and jobs from the significant Government investment in the Old Oak Common station”.
310.The Town and Country Planning Association (TCPA) highlighted the ability of Development Corporations to capture uplifts in land value through compulsory purchase powers, the income from which could be used for investment in supporting infrastructure. While the Ebbsfleet Development Corporation has compulsory purchase powers, it is not intended that it should become the principal landowner; Mr Cassidy told us that “we are going to adopt a partnership approach … whereby we have an agreement with the land owners as to how this will proceed”.
311.The Government should consider the potential for extending the Development Corporation model to other major sites in England, where larger housing sites might benefit from having a single delivery authority with stronger powers and where local authorities are supportive.
312.A frequent theme of public debate around housing delivery has been the issue of sites with planning permission for new homes which have yet to be developed.
313.Recent figures produced by the Department for Communities and Local Government indicate that around 251,000 homes were granted planning permission in England in the year to 30 September 2015. However, only around 124,490 homes were actually completed in 2014/15. A range of reasons have been cited for this disparity, along with policy proposals to address it.
314.Dame Kate Barker argued that the extent of “unbuilt” housing was exaggerated because it included major sites which were in the process of being built out over a number of years. Jones Lang LaSalle gave a number of reasons for permitted sites being unbuilt, including sites not being in the control of developers; the time taken to discharge conditions; market conditions and the availability of skills and labour; and the lack of diversity in the housebuilding and development industry, including the loss of small and medium sized businesses during the recession.
315.We also heard evidence that leaving sites unbuilt can often be a rational economic decision to maximise sale values or to provide guaranteed development pipelines. Shelter informed us that:
“There is plenty of evidence that planning permissions have been going up very fast and housebuilding has not. There is actually very little direct evidence and connection between the number of homes that get built and the number of planning permissions that are secured … developers quite rationally have no interest in building so many homes that prices are lowered. Therefore, it makes absolute market logic sense to constrain housing supply to maintain maximum sales prices”.
316.Dame Kate Barker also noted that it was rational for developers to have large “land banks” because of uncertainty over which sites might be granted planning permission. She suggested that local authorities would support the sequencing of development meaning that even in cases where landowners had control of 15 years of land for development, the local authority would be unlikely to grant permission for all of it immediately.
317.The issue of “land banking” is also connected to the shortage of diversity in the housebuilding industry and the dominance of larger volume housebuilders, particularly following the recession. It was suggested that this could be addressed by promoting a greater mix of large and small developers in the housebuilding industry. The Federation of Master Builders told us:
“The idea that a small developer will buy such land and sit on it is just not going to happen. The national housebuilders are accused all the time of landbanking, but in their defence from purchasing a piece of land to actually building the first property on site is probably three to five years. People do not realise that we are probably going for a year on pre-application before we actually put an application in”.
318.We also heard evidence relating to overseas nations which have achieved higher build-out rates. Nigel Atkins informed us that, in France, mixed-tenure housing sites of 400 units could be completed in as little as three years.
319.There have been a range of policy proposals to address the issue of sites with planning permission that are sitting undeveloped, including the imposition of some form of charge to incentivise swifter housing delivery on such sites. Any such measure would necessarily need to be discretionary, as it should be recognised that there are legitimate reasons for building work not having commenced on particular sites, including development viability issues and undischarged planning conditions.
320.The Local Government Association (LGA) called for financial penalties for developers who have sought and obtained planning permission but then allowed it to expire. The LGA proposed that this could include a progressive increase in the Community Infrastructure Levy that increases every year the development has not been commenced, or the ability to charge a level of council tax equivalent to what would have been received from the development from the point that planning permission expires.
321.It was noted, including by the Housing and Planning Minister, that sites in multiple ownership are likely to be built out more quickly than sites in the control of a single developer. This refers back to the issues we have discussed in relation to the diversity of the development and construction industries, and the ability of local authorities to support land assembly on major sites (see paragraph 260).
322.Nevertheless, we see the gap between planning permissions and housing completions as a fundamental one in respect of securing increased housing supply. In a climate where over 240,000 homes a year are being granted planning permission, it is a fundamental failure of the development system that over 100,000 fewer homes are actually being built. This situation must be addressed.
