HOUSING: Will the planning shake-up help to level up?

By Colin Brown | 11 November 2020

Concerns about unmet housing need are far from new. In London, where the proposed new London Plan is anticipated to result in an annualised shortfall of at least 14,000 homes, the cost of under-provision is well known.

But London is not alone and the issue is accelerating elsewhere. In the North and Midlands, infrastructure changes including HS2 and the various initiatives contained within the Northern Powerhouse are set to bring about increased demand. And, while housing need in the South East will remain, this could be exacerbated as counter-urbanisation and outwards migration from London to all corners of the country takes hold as a result of COVID-19 and the move towards remote working.

As the planning system undergoes substantial change, housing need is a constant challenge that all local authorities face.

So it is perhaps unsurprising some have commented that the proposed revisions to the standard method of assessing housing need – which were published for consultation in August – will bring about substantial increases in the rural shires and suburbs relative to the urban North and Midlands. Figures from the House of Commons library suggest that rural and suburban Surrey will see an increase of 45,000 homes while Manchester – the ultimate destination of HS2 and one of the remaining strongholds of the Red Wall – will see a reduction of 14,000.

Garden communities have long been viewed as a means of successfully aligning the delivery of residential housing, employment, social, community, and strategic infrastructure. And yet proposed garden cities are appearing disproportionately in the South, with no fewer than five planned for Essex alone in response to likely increased demand because of Crossrail 2. There is indisputably demand in Essex, but why is a similar approach not being planned for Lancashire or the Midlands in relation to HS2?

A particularly pressing issue is affordable housing. The Government’s planning White Paper proposes some fundamental changes to the delivery of affordable housing which could have ramifications for registered providers and developers alike, throughout the UK – but will they deliver the necessary results?

The current system sees developers and local planning authorities negotiate levels and tenures of affordable housing up front, based on policy. Typically, a mix of rent and shared ownership units would be provided and sold to a registered provider based on a payment profile which would help cashflow the development.

Within the proposals, the preferred affordable homeownership product will be First Homes, and the Government anticipates that a minimum of 25% of all affordable housing units secured through Section 106 agreements will be delivered as First Homes. A minimum 30% discount to market sale prices is proposed (potentially up to 50%) with the homes being sold to first time buyers directly by the developer. However, such steep discounts may reduce the value of the affordable housing units below the level a registered provider would have paid for an equivalent shared ownership unit, thereby reducing a scheme’s viability. Furthermore, in bypassing the registered provider on this element of the scheme, there is no cashflow benefit to the developer and the reduced cross-subsidy makes it difficult for the registered provider to deliver the rented element.

The White Paper aims to increase the quantum of affordable housing above current levels and at the same time raise more money from developer contributions. These will be seen in some quarters as laudable goals, but there is limited planning gain available. The proposals seek to inextricably link the on-site affordable housing provision with levy receipts so that they could flex up and down with market changes. But how will a registered provider purchaser build a development programme with the potential for so many moving parts?

A number of registered landlords have also raised concerns about the potential removal of the requirement for developers to build affordable housing on small sites, which forms part of the proposals. Recent analysis carried out by Glenigan for the Local Government Association demonstrates how, had this been in place over the last five years, 30,000 fewer affordable homes would have been built across England.

The current planning regime is far from perfect. But large-scale changes provide the opportunity to improve upon it while also delivering on the Government’s ‘levelling up’ objectives. They provide the opportunity to accommodate the additional demand brought about by HS2 and demographic shifts while delivering truly sustainable communities and an adequate proportion of affordable housing. This kind of strategic thinking has the potential to substantially benefit future change.

Colin Brown is head of planning and development at Carter Jonas

@ColinBrown09

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