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Social Housing Speed Read – The Letwin Review

In this week's Speed Read, we discuss the Final Report of the Independent Review of Build Out (the Letwin Review), published on 29 October 2018, and its potential impact within the social housing sector.

The Letwin Review – aims and findings

Oliver Letwin, MP for West Dorset, was commissioned to ‘explain the significant gap between housing completions and the amount of land allocated or permissioned in areas of high housing demand, and make recommendations for closing it’. This focused on ‘build out rates’ – the time taken from obtaining planning permission to building homes, which currently has a huge shortfall.

Figures from the Ministry of Housing, Communities and Local Government found that in 2016/17, whilst planning permission was granted for 313,700 new homes, only 183,570 homes were built. This gap of 130,000 houses heightened concerns relating to “land-banking”; purchasing land for investment rather than having specific plans or intentions to develop the land. However, when delivering the Budget, Chancellor Philip Hammond stated that the Letwin Review concluded that ‘large housebuilders are not engaged in systematic speculative land-banking’.

Rather, the Letwin Review concluded that the slow build out rates were the result of ‘homogeneity of the types and tenures of the homes on offer’ on large sites in areas of high housing demand, and recommended that the Government should adopt new planning rules for large sites (of 1,500 units or more), requiring them to have ‘a diversity of offerings’, including social housing. It is thought that build out rates would therefore increase as the houses would appeal to a wider market.

Impact on social housing

The Letwin Review acknowledged that the National Planning Policy Framework (“NPPF”) already encourages new developments to meet need for affordable housing, and to expect planning policies to allocate at least 10% of the homes for affordable home ownership. However, it was suggested that these requirements do not ‘provide a sufficient guarantee’ that large sites will be diverse enough.

It was recommended that the legislation within this area should be amended, compelling large sites to comply with a ‘housing diversification’ requirement, and giving local authorities power to order large sites to contain such a mix of houses. It is hoped that by diversifying large sites to include homes with social and affordable rent, this would lead to a faster build-out rate and lessen the reliance on sales rates.

Landowners are currently able to value their land using ‘hope value’; the market value of the land once it has been developed, rather than in its current agricultural form. This is a concern for the industry, as many social housing providers simply cannot afford to develop land at these prices; a recent report by the National Housing Federation (“NHF”) found that ‘organisations trying to build social housing are increasingly outbid on land by private developers’. The Review suggested limiting the valuation of land to a maximum of ten times its existing land value.

Responses within the sector

The NHF expressed disappointment that their recommendation of 50% affordable housing for public land was not addressed in the Letwin Review, after they had worked closely with the Ministry of Housing, Communities and Local Government on this matter.

Hugh Ellis of the Town and Country Planning Association criticised the Review’s approach to the valuation of land, stating that if local authorities are ‘to take a leading role in development of land, they need to get it at the right price’, and expressed disappointment that the Review did not take a stronger stance on prohibiting landowners being entitled to hope value, which he stated remains one of the “key barriers” within the sector. This echoes criticism voiced by Kate Henderson, the Chief Executive of the NHF, in relation to the Budget. As we reported last week,  Ms Henderson stated that the current cost of land made it extremely difficult for those who wanted to purchase land for social housing.

However, some key figures within the sector reacted more positively to the Review. Austen Reid, the Group Director of Development for Clarion Housing Group, the UK’s largest social landlord, stated that they welcomed the proposals contained in the Letwin Review.  In their response, they said that they ‘look forward to the Government acting on the review and introducing policies to help us deliver the homes this country needs’.

Although the Letwin Review may not have been as ambitious as many within the sector had hoped, we could see an increase in social housing units on large sites if the Government choose to implement the Review’s policy recommendations. Housing associations and local authorities will have to await the Government’s response to the Review, which is due in early 2019.

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.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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