Plenty of problems identified, but no real solutions
The recent National Audit Office (NAO) report, Planning for New Homes, is pretty damning toward the government’s ambition of building 300,000 new homes per year in the UK. It also points out the shortcomings of local authorities in achieving planning goals, slates the methods used to forecast housing demand, and pours scorn on the methods used to impose penalties on underdelivering local authorities. Oh, and the NAO recommends that developers should contribute more to infrastructure.
Here we look at the main findings of the report.
The 300,000 new-homes-per-year target will be ‘challenging to meet’
The NAO notes that the target of 300,000 new homes per year set by the Ministry of Housing, Communities & Local Government in the 2017 budget will be ‘challenging to meet’. There were 222,000 new homes delivered in 2017/18. While this is a step in the right direction, the NAO notes that to meet the 300,000 target consistently from the mid-2020s will require an increase of 69% in the average number of new homes delivered each year between 2005 and 2018. This will be difficult for many reasons, including:
· There is a skills shortage in planning
Without enough planners working in local authorities, it is difficult to get planning permissions processed at the speed required. Local authority planning staff numbers fell by 15% between 2007 and 2016, and spending on planning functions has decreased by a colossal 14.6% in real terms between 2010/11 and 2017/18.
· Local authorities have struggled to produce up-to-date local plans
Unsurprisingly, given the shortage of planners, local authorities are struggling to provide updated local plans. By December 2018, less than half had set out their strategies to meet the demand for new homes.
· The standard method for assessing housing need is flawed
It isn’t clear whether the Department’s standard method is consistent with the ambition of delivering 300,000 new homes per year overall. The Department intends to revise the method, but in the meantime, four of nine regions have seen an increase in housing need compared to the need assessed by local authorities. For example, in London the mayor has assessed a need for 66,000 new homes annually, while the combined assessed need of local authorities is just 46,000 new homes annually. Whatever the real target should be, the delivery of 31,723 new homes in 2017/18 falls woefully short of target.
· The standard method reduces the need for new homes in other regions
According to the standard method, other regions don’t need as many new homes as assessed by their local authorities. For example, the North West, Yorkshire and the Humber, the North East, West Midlands and East Midlands need 24%, 23%, 19%, 11% and 3% fewer homes than assessed by their local authorities.
This means that local authority plans to regenerate and stimulate economic growth would be hampered – local support for new homes could be difficult to obtain.
Local authorities could be penalised unfairly for not delivering on their promises
This year the Department will start penalising local authorities that don’t deliver on their promises of new homes delivery. On the face of it, this is an acceptable strategy to ensure that new homes are built. There is just one small problem with the strategy: local authorities can only influence house building, they cannot ensure it happens.
Local authorities have, by and large, delivered planning permissions more quickly; but generally, it is not the local authorities that build homes. If developers don’t build the homes that they have been given permission to build, it is the local authority that is penalised. Of course, developers have many restraints on what they can deliver – including, for example, economic conditions and a shortage of skilled labour. If developers can neither build nor sell in sufficient numbers, the 300,000 target for new homes will be missed.
Developers should contribute more toward infrastructure
The report also concluded that the system for getting developers to contribute to the cost of infrastructure is not working properly. The system enables local authorities to obligate contributions from developers (mostly through 106 agreements) and the Community Infrastructure Levy. But the system is complex. To date, only 47% of local authorities have implemented the Levy, as against Department targets of 82% to 92%.
The £5.5 billion Housing Infrastructure Fund should help local authorities to close funding gaps for infrastructure spending, but the NAO believes that developers could do more. The Department is introducing reforms to enable local authorities to negotiate higher contributions, but these may take several years to implement.
The NAO’s recommendations lack clarity
In its 52-page report, the NAO makes five recommendations. I reproduce them here, as they appear on page 12 of the report:
- The Department needs to regularly monitor the gap between the number calculated by the standard method, local authorities’ own assessment and the ambition for 300,000 new homes and assess the risks of not meeting its ambition.
- The Department needs to assess the numbers of, and the potential implications for, local authorities that are at risk of failing the housing delivery test and set out how it will support those local authorities.
- The Department’s performance metrics for local authorities and the Planning Inspectorate for dealing with planning applications and appeals need to reflect performance more fully, the process in its entirety, and take capacity into account.
- The Department needs to work with local authorities and other government departments to ensure that the necessary infrastructure is funded and delivered.
- The Department should work with industry bodies on detailed research on the skills gaps in local authorities’ planning teams, particularly on the shortages of experienced planners with specialist skills sets.
Sir Amyas Morse, the head of the NAO, concluded that, “For many years, the supply of new homes has failed to meet demand. From the flawed method for assessing the number of homes required, to the failure to ensure developers contribute fairly for infrastructure, it is clear the planning system is not working well. The government needs to take this much more seriously and ensure its new planning policies bring about the change that is needed.”
In response, Housing Minister Kit Malthouse said: “I recognise the challenges identified by the NAO, and the simple truth is over the last three decades, governments of all stripes have built too few homes of all types.”
It appears that everyone knows there are too few new homes being built. Government and the National Audit Office have both identified the problem of inadequate supply to meet demand. But problems are easy to identify. What these bodies appear to struggle with most is finding proper solutions. Perhaps if they involved property developers in their deliberations more fully, they would find some workable proposals.
To connect with investors with long-term horizons, get in touch with Castlereach today. Call the team on 0207 923 5680. Our partnership will help get your new build and off-plan development sales to where you need them to be.
Live with passion