Select committee inquiry
Planning and the broken housing market inquiry
Closed
What the inquiry looked at
“The Ministry of Housing, Communities and Local Government (the Department) sets the national policy for the housing planning system in England and local authorities are responsible for implementing this policy. From the mid-2020s, the Department aims to support the delivery of 300,000 new homes per year and has made changes to the planning system designed to help local authorities in England determine how many, where and what type of new homes should be built. A recent report from the National Audit Office (NAO) found serious flaws in the government’s planning system and concluded that, in its current state, it cannot demonstrate that it is meeting housing demand effectively. Between 2005-06 and 2017-18, 177,000 new homes per year have been built on average; the NAO found that, to meet its ambition, the Department will need to oversee a 69% increase in the average number of new homes built since 2005-06. This is a challenge because the number of new homes being built per year has never exceeded 224,000 in the last decade. Local authorities help to deliver new homes by producing local plans which should set out how many and where new homes will be built. However, the NAO report discovered that local authorities are struggling to produce local plans: only 44% had an up to date plan in December 2018. The Public Accounts Committee has investigated the housing market on a number of occasions ( Homeless Households December 2017; Housing: State of the Nation April 201). These inquiries highlighted its concerns around England’s long-running housing shortfall and the consequences of this: homelessness, rent affordability and the barriers people face in getting on the property ladder. On 29 April, the Committee will question officials from the Ministry of Housing, Communities and Local Government on: How the Department will achieve its ambition for 300,000 new homes a year from the mid-2020s; Local authorities’ spending on planning and their processes for dealing with planning applications; and Long-term funding for infrastructure to support new homes.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In the committee's words, from the summary of 103rd Report: Planning and the broken housing market ↗
The government has an ambitious target of delivering 300,000 new homes per year by the mid-2020s, but inherent problems at the heart of the housing planning system are likely to jeopardise this target. If the Government delivers 300,000 new homes per year, this would be a significant increase in the rate of house building, with the number built a year averaging only 177,000 in the period 2005–06 to 2017–18. While the Ministry of Housing, Communities and Local Government (the Department) has made some recent reforms to the planning system, much more needs to be done and it still does not have a detailed implementation plan for how it will scale-up house building.
The Department stresses that it wants a ‘plan-led system’, with local authorities determining the shape of development in their areas through their own local plans.
We welcome this outlook, which has the potential to engender a housing system which is both efficient and able to be tailored to local communities. But local authorities are struggling to produce local plans showing how many, where and what types of new homes are needed in their areas, and fewer than half of authorities have an up-to-date local plan, and the Department is reluctant to take decisive action. New housing developments also need supporting infrastructure in place and the Department estimates that £12 billion a year towards the cost of this infrastructure should come from public sources. The rest must come from developers, but local authorities find it difficult to navigate complex negotiations with developers who are too often able to negotiate lower contributions to infrastructure.
What the government said
No government response is linked to this report.
How the inquiry ran
Each dot is a dated item listed on this page, from 29 April 2019 to 26 June 2019.
- Oral evidence 29 Apr 2019
- Report 26 Jun 2019
- Correspondence 11 Jun 2019
What it recommended 4 recommendations · 17 conclusions
1The Department has a highly ambitious target to deliver 300,000 new homes per year by...
Recommended (the committee's words)
The Department has a highly ambitious target to deliver 300,000 new homes per year by the mid-2020s but does not have detailed projections or plans on how it will achieve this. Meeting the target of 300,000 new homes a year will need a significant step-up in the level of house building. Current levels are not promising: the number of new homes has increased every year since 2012–13, with 222,000 new homes in 2017–18, but the average number in the period 2005–06 to 2017–18 was still only 177,000 a year. The Department accepts that it will need to transform the housing market to get more new homes built and says that achieving the target would be “very challenging”. Despite having introduced some projects to help, including encouraging small builders through the small builders guarantee scheme and reforming the planning system, the Department simply does not have the mechanisms in place to achieve the 300,000 target. This is compounded by lack of detailed rationale as to why this target was chosen in the first place. It also lacks year-on-year projections on how it will ramp up house building, only illustrative projections which are not in the public domain. To make this even more concerning, the target does not align with the Department’s new method for calculating the need for new homes which shows that just 265,000 new homes a year are needed. Recommendation: By October 2019, the Department should set out, in a single publicly-available document, the full set of actions it is taking to achieve the target of 300,000 new homes and include year-on-year projections for the number of new homes it expects to be built.
2Fewer than half of local authorities have an up-to-date local plan in place, despite the...