323.We believe that the Government must consider measures to help accelerate the delivery of housing on sites with planning permission, such as permitting the charge of equivalent council tax rates when development has not commenced after a specified period of time, subject to safeguards when there are genuine reasons to prevent the development proceeding.
324.Since the introduction of the National Planning Policy Framework (NPPF), ‘development viability’ as a concept has become a much more prominent—and problematic—element of the planning system.
In planning terms, a development is ‘viable’ if the developer is able to deliver it, cover all of its associated costs, and make a reasonable profit.
The National Planning Policy Framework states that “to ensure viability, the costs of any requirements likely to be applied to development, such as requirements for affordable housing, standards, infrastructure contributions or other requirements should, when taking account of the normal cost of development and mitigation, provide competitive returns to a willing land owner and willing developer to enable the development to be deliverable”.
In practice, this means that all policies set out in the development plan—such as requirements for affordable housing, supporting infrastructure or environmental measures in new developments—must be tested for each individual scheme to ensure they do not make the development unviable once developer profit is accounted for. Often, a developer will submit a ‘viability assessment’ to the local authority setting out costs of the development including land, labour and materials, which is then used as a basis for negotiation of planning obligations such as those set out above. Obligations are often negotiated down from those specified in the development plan to ensure viability.
325.The overarching requirement for local authorities to secure a competitive return for the developer and landowner in every scheme means that, in practice, every requirement set out in the development plan is made subject to viability negotiations. We heard evidence that viability is therefore now the key element in discussions between local authorities and developers over specific planning proposals. It was suggested that the absence of an agreed methodology means authorities approach the issue differently, causing uncertainty and delay as well as the potential for exploitation by developers seeking to avoid planning obligations.
326.A particularly frequent point of negotiation is the level of affordable housing that development can viably incorporate. The National Planning Policy Framework (NPPF) defines affordable housing as:
“Social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market … affordable housing should include provisions to remain at an affordable price for future eligible households or for the subsidy to be recycled for alternative affordable housing provision”.
327.Local authorities are also required by the NPPF to plan for housing need in their area, including affordable housing need. We heard evidence, however, that the process of viability assessment undermines this, and thus the delivery of mixed communities.
328.The London Borough of Islington told us that developers’ viability assessments are systematically pessimistic in their assumptions about their ability to deliver planning obligations such as affordable housing and supporting infrastructure. This is to a great extent because developers will bid for land on the basis of their ability to avoid planning obligations, with the bidder who is most confident about avoiding the costs of such obligations bidding the most. This inflated land cost is then factored into developers’ viability assessments and used in itself as justification for avoiding planning obligations. This means that there is a circularity to the calculation of land cost in viability assessment.
329.As a consequence, development even in high property value locations such as Islington is often argued by developers to be ‘unviable’ because of the cost of development plan policies. These policies may need to be negotiated downwards before a developer is willing to proceed with their plans. This often involves renegotiation of affordable housing contributions.
330.Other evidence gave a similar perspective on the impact of the viability provisions in the NPPF. The Royal Institute of British Architects also highlighted provisions enabling developers to renegotiate Section 106 agreements.
331.We do not believe it is the deliberate intention of the viability provisions in the NPPF and Planning Practice Guidance to undermine the delivery of affordable housing or other key planning objectives such as local infrastructure, as this would be inconsistent with other policy prescriptions in the NPPF. The evidence that this has been the ultimate consequence of these provisions is, however, compelling.
332.In particular, the Planning Practice Guidance states that, “where the viability of a development is in question, local planning authorities should look to be flexible in applying policy requirements wherever possible”. The evidence we have received indicates that such guidance places the onus on local authorities to abandon the delivery of wider planning objectives on individual sites in order to secure development. This has the effect of undermining the plan-led system even where local plans have themselves been tested for viability.
333.We believe there is therefore a compelling case to revise national planning policy and guidance to ensure that individual viability assessments do not systematically undermine the delivery of affordable housing and other planning obligations.
334.Such revisions to planning policy could include a requirement for the full public disclosure of viability assessments; standardised guidance on the calculation of land values and other inputs; a requirement to use independent consultants to determine scheme viability where agreement cannot be reached; and a stipulation that new development should, as a general rule, seek to fulfil development plan objectives including the delivery of affordable housing and infrastructure.
