Social Housing Speed Read – National Audit Office report on planning for new homes

The report, titled ‘Planning for New Homes‘ discusses how the planning process serves the Government’s well-published ambition to build 300,000 new homes a year by the mid-2020s, and how well the planning strategy can get ‘the right homes in the right places’. We consider what this report means for the social housing sector.

Overview

The report is sceptical of the Government’s 300,000 home target. The NAO highlight that this figure was produced at the 2017 budget but without any calculations to illustrate how it will be achieved. The target is described as being ‘challenging to meet’.

From a lack of local plans to an inability to assess where homes are needed, or the length of time it takes to appeal a planning decision, there are a range of problems. It is illustrative of the constraints on the planning process that there has been a 14% real-terms cut in council spending on planning functions between 2010-11 and 2017-18.

Developer’s contributions to the cost of infrastructure and the amounts of affordable housing included on sites ‘are not keeping pace with increases in house prices’. This means that although the contribution to affordables has increased overall, the contributed amount per home has remained steady whilst the average house price has increased by 31%.

The NAO highlight the issue of developers re-negotiating their contributions based on the financial viability of sites, despite the fact that the profit-margins of the top 5 housebuilders has increased from 12% in 2012 to 21% in 2016.

The report adds that LAs lack the negotiating skills to deal with the downgrades in contribution to affordable housing, and that the system lacks transparency as LAs do not have to publish developer contributions.

Analysis and reaction

So how realistic is the Government’s 300,000 home delivery target? The demands on contractors and the skills shortage remain key issues. Along with the demand for new-build private sale homes and mortgage availability, these planning concerns are unlikely to be good news for RPs hoping to buy stock from developers struggling to get to grips with the planning process.

We have, however, reported in recent Speed Reads on the strong appetite for investors in social housing, and the high demand.

The report casts doubt on the statistics on houses built, as the highest-ever building figure is way short of 300,000, a jump that would require a 69% increase in average building over the last 13 years. However the record high number was achieved last year, so this could indicate that the market is strong.

The report demonstrates that the social housing market is likely to require substantial Government intervention in terms of policy and funding to assist the market in producing the required amount of homes.

Equally, not everyone shares the MHCLG’s enthusiasm, Labour MP and shadow housing secretary John Healey stating that “[the report] shows that deep cuts and poor planning changes are stopping us building the homes the country needs”, and that this information should be a “wake-up call” to the current Government.

The report asserts that ‘50% of local authorities [LAs] likely to fail the ‘housing delivery test’ in 2020 for not building enough homes, so could face penalties’

If half of LAs are expected to fail the test then this points to more structural issues with the planning process, rather than a case of individual mismanagement.

Further, penalties could put LAs in an even more difficult financial situation. Budget cuts to planning departments from austerity measures has caused a reduction in key staff and funding that will not be reversed by imposing penalties on under-performing LAs. This is why there needs to be an emphasis on supporting LAs through policies, not just expecting LAs to come up with the amounts of social housing that is required on its own, especially when developers seem keen to renegotiate their contributions to affordable housing.

One of the proposed penalties is giving developers more freedom on where they can build. Whilst this may free up more sites, it is unlikely to help increase the quality of social housing long-term; as this simply points to an attitude of allowing the planning process to take a backseat in deciding where and how to build.

The NAO’s report can be accessed in full here.

If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.