Tackling intergenerational unfairness Contents

Chapter 3: The housing challenge

The rising cost of housing

60.One major pressure that younger generations are facing is increased housing costs. As Figure 1 shows, the two youngest generations are devoting a greater proportion of their overall income to housing than previous generations. People born between 1981 and 2000 appear to be spending over one and a half times more, as a proportion of their income, on housing at the age of 25 than the generation born immediately after the Second World War spent at that age. For previous generations, housing costs as a proportion of income have declined as individuals enter their 30s, but it is unclear whether this latest generation will experience a similar decline.

Figure 1: Proportion of income spent on housing costs by generations: GB63

Line chart showing proprtions of income spent on housing costs per generation

Source: Intergenerational Commission, Home Affront: Housing across the generations (September 2017) p 31: https://www.intergencommission.org/wp-content/uploads/2017/09/Home-Affront.pdf [accessed 28 January 2019]

61.This increase in housing costs as a proportion of income does not appear to be caused by younger generations choosing to spend more to prioritise living space. The amount of floor space per person for those under 45 has fallen over the last 20 years whilst the amount for those over 45 has risen. Nor is it the case that younger generations are paying more to live closer to work. For the cohorts for which there are data, each cohort has had longer commutes than the generation before them had at their age.64

62.The relationship between generations and the proportion they spend on housing changes slightly if households are differentiated by tenure. In the private rented sector younger generations have a larger income gap with previous generations than the overall picture in Figure 1, with private renters born 1981–2000 paying 35 per cent of their income at 25 whilst private renters born just after the Second World War were paying just over 15 per cent of their income at 25. Mortgage holders in younger generations were paying similar amounts to mortgage holders born just after the Second World War at 25. This is mainly due to lower interest rates. This could change if interest rates rise.65 Older generations who owned at a young age had a more difficult experience than younger generations who own today. Owners from older generations faced higher interest rates and for some the experience of negative equity. However, there are fewer home owners in younger generations than those that came before, as seen from Figure 2.

Figure 2: Generational home ownership rates by age: UK66

Line graph showing percentage home ownership rates by age, per generation

Intergenerational Commission, Home Affront: Housing across the generations (September 2017) p 13: https://www.intergencommission.org/wp-content/uploads/2017/09/Home-Affront.pdf [accessed 28 January 2019]

63.There have been many social and economic changes between generations that could delay buying a house. Younger generations are entering the labour market later, are less likely to live with a partner and are having children later, all of which could delay the decision to buy; conversely, they could themselves be delayed by housing costs. Adjusting for these demographic differences does account for some of the home ownership differences between generations, but there remains a large difference between home ownership rates.67

64.The Intergenerational Foundation highlighted that this difference in home ownership has “huge implications for intergenerational equity”. House price rises across the country, especially in London and the South East, benefited home owners whilst young adults “must either buy or rent their housing in an over-inflated housing market or live with their parents for much longer than was considered usual by previous generations.”68 There has been some innovation in offering new models to tackle the housing crisis, such as Homeshare and the rent a room scheme.69 Age UK told us that whilst these schemes may be helpful for some, they are small scale and should not be seen as comprehensive solutions.70

65.A decline in homeownership is partly due to house prices being inflated by monetary policy. Quantitative easing and low interest rates have reduced the returns to saving and have increased the price of assets like housing.71 This is a destabilising factor that will need careful attention. But, whilst a tightening of monetary policy might reduce house prices, it would not necessarily reduce the cost of housing (as mortgage costs would rise).

Housing supply

66.We heard compelling arguments that the rise in housing costs and the decline in ownership is caused by a reduction in housing supply. Dr Kristian Niemietz told us that housing is the cause of many of the UK’s social and economic problems and this housing problem is caused by a lack of supply. He stated that since 1980 house prices in the UK have risen by a factor of 3.5 in real terms which makes the UK an outlier in international comparisons.72 Dr Niemietz said that these price increases in the UK result from building fewer new homes than in comparable countries for four decades. Professor Christian Hilber, Professor of Economic Geography at the London School of Economics (LSE), told us that the underlying problem was that supply constraints “have become extremely binding over the last couple of decades.”73 The TaxPayers’ Alliance suggested that different balances in supply against demand explain the regional differences in housing affordability.74 It stated that in London, floor space per person is falling and the average number of people per dwelling is rising, whilst the opposite is happening in much of the country.