335.The Government should revise the NPPF and NPPG to make clear that the process of viability assessment should not be used to compromise the ability of local authorities to meet housing need, including affordable housing need, as determined through development plans. This will reduce the unreasonable use of viability assessments to avoid funding of affordable housing and infrastructure.
336.The Government should also publish a nationally consistent methodology for viability assessment. This methodology should include standardised guidance on calculation of land values and other inputs, and a recommendation for full disclosure of viability assessments. Local authorities and developers should also have the right to seek arbitration from independent viability consultants where agreement on scheme viability cannot be reached.
337.As part of the reforms introduced in the Housing and Planning Bill, the Government is proposing to amend the definition of affordable housing to incorporate “starter homes”, which will be available to first time buyers with a 20% discount on the market rate.
338.Unlike other forms of affordable housing, there will be no provision for starter homes to remain at an “affordable” rate for future households after the first five years following a sale, or for the subsidy to be recyclable for future affordable housing provision. They represent a subsidy only to the first buyer of the property or for resales within the first five years, after which they become indistinguishable from private housing. The London Borough of Islington argued that this meant the policy “provides a one off benefit for developers, land owners and initial unit owners at the expense of the community and does not justify its costs”.
339.We consider that a principal purpose of affordable housing is to support the construction and maintenance of long-term mixed communities, where people on a range of incomes and backgrounds are able to live as neighbours. We have heard a range of evidence on the need to support mixed communities in new housing delivery, and requirements to support mixed communities in planning policy are also set out in the NPPF. Our visits to Birmingham and Southwark also indicated that successful redevelopment can be achieved by providing a mix of tenures in new housing.
340.If starter homes are to be provided in new developments in place of long-term affordable housing, such developments are unlikely to remain as long-term ‘mixed communities’. The Campaign to Protect Rural England also argued that the policy may disincentivise rural landowners who would otherwise have made land available to support the delivery of affordable housing:
“Communities and landowners in rural areas are supportive of new housing when it meets a local need. Both of these measures, however, will mean that there is no guarantee that housing association homes or Starter Homes will remain available to meet local needs in perpetuity. Landowners will be reluctant to sell land for housing which, within a few years, will be available at full market rate”.
341.We also heard evidence that the introduction of starter homes may risk the delivery of other affordable housing provision. This is because the Government is also proposing to introduce requirements for local authorities to “plan proactively” for starter homes and for “every reasonably sized site” to include a proportion of starter homes, limiting the ability of developers to support other forms of affordable housing without rendering development unviable. CBRE expressed concern that the measure might marginalise social rented and intermediate housing, telling us:
“If developers are being asked to subsidise starter homes as their number one priority, something else will inevitably get squeezed. A lot of infrastructure is already provided for by CIL, which is already non-negotiable, so that only leaves affordable housing to squeeze”.
342.We recognise and support the Government’s aspiration to promote home ownership. But the proposal to redefine affordable housing to include starter homes contains two risks. The first is that the policy emphasis on “starter homes” will mean that other forms of affordable housing such as low-cost rented housing are displaced, rather than supplemented.
343.The second is that it will undermine the aspiration to create mixed communities by classifying as “affordable” homes which are in fact only subsidised for the first five years of their lifetime, and would henceforth be indistinguishable from market housing. The loss of what might be termed “long-term” affordable housing, and the undermining of mixed communities in new developments, pose risks for the maintenance of successful built environments. This may be compounded by the proposal to require local authorities to sell higher-value council homes.
344.The Government should reconsider its proposal to include “starter homes” within the definition of affordable housing. The proposal risks undermining mixed communities and preventing the delivery of genuinely affordable housing for the long term.
345.The Government should revise its proposal to require starter homes on every reasonably sized development site. Local authorities should retain the discretion to prioritise long-term affordable housing over starter homes in the planning system where appropriate. The Government should also reconsider other policies set out in the Housing and Planning Bill, such as the requirement to sell higher value council homes, given that they could undermine the maintenance of mixed communities.
