Category: Housing White Paper

Post election review of housebuilding and housing policy

What now for housebuilding and housing policy? After last week’s general election result of a hung Parliament, a weakened prime minister and confusion about what direction exactly will happen next, the future for property developers and social housing is far from certain. Brexit, the Conservative alliance with the Democratic Unionist Party (DUP) and jockeying for position around the Cabinet table are all taking prominence in the ministerial mind, pushing into a distant second place all the discussions around vital public policy areas such as health, security, education and, of course, housing.

The first bit of good news for the industry is that there is now a housing minister in post after Gavin Barwell, the previous incumbent lost his seat in the election before returning as Theresa May’s chief of staff at No 10.
Alok Sharma, MP for Reading West since 2010 and a former junior Foreign Office minister, was appointed on Tuesday. Details of his views at this early stage are sketchy although he has tended to vote alongside the government on housing issues and has opposed some local building schemes.

So it is worth a recap. In February, the government published ‘Fixing our broken housing market’ (www.gov.uk/government/collections/housing-white-paper), its white paper response to criticisms that the UK is not building enough homes.
This was Theresa May’s first attempt to crack the housing conundrum – how to ensure enough homes are built without spending billions of pounds of public money. In short the recommendations were grouped into four areas: planning for the right homes in the right places; building homes faster; diversifying the market; and helping people now. You can read Residentially’s analysis of what that meant for developers and housing associations here:

Housing white paper review for housebuilders and developers
Housing white paper review for housing associations

Politically speaking, that feels like a blast from another, distant age. But how much is that likely to change? Finger in the wind stuff it may be at this stage, given the opprobrium which has greeted the Conservative 2017 manifesto since the election result was announced. Wholesale chunks are expected to be jettisoned from it once ministers settle down to business. It is, however, in our search for clues as to the likely shape of forthcoming policy, worth a look at the main points of the Labour and Conservative manifestos to see the kinds of ideas under discussion.

Conservative

• Meet 2015 commitment to build 1 million homes by 2020 and will build 500,000 more by 2022.
• Deliver the housing white paper – free up more land, encourage modern construction, allow councils to intervene when developers do not use planning permission, diversify who builds homes.
• Critical of high land costs and poor planning which results in, for example, a lack of infrastructure and communal facilities. Houses will ‘match the quality of previous generations with ‘high quality, high-density housing like mansion blocks, mews houses, terraced streets’.
• Maintain strong protections on national parks, green belt land and areas of outstanding natural beauty.
• Rebalance housing development away from the south-east. Government to build 160,000 homes on its own land.
• Increase specialist housing ie multigenerational housing or housing for older people including by helping housing associations increase their specialist housing stock.
• To achieve this, the government will enter into council housing deals with ‘ambitious, pro-development’ local authorities to help them build more social housing.
• The government will help councils’ housebuilding capability and capacity and provide low cost capital funding. This will create new fixed term council housing, sold privately after 10-15 years with tenants getting the automatic right to buy with proceeds from sales recycled into further similar schemes.
• Greater flexibility will be given to housing associations to increase housing stock.
• The government will help public and private developers to capture the increase in land value after they build to invest in local infrastructure to ensure that local communities benefit from land price increases.

Labour

• Invest to build over a million new homes via a national transformation fund. By the end of the next Parliament pledge to be building at least 100,000 council and housing association homes per year for affordable rent or sale.
• Establish a new Department for Housing to improve the number, standards and affordability of homes. Homes and Communities Agency to be overhauled and become housing delivery body, and give councils new powers to build homes.
• Prioritise brownfield sites and protect the green belt. Start work on a new generation of new towns to ‘avoid urban sprawl’.
• Better home insulation, consultation on new rules on minimum space standards and on new modern standards for building ‘zero carbon homes’.
• Local plans address the need for older people’s housing, ensuring choice and downsizing are available.
• The Land Registry to remain publicly owned.
• Remove government restrictions that stop councils building homes, begin a major council housebuilding programme.
• Plan to cap new house prices at local average incomes to help first time buyers.
• FirstBuy properties will be built by local councils and housing associations and partly paid for by developers who want to build new homes. Mortgages on 100,000 of the homes would be set at a third of the average salary in each local authority – with prices discounted by up to 40 per cent of the market price. Priority will be given to teachers, nurses and tradesmen. These properties will be built primarily by councils and housing associations and paid for partly through payments to councils by developers who want to build new homes. The discount would be preserved when the house is re-sold – meaning owners will be unable to make a full market-rate profit on the sale of their home.

So, the broadbrush political message is to build more homes – the Conservatives via more local initiatives, Labour via a nationally-led housebuilding programme. How much airtime housing gets in the Queen’s Speech seems up for grabs at the time of writing. And in the best traditions of politics and housebuilding policy…..no one really knows how or whether those testing targets will be met. Watch this space.