67.The Rt Hon The Lord Forsyth, Chair of the House of Lords Economic Affairs Committee, told us that the principal issue that needed to be tackled in the housing market was the need to build more affordable, social homes and the lack of government action needed to ensure that this happens.75 The Government’s evidence stated that “successive governments have not built enough homes, and the Government acknowledges that for many people today, the housing market does not work.”76 It has committed to delivering 300,000 homes a year by the middle of the next decade. However, as Lord Forsyth told us, it is not clear that the Government’s proposed measures will reach this target. Dr Niemietz suggested that current house prices are “predicated on the (implicit) assumption that the Government will not address the causes of the housing crisis, and that house prices and rents will continue to rise.” He suggested that once this assumption is no longer held prices could begin to fall.77

Figure 3: Trends in tenure (proportions), 1980 to 2017–18

Line graph showing proprtions of different types of tenure 1980 to 2017-18

Source: Ministry of Housing, Communities & Local Government, English Housing Survey: Headline Report, 2017–18 (January 2019) p 6: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/774820/2017–18_EHS_Headline_Report.pdf [accessed 31 January 2019]

68.Figure 3 shows the proportion of households living in different tenures. Whilst home ownership has declined over the last decade (falling from a peak of 70.7 per cent in 2005 to 63.5 per cent in 2017–18) and the private rental sector has increased in size (rising from a low of nine per cent in 1992 to 19.5 per cent in 2017–18), the largest change has been the large fall in the number of social renters (falling from 31.7 per cent in 1981 to 17.0 per cent in 2017–18). A substantial part of this was the result of tenants in the 1980s exercising their right to buy their homes.

69.Dr Rory Coulter told us that in the long-term “there is a pressing need to build more housing for low-cost and secure social renting tenancies.”78 The Peabody Trust stated that since 2010, the “construction rate on social housing has dropped by 97 per cent with projections estimating a loss of 370,000 social homes over the next three years.” It suggested that social rented stock “is being sold off into the private rented sector and not being replaced like for like.”79 London Councils suggested that a “chronic undersupply of social housing is a key factor” in the housing crisis in London. It argued that the country has not built a substantial amount of social housing since the late 1960s, when social housing made up almost half of the total supply. London Councils argued that due to central government’s “erosion of local authority budgets, and the borrowing cap on housing revenue accounts (HRA), councils have little scope to invest in social housing on the scale required.”80 During the course of our inquiry the Government has made progress on this by abolishing the HRA cap that controls local authority borrowing for house building.81 However, this will not by itself solve this problem, and will not help those local authorities which do not have an HRA.

70.Age UK told us how the lack of adequate housing supply affected different age groups:

“The general lack of housing supply particularly affects younger people although there is also a need for a wider range of affordable housing options for older people. A major obstacle to downsizing (or ‘rightsizing’) is the lack of affordable, suitable housing options in preferred locations, with access to good transport links and key services. … However, despite housing policies that have benefited older owner-occupiers there is an uneven distribution of housing wealth within this population. Older people living in areas with high property values, especially in London, the South East, and larger cities have more options to either downsize or release home equity. Older people living in parts of the Midlands, North East, North West, Scotland and Northern Ireland have fewer options because of lower property values”.82

71.The Centre for Ageing Better suggested that the problem of supply should not just be thought of as relating to young people. It states that “the biggest increase in demand for housing over the coming decades will be among older adults.” The Centre for Ageing Better suggested that as the proportion of older households increases, “so too will the proportion of the population with disability, accessibility and mobility requirements.” It highlights that most existing housing stock “does not meet the needs of people as they get frailer.”83

72.The supply of adequate housing is clearly a key issue for intergenerational fairness. This impacts young people through rising housing costs and impacts older people through a lack of suitable housing.84

73.The Government is not taking the action needed to ensure that there is a sufficient supply of affordable housing. In particular, action needs to be taken to substantially increase the supply of social housing. One means of doing this is to ease the ability of local authorities to borrow to fund housing building. This lack of action on housing is primarily hurting younger generations. However, younger generations can be helped by building more housing which is accessible and adaptable for older generations as part of a wider increase in supply.

The private rented sector

74.The private rented sector is growing but this is not necessarily by choice as most people still want to own their home. The Intergenerational Foundation told us that 79 per cent of non-home owners aged between 20 and 45 would like to own one day, although 39 per cent said that they did not think they would ever be able to afford it.85

75.We asked witnesses to name their top priority for government action to improve intergenerational fairness and a large number suggested improving conditions in the private rented sector. Ian Mulheirn, then Director of Consulting at Oxford Economics, suggested that the single biggest thing that the Government has the greatest power over is the difference of experience in renting against owning property. He stated that the “insecurity of tenure faced by younger people in the private rented sector is a world away from ownership”.86 Douglas McWilliams, Deputy Chairman of the Centre for Economics and Business Research (Cebr), told us that although people want flexibility when they rent, one of the biggest fears of young people is their uncertainty of tenure. He suggested that anything that could be done to increase their certainty without removing the rights of a landlord would be a good thing.87 Professor Sue Heath, Professor of Sociology at the University of Manchester, stated that the increasing pressure to move into owner-occupation is partly driven by the conditions of insecurity experienced by younger adults. She said that improving the private rental sector was a priority for her students.88 Paul Broadhead, Head of Mortgage Policy at the Building Societies Association, suggested that the reason that people took out unwise interest-only mortgages without any way of securing repayments was because it “was the only way they could get security of tenure.”89