346.Another key component of the under-delivery of new housing lies in the shortage of skills in the construction industry and other built environment sectors, as well as continued restrictions on development finance. The Construction Industry Council (CIC) described the extent of skills shortages and skills gaps as a “serious problem”.
347.In addition, a recent survey by the Royal Institution of Chartered Surveyors (RICS) noted that UK construction skills shortages were at their highest level since the survey was first undertaken in 1998. Over half of respondents reported difficulties in sourcing labour, with bricklayers and quantity surveyors in shortest supply; 71% of respondents had difficulty sourcing the former while 64% had problems with the latter.
348.Both the Construction Industry Council and the Royal Institution of Chartered Surveyors called for more outreach efforts to attract young people to the construction industry. RICS recommended the creation of a Construction Skills Investment Charter, while the CIC called for outreach programmes in schools.
349.The Homebuilders’ Federation echoed these points, noting shortages in bricklaying, carpentry and quantity surveying, and calling for an increase in apprenticeships as well as support for the new generation of university technical colleges, which it was suggested “offer a lot of opportunities to bring more people into the industry in a creative way”, including as a bridge between technical, vocational and academic education.
350.The Homebuilders’ Federation also called for reforms to the Construction Industry Training Board (CITB) to make it more attuned to the requirements of the housebuilding industry. The CITB made the case for better coordination between skills requirements and wider built environment policy, with skills policy “based on evidenced future skills demands and a clear understanding of whether we have the recruitment and training in place to meet them”.
351.The impact of skills shortages on overall housing supply is difficult to quantify, not least because of its relationship to other constraints such as market conditions and development viability. We have, however, observed a clear consensus across the built environment professions which suggests that the issue presents a problem to housebuilders.
352.Construction skills shortages are acting as a constraint on the delivery of housing. We urge the Government to take measures to remedy this situation. Such measures might include the expansion of apprenticeships, the promotion of construction trades in courses offered by university technical colleges, and increased support for outreach programmes within educational institutions to encourage more young people to enter the industry.
237 Written evidence from Dr Tim Brown of De Montfort University (), The Chartered Institute of Building (), National Housing Federation ()
238 BBC News, ‘UK population ‘to top 70 million in 12 years’’, 29 October 2015: [accessed on 22 January 2016]
239 Office for National Statistics, Families and Households, 2014 (28 January 2015): [accessed on 28 January 2016]
240 Department for Communities and Local Government, Live Tables on House Building [Table 209]: [accessed on 5 February 2016]
241 Written evidence from Public Health England (), Town and Country Planning Association (), Construction Industry Council (), Dr Tim Brown of De Montfort University ()
242 Department for Communities and Local Government, Live Tables on House Building [Table 209], op. cit. [accessed on 5 February 2016]
243 Oxford Brookes University, Housing market and low income housing provision in the UK (March 2011): [accessed on 9 February 2016]
244 Department for Communities and Local Government, Live Tables on House Building [Table 209], op. cit. [accessed on 5 February 2016]
248 Michael E. Stone, Social Housing in the UK and US: Evolution, Issues and Prospects, (October 2003): [accessed on 9 February 2016]
249 Pete Apps, ‘Councils struggle to replace homes sold under the right to buy’, Inside Housing, (4 April 2014): [accessed on 9 February 2016]
250 Written evidence from Care Repair England (), Judith Martin (); (Adrian Penfold)
251 Department for Communities and Local Government, National Planning Policy Framework, (March 2012), para 14: [accessed on 27 January 2016]
252 Written evidence from Department for Communities and Local Government ()
253 Department for Communities and Local Government, ‘Historic Housing and Planning Bill will transform generation rent into generation buy’ (October 2015): [accessed on 9 February 2016]