The housing white paper and how it might challenge developers and housebuilders

The White Paper includes a heavy focus on housebuilders with new measures including ‘more active use of compulsory purchase powers to promote development on stalled sites for housing’. This is aimed at speeding up housebuilding and would see land taken away from developers considered under-performing – ‘use it or lose it’ as the headlines describe it.
Confirmed proposals include cutting from three to two years the time that developers have to start the building process, once permission has been granted but only when the viability of a site isn’t put in jeopardy. The plans promise a planning framework that does more to support higher levels of development. This would include quicker and more effective processing and determination of planning applications as well as ‘an improved approach to developer contributions’. The paper also includes promises to encourage ‘modern methods of construction in house building’, ‘greater diversity of homebuilders by partnering with smaller and medium-sized builders and contractors in the Accelerated Construction programme, and helping small and medium-sized builders access the loan finance they need.
In return, the government says it expects developers to build more homes, to engage with communities to promote the benefits of development, to focus on design and quality, and to build homes swiftly where permission is granted.
Not just that, but developers will also need to take responsibility for investing in their research and skills base to create more sustainable career paths and create thousands of new skilled roles.
The government’s 2015 manifesto pledge to build 200,000 starter homes (those sold at a 20 per cent discount) this parliament and the requirement for 20% of the homes on all new developments to be starter homes has been dropped.
Instead, 10% of all sites will be required to be for affordable homeownership with the percentage of starter homes set locally by councils.Additionally, the length of time before the starter home could be sold at full market value will be increased to 15 years, in a reversal of previous government policy.
Finally, the government says it is considering whether to tell councils to take a developer’s track record into account when deciding planning permission for large sites and that councils should only change green belt boundaries “when they can demonstrate that they have examined fully all other reasonable options”. Where land is removed from the green belt a council should “offset” this with “compensatory improvements” to remaining green belt land. The government will also look at whether higher fees can be paid by developers who build on green belt land.

Specific recommendations that affect developers, as outlined in the white paper, include:

  1. Making sure every part of the country has an up-to-date, sufficiently ambitious plan so that local communities decide where development should go;
    Simplifying plan-making and making it more transparent, so it’s easier for communities to produce plans and easier for developers to follow them;
  2. Ensuring that plans start from an honest assessment of the need for new homes, and that local authorities work with their neighbours, so that difficult decisions are not ducked;
  3. Clarifying what land is available for new housing, through greater transparency over who owns land and the options held on it;
  4. Making more land available for homes in the right places, by maximising the contribution from brownfield and surplus public land, regenerating estates, releasing more small and medium-sized sites, allowing rural communities to grow and making it easier to build new settlements;
  5. Maintaining existing strong protections for the Green Belt, and clarifying that Green Belt boundaries should be amended only in exceptional circumstances when local authorities can demonstrate that they have fully examined all other reasonable options for meeting their identi ed housing requirements;
  6. Giving communities a stronger voice in the design of new housing to drive up the quality and character of new development, building on the success of neighbourhood planning
  7. Making better use of land for housing by encouraging higher densities, where appropriate, such as in urban locations where there is high housing demand; and by reviewing space standards
  8. Supporting developers to build out more quickly by tackling unnecessary delays caused by planning conditions, facilitating the strategic licensing of protected species and exploring a new approach to how developers contribute to infrastructure;
  9. Backing small and medium-sized builders to grow, including through the Home Building Fund;
  10. Supporting custom-build homes with greater access to land, giving more people more choice over the design of their home;
  11. Bringing in new contractors through our Accelerated Construction programme that can build homes more quickly than traditional builders;
  12. Encouraging more institutional investors into housing, including for building more homes for private rent, and encouraging family- friendly tenancies;
  13. Holding developers to account for the delivery of new homes through better and more transparent data and sharper tools to drive up delivery;
  14. Boosting productivity and innovation by encouraging modern methods of construction in house building;

Government announcements are routinely described as ‘radical’ and this white paper was no exception. Sadly, beyond community secretary Sajid Javid’s rousing calls-to-arms to the housebuilding and housing sectors to provide more places for people to live, was a distinct lack of detail. This has led to commentators labelling the White Paper a damp squib. While this may be a little unfair – in parts there are bold moves – in many ways it is by no means clear that ‘Fixing our broken housing market’ is anything like the promised silver bullet to get the UK building more homes. The government has at least acknowledged that the ‘home ownership for all’ ideal is looking further away than ever and has put its weight behind the build-to-rent industry. For instance, there are measures in the paper which promote the building of apartment blocks managed by professional companies and backed by institutional lenders. The rise in stamp duty last April badly hit this sector and it needs help to become established. In addition the emphasis on modern methods of construction is a welcome boost which may help open the market to new – possibly quicker, possibly cheaper – ways of building and therefore selling homes. But it is developers, housebuilders and councils who will be feeling the effect of the proposals the most. Forcing councils to provide comprehensive local plans which calculate their housing needs and which will need to be revisited every five years could put significant pressure on those that do not submit or stick to them. The rises in fees by 20 per cent will help soften the blow and some will say that central government holding local authorities to account more readily is a welcome move.
But what are developers to make of the announcement? Is the spectre of compulsory purchase orders on those developers which retain land for future development enough to scare them into altering their entire approach to creating a pipeline of development land? Some in the industry fear this will actually have the reverse effect of that intended and lead to fewer planning applications. Land is, in effect, the industry’s raw material and needs to be carefully managed if developers’ business models are to work properly. Forcing an increase in the rate of building once work has begun could also be counter-productive and cause developers to only apply for planning permission for smaller sites. If landbanking does exist in real life to the same extent and in the same way as it does in the febrile imaginations of newspaper editors then the government’s plans to beef up the powers of the Land Registry – not so long ago planned for privatisation – could make the ownership of land that much clearer. Ministers hope to have comprehensive land registration complete by 2030.