76.The Intergenerational Foundation told us that people in private renting move far more often than in other tenures. In 2013/14 one in four private renters moved home compared to only five per cent of social renters and three per cent of owner occupiers. This is a particular problem in London where 37 per cent of private renters had moved three or more times in the past five years.90

77.Professor Karen Rowlingson highlighted the effect that insecurity in the private rented sector has on younger generations, particularly those with families. She stated that families “can be asked to leave their homes with two months’ notice and have to move away from schools and friends to find alternative accommodation”.91 The Intergenerational Foundation told us that a quarter of families now live in the private rented sector.92 Children who move home more frequently do less well in school and if they move often whilst very young can miss out on key vaccinations.93 Some adults are delaying the decision to have children due to living in the private rental sector. The Intergenerational Foundation stated that 47 per cent of 20–45 year olds did not believe it was right to have children until they owned their own home. It suggested that:

“The reason why renting privately in England is so unstable is because tenants enjoy virtually zero legal protection from being evicted if they are renting under the Assured Shorthold Tenancy (AST) agreements which predominate within the private rented sector, which usually last for either 6 or 12 months. Landlords are free to increase the rent each time an AST gets renewed, and can seek a court order to have a tenant evicted for no legal reason (even if the tenant isn’t in rent arrears) as long as they have lived in the property for a total of more than six months. This is completely different to the situation in Ireland and most other European countries which have large private rented sectors, where tenants enjoy greater protection from eviction.”94

78.It found that 57 per cent of 20–45 year olds also believed that they would not be able to retire if they were still renting.95 Age UK told us that they are concerned about the increasing number of older people living in the private rented sector. It stated that nine per cent of households in the private rented sector are over 65 but that this could increase to a million households by 2035–36.96 The Centre for Ageing Better told us that the private rented sector has the highest proportion of poor quality housing and this affects the wellbeing of older renters by increasing their risk of falls and exacerbating existing health conditions.97

79.Members of our Contact Group expressed many of the same concerns as in our formal evidence. They told us that they were faced with low quality housing that was often unaffordable and insecure, with the threat of possible eviction constantly hanging over them.

80.The Government is taking a number of steps to try and improve the private rented sector. It has supported the new creation of the new Tenant Fees Act 2019, which bans letting fees paid by tenants, and the Fitness for Human Habitation Act 2018 which ensures minimum safety requirements.98 The Government recently consulted on the barriers to longer tenancies and proposed creating a new minimum three-year model tenancy but has yet to publish a response to this consultation.99

81.Increased regulation of the private rented sector could result in fewer landlords entering or remaining in the market. This is especially the case for small landlords who let only one property and may require greater flexibility. Nonetheless, while policy needs to be sensitive to those risks, there is need for further reform.

82.The Government’s proposed reforms do not create a regulatory framework that will provide private tenants the security they need. This particularly affects young people who are unable to buy and becomes a greater problem as they age. Change is needed so that renters who want a long-term secure tenancy can find one.

Intergenerational transfers and financial products

83.Although younger generations have faced a more difficult housing market than previous generations, they are also receiving greater support from older generations. Douglas McWilliams told us that their survey found that increasing numbers of young people are receiving support from relatives in buying a house. Its research found that as of April 2018, 316,000 properties were purchased that year with help from an older generation, representing 27 per cent of all purchases. The average contribution was between £5,000 and £6,000.100 Paul Broadhead told us that close to 60 per cent of first-time buyers expected to need some help from family members.101 Nigel Keohane, SMF’s Director of Research, explained to us that whilst there was evidence that older generations were increasingly helping with deposits, intergenerational transfers often went beyond this:

“Most of the assistance is for helping people cope day to day. Some of that would be paying the rent, some would be paying the bills, some of it would be cash payments to the younger generation to help them get by. The second reason why that is important is because when we think about the bank of mum and dad we tend to think of quite affluent older people helping potentially reasonably affluent younger people. That is going on, but there is a lot of activity going on right across the socioeconomic spectrum. Looking at people in lower-skilled occupations, we did some analysis of government surveys and found about a third of those people there are giving regular financial support to the younger generation, to their children.”102