Concluded (the committee's words)
Fewer than half of local authorities have an up-to-date local plan in place, despite the Department stressing the importance of a ‘plan-led system’ for development. Local plans are required by planning legislation and should be the key way that local authorities demonstrate how they will help meet the need for new homes in their areas. However, local authorities are often under-resourced and under-staffed and struggling to produce plans as they can be technically complex, time consuming and resource intensive. As of December 2018, only 143 (42%) of local authorities had an up to date local plan, 149 (44%) had a plan that was more than five years old, and 46 (14%) had no plan at all. Despite these significant gaps, the Department has made limited use of its powers to intervene in local authorities who have not produced a local plan. In November 2017, the Secretary of State wrote to 15 of the local authorities who did not have a local plan and in January 2019, made more direct interventions in two local authorities. But these figures barely scratch the surface of the significant number of local authorities which either have no plan at all or a very old one. The Department is avoiding decisive action: while it has powers to remove local planning away from a local authority, it told us that is reluctant to take what it considers to be a ‘significant step’. Recommendation: By the end of 2019, the Department should write to us detailing what additional interventions it will make when local authorities fail to produce local plans. These interventions should include a range of ‘carrot and stick’ measures of support and penalties. 6 Planning and the broken housing market
3The Planning Inspectorate’s performance is poor and detracts from efforts to deliver 300,000 new homes...
Recommended (the committee's words)
The Planning Inspectorate’s performance is poor and detracts from efforts to deliver 300,000 new homes a year. The time taken by the Planning Inspectorate to determine housing appeals, which increased from 30 to 38 weeks in the five years from 2013 to 2018, is delaying the building of new homes, hampering progress on targets and creating uncertainty for local authorities and communities. The Department knows the Inspectorate needs to significantly improve its performance. In June 2018, the Secretary of State commissioned a review of how the Inspectorate deals with appeal inquiries. The Department expects the Inspectorate will develop an action plan promptly in response to the review’s findings and has also agreed a performance recovery business plan of £13 million to help the Inspectorate improve. The Department says that reforms need to focus on improving business processes with some investment in new technology. The Inspectorate is also recruiting more inspectors to help it deal with the backlog of appeals. The Department has an admirable ambition that the Planning Inspectorate will improve its performance by the end of 2019 and be able to decide appeals within 18 weeks on average but it did not stipulate targets for other areas of the Inspectorate’s performance. Recommendation: By the end of 2019, the Department should set out for us detailed actions and milestones for the Planning Inspectorate’s performance improvements across the full range of all its services.
4The system to get contributions from developers to the cost of infrastructure is not working...
Concluded (the committee's words)
The system to get contributions from developers to the cost of infrastructure is not working effectively, and too often favours developers at the expense of local communities. To pay for infrastructure, the Department estimates that around £12 billion a year should come from the public purse and the rest from developers. Local authorities lack certainty on how infrastructure will be funded from public sources as government departments are not required to align their investment strategies with local plans. Local authorities may lack the skills to negotiate contributions from developers through section 106 agreements and there is little transparency of these negotiations. In two tier authorities there is the added risk of insufficient co- ordination between them to achieve the maximum contribution. Local authorities can also use the Community Infrastructure Levy to get contributions from developers, but as of January 2019 only 47% of local authorities had implemented the Community Infrastructure Levy. Implementing the Community Infrastructure Levy is complex, time consuming and yields small returns in areas of low land value. The Department is aware of these shortfalls and introducing and consulting on several reforms to section 106 and the Community Infrastructure Levy which aim to simplify the process, bring more transparency and help prevent developers reducing contributions using viability arguments. Some of these reforms will need legislative changes and could take several years to be put in place. Recommendation: The Department should continuously monitor whether its reforms to the Community Infrastructure Levy and section 106 are having the impact that is necessary and adjust or adapt accordingly. It should update us by the end of 2019 on the impact of those reforms already in place, and on the progress of implementing those that were in development at the time of our evidence session. Planning and the broken housing market 7
5The Department acknowledges that it will need to sustain and increase the numbers of affordable...
Recommended (the committee's words)
The Department acknowledges that it will need to sustain and increase the numbers of affordable housing built to help it achieve the target of 300,000 new homes but cannot say how many and what types of affordable homes are needed. The Department has not detailed its expectations for numbers of these types of homes to be built as part of its 300,000 target for new homes. It is encouraging greater numbers of affordable homes to be built though the Affordable Homes Programme; and its reforms to the planning system aim to deliver more homes in areas of high unaffordability, such as London and the South East. At local level, local authorities detail the numbers of types of affordable housing needed in their local plans including social housing, affordable rent, built to rent, and that provided by Housing Associations. However, these planned numbers can be undermined as developers renegotiate section 106 agreements to provide less affordable housing than originally agreed with local authorities. The Department believes that its reforms to section 106 agreements would help the provision of affordable homes. Recommendation: By October 2019, the Department should set out its expectations for the types, tenures, and amounts of affordable and social housing to be delivered and how this will contribute to the 300,000 new homes a year.