All in all, the fear lingers that, rather than providing a radical solution to a notoriously intractable public policy problem, ‘Fixing our broken housing market’ just slaps some go-faster stripes on previous white paper policies and calls itself a Ferrari.

How will the new housing white paper affect housing associations?

Social housing providers have a pile of new initiatives in their in-trays. For housing associations and other not-for-profit developers, the paper stresses that ministers have already promised £7.1 billion in funding through the Affordable Homes Programme and have pledged to ‘provide clarity over future rent levels’. But it adds that in return for this, the government expects them to build ‘significantly more’ affordable homes during the current Parliament.
The government is offering local authorities higher fees and new capacity funding to develop planning departments, simplified plan-making, and more funding for infrastructure. They have promised to make it easier for local authorities to take action against those who do not build out once planning permission has been granted. The paper also alludes to the government being ‘interested in the scope for bespoke housing deals to make the most of local innovation’ but offers no further detail.
The request from government is for local authorities to be ‘as ambitious and innovative as possible’ to get homes built in their area and insists all local authorities should develop an up-to-date housing plan, to decide applications for development promptly and ensure the homes they have planned are built out on time.If local authorities do not fulfil this deal, the white paper promises that the Government will intervene and take action.
For housing associations and social landlords, the government has promised to set out a new rent standard for social landlords for the period after 2020 “in due course” to help housing associations build.
The government’s controversial 1% rent cut will continue but pledged measures to help them borrow against future income thereafter. The document also urged housing associations to become more efficient and develop more housing, and said it was developing proposals to set up ways of measuring the sector’s efficiency.

Specific measures in the white paper aimed at social housing providers and local authorities include:

  1. Providing greater certainty for authorities that have planned for new homes and reducing the scope for local and neighbourhood plans to be undermined by changing the way that land supply for housing is assessed;
  2. Boosting local authority capacity and capability to deliver, improving the speed and quality with which planning cases are handled, while deterring unnecessary appeals;
    Supporting housing associations and local authorities to build more homes
  3. Holding local authorities to account through a new housing delivery test.
  4. Encouraging the development of housing that meets the needs of our future population and helping the most vulnerable who need support with their housing, developing a sustainable and workable approach to funding supported housing in the future;

Government announcements are routinely described as ‘radical’ and this white paper was no exception. Sadly, beyond community secretary Sajid Javid’s rousing calls-to-arms to the housebuilding and housing sectors to provide more places for people to live, was a distinct lack of detail. This has led to commentators labelling the White Paper a damp squib. While this may be a little unfair – in parts there are bold moves – in many ways it is by no means clear that ‘Fixing our broken housing market’ is anything like the promised silver bullet to get the UK building more homes. The government has at least acknowledged that the ‘home ownership for all’ ideal is looking further away than ever and has put its weight behind the build-to-rent industry. For instance, there are measures in the paper which promote the building of apartment blocks managed by professional companies and backed by institutional lenders. The rise in stamp duty last April badly hit this sector and it needs help to become established. In addition the emphasis on modern methods of construction is a welcome boost which may help open the market to new – possibly quicker, possibly cheaper – ways of building and therefore selling homes. But it is developers, housebuilders and councils who will be feeling the effect of the proposals the most. Forcing councils to provide comprehensive local plans which calculate their housing needs and which will need to be revisited every five years could put significant pressure on those that do not submit or stick to them. The rises in fees by 20 per cent will help soften the blow and some will say that central government holding local authorities to account more readily is a welcome move.
But what are developers to make of the announcement? Is the spectre of compulsory purchase orders on those developers which retain land for future development enough to scare them into altering their entire approach to creating a pipeline of development land? Some in the industry fear this will actually have the reverse effect of that intended and lead to fewer planning applications. Land is, in effect, the industry’s raw material and needs to be carefully managed if developers’ business models are to work properly. Forcing an increase in the rate of building once work has begun could also be counter-productive and cause developers to only apply for planning permission for smaller sites. If landbanking does exist in real life to the same extent and in the same way as it does in the febrile imaginations of newspaper editors then the government’s plans to beef up the powers of the Land Registry – not so long ago planned for privatisation – could make the ownership of land that much clearer. Ministers hope to have comprehensive land registration complete by 2030.

All in all, the fear lingers that, rather than providing a radical solution to a notoriously intractable public policy problem, ‘Fixing our broken housing market’ just slaps some go-faster stripes on previous white paper policies and calls itself a Ferrari.