84.The SMF’s research finds that 23 per cent of familial financial assistance is to help cover the general costs of living, only seven per cent is to help buy a home and a similar proportion (six per cent) is to help pay for the costs of rent.103 Professor Karen Rowlingson told us that families are supporting each other by “giving significant financial gifts or loans; by providing accommodation directly; and/or helping with rent/mortgage payments”.104 The National Pensioners Convention told us that some older members of working-class families were selling possessions or taking out loans to support younger generations.105

85.Another form that this financial support can take is through intergenerational financial products. Isobel Stephen, Housing Supply Director at the Ministry of Housing, Communities and Local Government (MHCLG) explained the variety of products available. She told us that the market can be divided into three parts: equity release, interest-only mortgages and intergenerational mortgages. Equity release is where a relative can release some equity from their property which can be used to fund a deposit. No repayment is required until the property from which equity has been taken from is sold, but this tends to be expensive. Isobel Stephen stated that the “average amount of equity released is £60,000. There are about 37,000 of those mortgages taken out every year. The average age of the borrower is 70.”106 Equity release products are typically offered by insurance companies.

86.Interest-only mortgages for retired people were facilitated by a rule change by the Financial Conduct Authority last year. These allow the borrower to free up equity from their house that is repaid when the property is sold but in the intervening period the borrower makes monthly interest payments. However, Isobel Stephen told us that there “is a challenge for the lenders in pricing the risk in case somebody stops working or becomes ill and requires care.”107

87.An intergenerational mortgage is where a deposit is replaced or combined with a charge against a relative’s home or savings. Isobel Stephen gave the example of “a Barclays product where a first-time buyer can get 100 per cent loan to value on the property that they are buying if a relative deposits 10 per cent of the value of the property in a Barclays bank account as collateral against the mortgage.”108

88.There is a growing market of intergenerational mortgage products in response to the increasing difficulty that younger generations face in accessing affordable housing. Paul Broadhead told us that the equity release market in 2017 was approximately £3 billion with around a quarter of that being used to help family with housing, either to buy or rent.109 Douglas McWilliams told us that equity release is only 14 per cent of the funding from the so called “Bank of Mum and Dad” to help younger generations afford a deposit. He told us that seven per cent of the funding comes from re-mortgaging and six per cent from taking out a loan.110 Paul Broadhead explained to us that the increase in joint purchases with family members alongside guarantor mortgages were not necessarily helping those who would not otherwise be able to buy but were instead helping people to buy earlier than they otherwise would have been able to.111

89.Care & Repair England warned us that six per cent of older households rent privately and 18 per cent live in social housing, so reliance on older generations to help younger generations to owner occupation would exacerbate inequalities between families and others.112 Nigel Keohane suggested to us the role that intergenerational financial products could play:

“It seems to me from a societal perspective we are not worried about people who do not own homes because they do not have that equity to release; we are not really worried about the people who have got a lot a financial wealth because they can give cash. We are worried about the middle section of the population who may have housing wealth, but only a modest amount of financial wealth. It probably would not be in their interests for them to dispense with all their financial wealth because that would potentially cause them problems further down the line. That seems to be the target group.”113

90.Nigel Keohane suggested that this target group could be helped by a guarantor mortgage to use their own property as collateral for younger generations. He suggested that equity release was a less desirable product as it has substantially higher interest rates than mortgage products.114 Paul Broadhead explained that another reason why there was increasing innovation within financial products was that the sector was entering a better regulatory environment. He told us that between the financial crisis in 2007/08 and 2015 the sector had been using the money it would usually invest in innovation on complying with new regulation. There was more innovation taking place now.

91.Intergenerational transfers play an important role in housing affordability for many members of younger generations. There is a need for innovative, flexible products which can help address this issue. The Government and the Financial Conduct Authority have a key role to play in ensuring a regulatory framework that encourages new challenger entrants to these markets, who can shake up the existing playing field.

92.Paul Broadhead suggested that one thing holding back the ability of younger generations to obtain mortgages was the Bank of England’s requirements on mortgage providers. He told us that the Bank of England’s rules effectively mean that “mortgage lenders stress-test that people can afford mortgages at around seven per cent to eight per cent over five years.” He argued that we are unlikely to see interest rates that high in the near future and that people were stuck living in rented accommodation because of the way the stress test is done.115 However, careful consideration would have to be given as to what level of financial risk it is wise to expose younger generations and the economy as a whole to.

93.Ian Mulheirn told us policymakers can trade financial stability for higher home ownership rates by allowing for very high loan-to-value rates at scale, but that this was not a good idea.116 In the absence of financial instability he suggested that direct government support is necessary to increase the supply of affordable housing.