254 Written evidence from the Confederation of British Industry ()
255 Department for Communities and Local Government, Live Tables on House Building [Table 208], op. cit. [accessed on 5 February 2016]
256 Homes and Communities Agency, Local authorities: bidding for new build, March 2011: [accessed on 5 February 2016]
257 Capita Property and Infrastructure, ‘Birmingham Affordable Municipal Housing Trust’: [accessed on 5 February 2016]
258 (Councillor Gillian Brown)
260 (Chris Carr)
261 (Lord Best)
262 (Chris Carr)
263 (John Slaughter)
264 (Chris Carr)
265 Department for Communities and Local Government, ‘PM: the government will directly build affordable homes’ (4 January 2016): [accessed on 4 February 2016]
266 Department for Communities and Local Government, ‘Builders Finance Fund: guidance and shortlist’ (8 September 2014): [accessed on 4 February 2015]
267 Supplementary written evidence from Department for Communities and Local Government ()
268 Written evidence from Federation of Master Builders ()
270 (Toby Lloyd)
271 (Brandon Lewis MP)
272 (Steve Melligan)
273 [HL Bill 87 (2015–16)-EN]
274 Written evidence from Town and Country Planning Association ()
276 Written evidence from URBED ()
277 (Toby Lloyd)
278 (Dame Kate Barker)
279 Nathaniel Lichfield & Partners, ‘Brownfield First: common sense or a political minefield?’ (June 2015): [accessed on 27 January 2016]
280 Department for Communities and Local Government, National Planning Policy Framework (2012): [accessed on 27 January 2016]
281 [HL Bill 87 (2015–16)-EN]
282 Richard Garlick, ‘Brownfield alone won’t solve housing shortage’ Planning, (7 November 2014): [accessed on 27 January 2016]
283 Written evidence from Campaign to Protect Rural England (), (Hugh Ellis)
284 See written evidence from Roger Hutton () on Green Belt policy interpretation.
285 (Anneliese Hutchinson)
286 (Paul Miner)
287 (Anneliese Hutchinson)
288 Department for Communities and Local Government, ‘Planning Practice Guidance: What are the time periods for determining a planning application?’ (6 March 2014): [accessed on 5 February 2016]
290 Local Government Lawyer, ‘DCLG to raise speed threshold for “under performing” planning authorities’ (19 June 2014): [accessed on 8 February 2016]
291 Written evidence from Department for Communities and Local Government ()
292 (Guy Bransby)
293 (Richard Lemon)
294 (Steve Melligan)
295 (Brandon Lewis MP)
296 Powers to introduce Mayoral Development Corporations were introduced by the . Powers for the government to establish Development Corporations exist through the .
297 (Michael Cassidy)
298 (Michael Cassidy)
299 Old Oak and Park Royal Development Corporation
300 (Michael Cassidy)
301 Department for Communities and Local Government, Planning Applications in England: July to September 2015 (December 2015): [accessed on 5 February 2016]
302 Department for Communities and Local Government, Live Tables on House Building [Table 209], op. cit. [accessed on 5 February 2016]
303 (Dame Kate Barker)
304 (Guy Bransby)
305 (Toby Lloyd)
306 (Dame Kate Barker)
307 (Chris Carr)
308 Written evidence from Mr Nigel Atkins ()
309 Isabel Hardman, ‘Exclusive: No 10 advised to punish land hoarders’, Spectator (19 October 2012): [accessed on 10 February 2016]; Patrick Wintour, ‘Lyons review for Labour urges new powers to boost housebuilding’, The Guardian (October 2014): [accessed on 8 February 2016]
310 Written evidence from the Local Government Association ()
311 Department for Communities and Local Government, National Planning Policy Framework (March 2012) Annex 2: Glossary: [accessed on 27 January 2016]
312 Written evidence from London Borough of Islington ()
315 (Ruth Reed)
316 Department for Communities and Local Government, ‘Planning Practice Guidance: What does the National Planning Policy Framework expect on viability in planning?’ (6 March 2014): [accessed on 5 February 2016]
317 Department for Communities and Local Government, National Planning Policy: consultation on proposed change (December 2015): [accessed on 8 February 2016]
318 Written evidence from the London Borough of Islington ()
319 Written evidence from Local Government Association (), National Housing Federation (), Judith Martin ()
320 Written evidence from the Campaign to Protect Rural England ()
321 (Richard Lemon)
322 Written evidence from Construction Industry Council ()
323 Royal Institution of Chartered Surveyors, ‘Britain faces bleakest construction skills shortage in almost 20 years’ (23 October 2015): [accessed on 26 January 2016]
325 (John Slaughter)
327 Written evidence from the Construction Industry Training Board ()