NAO report damns government, local authorities and developers
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
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
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
Developers should contribute more
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
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
- 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
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.
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