Development of public sector land

94.One way in which the Government can support increasing supply of affordable housing is by making better use of the land that it already owns. This was one of the issues addressed in the House of Lords Economic Affairs Committee’s report on Building more homes.117 It recommended that a senior cabinet minister should be responsible for identifying and coordinating the release of public land for housing, with a particular focus on providing low cost homes. The evidence we received also suggested that the use of public land is an under-used lever in providing more affordable homes. We heard that the lack of competence within Government to manage the land it owns undermines its ability to make the best use of it to tackle the housing crisis.

95.Julian McCrae, Senior Adviser to the International School for Government at King’s College London, told us that the idea of using public land “was an old perennial of what Governments try to look at and find value from.” He said that civil servants had been asked to do this since at least the 1970s but there had been little progress from these efforts. The one area that he identified where progress had been made was in the management of the part of the government estate on and around Whitehall since 2010. He told us that the difference was that there had been a much more information-led approach looking at utilisation rates to understand what property was needed and what could be disposed of. The key to this approach was investment in acquiring the knowledge and the capability to use that knowledge. He told us that in “that relatively small part … of the government property [port]folio, we have the capability to manage things properly.”118 When we questioned Kit Malthouse MP, the Minister of State for Housing, we were not persuaded that the Government had that capability to manage public land. He stated that although all departments should have a list of the land that they own or is owned by subsidiaries, he could not “speak for all departments as to whether it is completely accurate or not”.119

96.There is some evidence of government activity to improve this capability. The Government’s public sector land disposal programme had sold land with capacity for 13,817 homes by September 2016 and had identified land for disposal for a further 131,675 homes.120 It released a new Government Estate Strategy in July 2018121 and has developed an online government property and land finder tool122 which allows the public to find public land to rent, buy or to contest its current use. However, this tool does not include all public land and is symptomatic of the Government’s approach. It has the right idea in wishing to use public land to help tackle the housing crisis but is not investing enough to be most effective. It is inadequate to the pace and level needed and the scale of publicly owned land.

97.The Government has failed to manage properly the land which it owns. It should invest in developing a central government capability to understand fully what land public bodies own, how public sector bodies use that land and where it can be disposed of.

98.A further limitation on the use of public land is the requirement that it must be disposed of at market value. Tom Kenny, the Acting Deputy Head of Policy and Research from the Royal Town Planning Institute (RTPI) told us that this could be a key way in which local authorities can meet social needs in their area.123 The Government recently consulted on giving local authorities broader powers to dispose of local authority land at less than market value when there are wider public benefits, without seeking specific consent from the Secretary of State. However, this would still not dramatically alter the balance of power and force more public land to be used to provide affordable housing and would not affect public land owned by any public body other than local authorities. We asked witnesses about radically shifting the balance of power so that local authorities lead the process and the onus would shift onto public bodies to object or develop the land themselves. Tom Kenny told us that the RTPI “would certainly welcome local authorities taking a bigger role in proactively planning to meet the needs in their areas.”124

99.When we put this suggestion to the Minister, he suggested that a negotiated outcome between local authorities and other bodies would be more productive but failed to provide any reason why this would be the case.125 This negotiated approach has not produced stellar results to date; it is time to think more radically about public land. This failure should be seen within the wider context of other land with planning permission not being developed. The Government should look more widely at how to ensure land with planning permission is built on and brought to market more quickly, but specific action is needed on public land. Local authorities already have the ability to apply for planning permission on public land, but they lack the power to ensure that development takes place.

100.In order to increase housing supply, local authorities should be given a presumption to develop on land owned by public sector bodies. Local authorities should be empowered to ensure that development on public land takes place.

Box 1: Proposed reform of public land development

If a local authority includes public land within its local plan or in a supplementary planning document, then the public authority which owns that land should have six months to submit plans for developing it. In the absence of a response, the local authority should be able to grant itself planning permission in the normal way, where the landowner would have the opportunity to make representations at the Planning Committee.

If permission is granted, then the matter should be remitted directly to the Secretary of State, who would only be able to decline on the basis of non-planning concerns, such as national security or public health and would be obliged to lay a report before Parliament stating the details of these concerns. If the Secretary of State upholds the permission, then the public land owner should have a limited period in which to show a clear intent to execute on the plan. In the absence of this clear intent then the local authority may appoint developers to deliver the plan.

