Autumn Budget 2017
Yesterday saw the long-awaited delivery of Chancellor Philip Hammond's second budget which revealed a number of key announcements with a strong emphasis on 'fixing the broken housing market’ and ‘restoring the dream of home ownership'.
DHA have summarised the proposed changes for the planning system. Most of these changes will be subject to further consultation expected before the Spring 2018 budget. As is so often the case, many of the details are still to follow.
The Government has announced that over the next 5 years they will commit a total of £44 billion in capital funding, loans and guarantees in order to boost the supply of skills, resources and land for building through the creation of financial incentives to deliver 300,000 net additional homes per annum by 2020, the biggest annual increase in housing supply since 1970.
The budget has placed particular focus on the need to get small and medium-sized house builders building, through the provision of £630 million through the Productivity Investment Fund. The Government claim that this will release the delivery of 40,000 homes on small, stalled sites by funding on-site infrastructure and land remediation.
Other investment announced with the budget includes:
- £2.7 billion to double the infrastructure fund announced by the Department of Communities and Local Government in June 2017;
- £400 million of loan funding for estate regenerations to transform run-down neighbourhoods and provide new homes in high-demand areas;
- £1.1 billion to unlock strategic sites including new settlements and urban regeneration schemes as part of a "Land Assembly Fund";
- The lifting of Housing Revenue Account caps for Council's in high demand areas so that they may build more Council homes;
- £8 billion new financial guarantees to support private house builders and the purpose built private rental sector; and
- In recognising that supply is supported by a high skilled labour force, the government are investing £34 million to develop construction skills across the country.
Government to 'strengthen' housing delivery test
The budget announced that following the publication of February's Housing White Paper, the government will consult on strengthening the housing delivery test with “tougher consequences” where planned homes are not being built. They intend to do this by automatically applying the National Planning Policy Framework's presumption in favour of development where an authority’s housing delivery falls below 75 percent of the housing requirement, from 2020. The White Paper had originally suggested applying the presumption when delivery falls below 25% from 2018. There will also be a consultation on measures to make local authorities bring forward 20 percent of their housing supply as small sites.
The government also announced they will assist in speeding up the development process by removing exemptions from the deemed discharge rules in order to get buildings on site more quickly and ensure that development is not held back by delays in discharging conditions.
Deallocation of sites with no prospect for delivery
The government has said it will consult on a proposal to take allocated sites out of local plans where there is no prospect of a planning application being made for their intended use. The move, billed as a 'strengthening policy' is included as one of the many measures intending to speed up the delivery of new homes.
It is also expected that consultation will take place on a new policy whereby local authorities would be expected to granting planning consent for land outside of the development plan where a high proportion of affordable housing is provided. This excludes Green Belt areas in line with the Government's commitment to protect such land.
The budget also indicated that government will shortly activate powers enabling ministers to direct local planning authorities to produce joint statutory plans. This follows the announcement last week from the Communities Secretary Sajid Javid, whom intends to take over plan-making powers from 15 authorities deemed to have failed to put an up-to-date plan in place.
Relieving land banking issues
A key issue raised within the budget was the gap between the numbers of residential planning permissions being granted versus the homes being build. Hammond acknowledged that in London alone, there are 270,000 residential permissions that are unbuilt. The government is to set up a review panel, chaired by Tory MP Oliver Letwin to "explain the significant gap between housing completions and the amount of land allocated or permission, and make recommendations for closing it".
The review will provide an interim report in time for the Spring Statement 2018. If this finds that "vitally needed land is being withheld from the market for commercial, rather then technical reasons" the government will intervene to ensure such land is brought forward for development. In doing so, the government will create a central register of residential planning permissions in order to improve "land banking" issues.
Changes to infrastructure levy to capture land value uplift
A report published in February by the Community Infrastructure Levy (CIL) Review Panel had proposed to remove CIL and replace it with a system that would see all development facing a low-level charge with little to no exemptions. However, the budget published yesterday indicates that the government will not be introducing the proposals set out within the review. Instead, the government will be looking to "speed up the process of setting and revising CIL" making it easier to respond to changing market circumstances.
The budget document proposes to allow authorities to set rates which better reflect the uplift in land values between a proposed and existing use. Rather than setting a flat rate for all development of the same type (residential, commercial, etc.), local authorities will have the option of a different rate for different changes in land use.
The document also announces that where an authority has adopted CIL, section 106 pooling restrictions could be removed in circumstances where an authority is in a low viability area or where significant development is planned on several large strategic sites.
The rate of indexation will be altered to reflect house price inflation, rather than build costs in order to ensure that CIL keeps up with the general housing price inflation and if prices fall, rates will fall too in order to avoid viability issues.
New town development corporations
The budget document has said that the "government will bring together public and private capital to build five new garden towns, using appropriate delivery vehicles such as development corporations, including in areas of high demand such as the South East".
The budget also adds that in order to ensure that investment is appropriately targeted to help grow the economy, the government will support more strategic and zonal planning approaches through housing deals in the South East where the housing need is most acute.
Housing and Communities Agency (HCA) makeover
Hammond confirmed in his speech that the HCA would be renamed "Homes England" and would expand to help support local authorities and developers to deliver new housing and infrastructure.
The accompanying Treasury budget document says that the government will strengthen the ability of the HCA to "use investment and planning powers to intervene more actively within the market", this would be aided by a £1.1 billion 'Land Assembly Fund'.
The document adds "the new fund will enable Homes England to work alongside private developers to develop strategic sites, including new settlements and urban regeneration schemes".
Other measures under consideration within the budget document include:
- minimum densities for housing development in city centres and around transport hubs;
- policy to support the conversion of empty space above high street shops;
- policy changes to support the conversion retail and employment land into housing;
- permitted development rights to allow commercial buildings to be demolished and replaced with new homes.