The capacity of local authorities to deal with planning issues

101.Much of the Government’s strategy for delivering more houses relies on local authorities’ ability to plan effectively for their local areas. The Minister told us that he did not believe central government should develop housing forecasting capacity for the future needs of different generations. He suggested that local authorities “are best placed to be able to make decisions about the formulation of housing in their area … and deciding through their plans what type of housing they think they need in their particular area.”126

102.Whilst the Minister acknowledged that forecasting would be “quite difficult” for central government, he expected local authorities to be able to do so. Given central government’s difficulties in developing robust modelling for future generations (as discussed in Chapter 2) this seems to be overly optimistic. When the Minister was pressed on how the Government was ensuring there was sufficient suitable housing for older generations, he told us that there was “a plan-led approach from local authorities.”127 He expected local authorities to develop a land supply that could be used for the following 10 years in order to be able to remove planning permission from uncooperative developers.128

103.Alongside this the Government has made it more difficult for local authorities to plan for their local area by introducing additional permitted development rights, where developers can bypass part or all of the planning permission processes in certain circumstances such as converting office space into housing.129 Setting aside the economic impact of lost office space in some areas, the inability of councils to control the use of such developments means that there is no way in which they can be made to comply with local need, for example, in new appropriate, affordable housing for younger people or older people.

104.Tom Kenny told us that local authorities were struggling to deliver the housing that their local area wanted. He suggested that a lack of resources and expertise were a problem for local authorities. Tom Kenny said that local authorities were losing through attrition by not being able to compete with the resources that developers could put in to viability negotiations.130 The Government nationally set limits on the basic fee for planning services, but local authorities can perform additional fee-generating activity. Between 2010/11 and 2017/18, there was a 37.9 per cent fall in net current real expenditure in real terms on planning functions by local authorities. However, once income generated from sales, fees and charges or transfers from other public authorities are included, the fall in spending was 14.6 per cent from £1.125 billion to £961 million.131 The Minister told us that planning fees had increased by 20 per cent but did suggest that “if it becomes clear that capacity in planning departments is a brake on development, we will have to look at that again.” The NAO has reported that:

“The Ministry of Housing, Communities and Local Government (the Department) has little oversight of how local authorities generate income from planning. It does not collect information on the extent of planning performance agreements, or how much income they are generating … The Department required local authorities to commit to spend the additional resource within their planning teams, but the Department has not performed detailed checks as to whether local authorities have spent the additional income generated on planning.”132

105.The Minister also raised the fact that capacity could be a problem for local authorities as they may occasionally need “a level of expertise and a senior planner which it would not necessarily have on a day-to-day basis.” His preferred solution for this was to pool that central expertise so that it could be shared between local authorities.133 The NAO’s investigation into the planning system found that the Department did not understand the extent of the skills shortages and only has “patchy” data on staff numbers.134

106.The Government should give powers to local authorities to set their own planning fees up to cost. Local authorities should ensure that additional fees are retained by planning departments.

Housing for older generations

107.Gareth Lyon, Head of Policy and Communications at the Associated Retirement Community Operators (ARCO) told us that the UK had much lower levels of people living in retirement communities than comparable countries. He stated that in “Australia, New Zealand and the US, between five per cent and six per cent of older people live in retirement communities. In the UK, that figure is 0.5 per cent to 0.6 per cent.”135 One positive feature of retirement communities is that they reduce overall care costs:

“The cost of providing lower level social care in a Retirement Community has been found to be £1,222 (17.8 per cent) less per person per year than providing the same level of care in the wider community. The cost of providing higher level social care has been found to be £4,556 (26 per cent) less per person per year. NHS costs reduce by 38 per cent for those moving into Retirement Communities, an average saving of £1,114.94 per person per year. This relates to GP visits, nurse visits, and hospital visits.”136

108.One problem that stops more retirement communities from being created is the inconsistency of planning use class assigned to them. Care homes are classified as C2 whilst regular houses are classified as C3. Properties classified as C2 can face fewer planning restrictions as to where they are built and have fees waived.137 ARCO states:

“There is a large body of case law and precedent confirming that genuine housing-with-care schemes often fall within the C2 use class, as they are capable of delivering high levels of care to older people. However, there is much confusion and inconsistency between different councils’ approaches to specialist older people’s housing-with care in terms of what Use Class such specialist accommodation falls within.”138

109.Age UK presented a slightly different case, stating that “the debate around whether there should be reforms to planning gain rules to incentivise retirement developments is finely balanced, and it can be argued they should make a reasonable contribution to affordable homes for lower income groups and community infrastructure costs, especially developments at the top end of the market.” It suggests instead that there should be a focus on a wider range of housing options for older people, including properties built to higher accessibility standards and encouraging the development of integrated age friendly homes and communities that bring younger and older generations together.139 On our visit to Doncaster we saw the positive effect that extra care housing can have by offering somewhere that can provide care whilst still helping residents remain part of the local community. As these facilities can provide care it is not clear why they are not more consistently classified for the basis of planning in the same use case as care providers. In the long-term, as ARCO recommends,140 it may make sense for them to have their own specialised planning use case.

110.The Government should issue guidance clarifying that extra care retirement communities fall within the C2 use class as they are capable of delivering high levels of care to older people and so should be treated as the same planning use class as care homes.

Planning for each generation

111.Different age groups can have differing housing needs and it is important for these to be considered. ARCO told us that currently only 11 per cent of Local Plans in England and Wales have specific policies to address older people’s housing needs, with only four per cent of plans including land allocations for housing for older people. This is despite the expectation that 30 per cent of the population will be over 65 by 2036.141 The Minister told us that two thirds of local planning authorities have no older people’s accommodation in their local plan. However, he stated that under the National Planning Policy Framework, local authorities are supposed to consider the needs of older people in their area and that this had not happened yet because we “are in a transition phase on planning.”142 The National Planning Policy Framework specifies that:

“the size, type and tenure of housing needed for different groups in the community should be assessed and reflected in planning policies (including, but not limited to, those who require affordable housing, families with children, older people, students, people with disabilities, service families, travellers, people who rent their homes and people wishing to commission or build their own homes).”143

112.The Minister suggested that as plans are submitted to inspectors they will be assessed on whether they have a sound evidence base.144 However, he did not state that a failure to consider the needs of older people would lead to inspectors rejecting the local plan. It is too early to say whether the new National Planning Policy Framework, updated in February 2019, with new guidance on this subject, will change this.145 Care & Repair England summarised the current state: “Planning policy and Building Regulations are currently failing to systematically address population ageing through building better homes that meet people’s needs across the lifecourse.”146 Younger people’s needs are not currently explicitly considered as part of the framework.

113.Whilst it is important for the housing needs of different age groups to be considered, we do not believe that this should be done by creating separated housing for each group, but instead by creating mixed communities with housing that is appropriate for different ages. We heard from Simon Gallagher, Planning Director at MHCLG, that the Government is looking at how good design can help create mixed communities that will survive in the long-term because it generates engaged communities.147 Tom Kenny told us that by designing places that are suitable for older people, planners can create places that work better for people with young children and for disabled people as the same features help each group. He stated that:

“If we are going to create compact, appropriate-density mixed-use developments with good links to public transport, we need to make them adaptable so that they can be converted if need be. If we are going to build this type of housing, we should try to build it everywhere, and for everyone, because it is just better.”148

Planning for all ages requires including attractive and accessible public space and facilities, the importance of which we discuss in Chapter 6.

114.The Government should issue planning guidance to recommend that local plans consider the needs of younger people alongside the existing specified demographics.

115.The Government should ensure that local plans have specific policies to address the needs of younger and older people. If the new National Planning Policy Framework’s requirement that local authorities consider these issues does not achieve this, then the Government must take more direct action.

63 Note: Income and housing costs both include housing benefit. Incomes and housing costs are assumed to be shared equally within households. Figures for each generation are derived from a weighted average of estimates by single year of age for each single-year birth cohort within that generation, generations are included if at least given birth years are present in the data. The graph is formed of Resolution Foundation analysis of data from Institute for Fiscal Studies Households Below Average Income (Family Expenditure Survey), covering 1961 to 1991, and data from Department of Work and Pensions, Households Below Average Income (Family Resources Survey) covering 1994–95 to 2015–16.

64 Home Affront: Housing across the generations, p 48–52

65 Home Affront: Housing across the generations, p 33–37. The picture in the social rented sector is more complicated and depends on how housing benefit is treated.

66 Note: figures for each generation are derived from a weighted average of estimates by single year of age for each single-year birth cohort within that generation, generations are included if at least five birth years are present in the data. The graph is formed of Resolution Foundation analysis of data from the Family Expenditure Survey covering 1961–1983 and data from the Labour Force Survey covering 1984–2017.

67 Home Affront: Housing across the generations, p 16–17

68 Written evidence from the Intergenerational Foundation (IFP0042)

69 HM Government, ‘Rent a room in your home’: https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme [accessed 7 March 2019], written evidence from Shared Lives Plus (IFP0015)

70 Written evidence from Age UK (IFP0047)

71 Q 31 (Ian Mulheirn and Paul Johnson)

72 Written evidence from Dr Kristian Niemietz (IFP0003)

73 Q 132 (Professor Christian Hilber)

74 Written evidence from the TaxPayers’ Alliance (IFP0069)

75 Q 113 (Lord Forsyth of Drumlean)

76 Written evidence from HM Government (IFP0058)

77 Written evidence from Dr Kristian Niemietz (IFP0003)

78 Written evidence from Dr Rory Coulter (IFP0019)

79 Written evidence from the Peabody Trust (IFP0023)

80 Written evidence from London Councils (IFP0029)

81 Budget 2018, p 62

82 Written evidence from Age UK (IFP0047)

83 Written evidence from the Centre for Ageing Better (IFP0049)

84 The Government’s announcements in the Spring Statement do not alter this conclusion.

85 Written evidence from the Intergenerational Foundation (IFP0042)

86 37 (Ian Mulheirn)

87 Q 159 (Douglas McWilliams)

88 159 (Professor Sue Heath)

89 Q 159 (Paul Broadhead)

90 Written evidence from the Intergenerational Foundation (IFP0042)

91 Written evidence from Professor Karen Rowlingson (IFP0026)

92 Written evidence from the Intergenerational Foundation (IFP0042)

93 ‘Moving home can affect your children’s health and education’, The Conversation (26 August 2016): https://theconversation.com/moving-home-can-affect-your-childrens-health-and-education-62738 [accessed 28 January 2019]

94 Written evidence from the Intergenerational Foundation (IFP0042)

95 Ibid.

96 Written evidence from Age UK (IFP0047)

97 Written evidence from the Centre for Ageing Better (IFP0049)

98 Written evidence from HM Government (IFP0058)

99 Ministry of Housing, Communities & Local Government, Overcoming the Barriers to Longer Tenancies in the Private Rented Sector (July 2018): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/721556/PRS_Longer_Tenancies_Consultation.pdf [accessed 28 January 2019]

100 Q 152 (Douglas McWilliams)

101 152 (Paul Broadhead)

102 Q 152 (Nigel Keohane)

103 Social Market Foundation, Britain’s Family Bank: An examination of family financial support across the generations and its impact (September 2018) p 15: http://www.smf.co.uk/wp-content/uploads/2018/09/Britains-Family-Bank-1.pdf [accessed 28 January 2019]

104 Written evidence from Professor Karen Rowlingson (IFP0026)

105 Written evidence from National Pensioners Convention (IFP0030)

106 96 (Isobel Stephen)

107 Ibid.

108 Ibid.

109 Q 153 (Paul Broadhead)

110 Q 153 (Douglas McWilliams)

111 Q 154 (Paul Broadhead)

112 Written evidence from Care & Repair England (IFP0020)

113 Q 154 (Nigel Keohane)

114 Ibid.

115 Q 158 (Paul Broadhead)

116 Q 31 (Ian Mulheirn)

117 Economic Affairs Committee, Building more homes (1st Report, Session 2016–17, HL Paper 20)

118 Q 173 (Julian McCrae)

119 Q 204 (Kit Malthouse MP)

120 Supplementary written evidence from the Ministry of Housing, Communities and Local Government (IFP0066)

122 HM Government, ‘Find government property and land to rent or buy’: https://www.gov.uk/find-government-property [accessed 28 January 2019]

123 Q 124 (Tom Kenny)

124 Q 125 (Tom Kenny)

125 Q 204 (Kit Malthouse MP)

126 Q 193 (Kit Malthouse MP)

127 Q 196 (Kit Malthouse MP)

128 Q 199 (Kit Malthouse MP)

129 The Town and Country Planning (General Permitted Development) (England) Order 2015 (SI 2015/596)

130 Q 129 (Tom Kenny)

131 National Audit Office, Planning for new homes (February 2019) p 11: https://www.nao.org.uk/wp-content/uploads/2019/02/Planning-for-new-homes.pdf [accessed 11 February 2019]

132 Planning for new homes, p 39

133 Q 201 (Kit Malthouse MP)

134 Planning for new homes, p 41

135 Q 122 (Gareth Lyon)

136 Written evidence from ARCO (IFP0014)

137 Harrison Clark Rickerbys Solicitors, ‘C3 or not C3? Planning use classes for retirement housing’ (November 2016): https://www.hcrlaw.com/blog/c3-not-c3-planning-use-classes-retirement-housing/ [accessed 28 January 2019]

138 Written evidence from ARCO (IFP0014)

139 Written evidence from Age UK (IFP0047)

140 Written evidence from ARCO (IFP0014)

141 Ibid.

142 Q 196 (Kit Malthouse MP)

143 Ministry of Housing, Communities & Local Government, National Planning Policy Framework, CP 48, February 2019, p 17: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/779764/NPPF_Feb_2019_web.pdf [accessed 4 April 2019]

144 Q 196 (Kit Malthouse MP)

145 Ministry of Housing, Communities & Local Government, ‘Housing and economic needs assessment’: https://www.gov.uk/guidance/housing-and-economic-development-needs-assessments [accessed 4 April 2019]

146 Written evidence from Care & Repair England (IFP0020)

147 Q 99 (Simon Gallagher)

148 Q 127 (Tom Kenny)

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