6We are concerned that the Department and local authorities are not doing enough to prevent...
Recommended (the committee's words)
We are concerned that the Department and local authorities are not doing enough to prevent poor build quality of new homes. There are concerns about poor quality of the build of new homes and that of office accommodation converted into residential accommodation through permitted development rights. The Department is focusing on the quality and safety of high-rise residential buildings after the Grenfell fire. It does not have a specific programme to address concerns about the quality of new builds. It has some initiatives which aim to improve the quality of design of new homes, including revising the Department’s design guide, although these do not address the quality of the final build. Recommendation: a) By October 2019, the Department should set out how it will work with local authorities, developers, and other agencies on how they will prevent, penalise and compensate for poor residential build quality. b) When it releases the design guide, the Department should define what a sufficient quality of final build should look like. 8 Planning and the broken housing market 1 Oversight and assurance
7The Department does not have detailed calculations as to why the target of 300,000 new...
Concluded (the committee's words)
The Department does not have detailed calculations as to why the target of 300,000 new homes was chosen. It also told us that it did not have year-by-year projections on how it will achieve that target but had ‘illustrative projections’ which look at different ways of meeting the target and are not in the public domain. While the Department does not have detailed calculations as to why the target was chosen, it told us that the figure was based on a number of studies including Kate Barker’s work of 2004 and the Lyons review, which suggested 250,000 new homes and above and close to 300,000 are needed to stabilise prices. The target does not align with the Department’s new method for calculating the need for new homes which shows that just 265,000 new homes a year are needed.9 Local plans
8Local plans are required by planning legislation and should be the key way that local...
Concluded (the committee's words)
Local plans are required by planning legislation and should be the key way that local authorities demonstrate how they will help meet the need for new homes in their areas. The Department stressed the importance of a ‘plan-led system’ for development, with local authorities responsible for producing the plan and determining how they want development to be shaped in their local area.10 As of December 2018, only 143 (42%) of local authorities had an up to date local plan, 149 (44%) had a plan that was more than five years old, and 46 (14%) had no plan at all.11
9The Department told us about the findings of the Local Plans Expert Group which gave...
Concluded (the committee's words)
The Department told us about the findings of the Local Plans Expert Group which gave reasons why local authorities were struggling to get plans in place. This included the absence of a standard methodology to calculate the need for new homes—a key part of local plans.12 Without a standard method, local authorities used various ways to calculate the need for new homes in their area. The Department estimated that it cost £50,000 per local authority to calculate this need. The Department has supported local authorities to develop plans, including a Planning Delivery Fund of £16 million (2017–18 to 2018–19), and support from the Planning Advisory Service. Recently, it has also introduced policy reforms such as the standard method for calculating the need for new homes, which aims to simplify, speed up and give transparency as to how local authorities calculate this need in future.13
10The Secretary of State, through the Department, has powers to intervene if a local authority...
Concluded (the committee's words)
The Secretary of State, through the Department, has powers to intervene if a local authority has not produced a local plan. These powers range from making local authorities produce an action plan, to the Department producing a local plan for a local authority on behalf of the Secretary of State. In November 2017, the Secretary of State wrote to 15 of the local authorities which did not have a local plan to challenge them on their lack of progress. In January 2019, he made more direct interventions in two local authorities.14 8 Qq 6-12 9 Qq 3, 9; C&AG’s Report, paras 8, 1.19 10 Qq 62, 63; C&AG’s Report, para 1.9 11 C&AG’s Report, paras 7, 1.10, Figure 6 12 Q 53 13 Qq 38, 50, 62; C&AG’s Report, paras 1.9 1.15 14 Qq 56-62; C&AG’s Report, para 1.11 10 Planning and the broken housing market The Department told us that taking local planning away from a local authority would be “a very significant decision”, particularly as it considers some local authorities are making progress, and not one that Ministers have yet wanted to take.15 The Planning Inspectorate
11The time the Planning Inspectorate has taken to determine housing appeals (other than via written...
Concluded (the committee's words)
The time the Planning Inspectorate has taken to determine housing appeals (other than via written representations) has increased significantly since 2013–14. Between 2013–14 and 2017–18, the Planning Inspectorate estimated that the time it took to determine a housing appeal through an informal hearing or inquiry increased from 30 to 38 weeks. During this period the number of appeals fell from 833 to 703 a year. The Planning Inspectorate’s slow decision-making delays the building of new homes and creates uncertainty for local authorities and communities.16
12The Department was aware that the Planning Inspectorate needs to significantly improve its performance and...
Concluded (the committee's words)
The Department was aware that the Planning Inspectorate needs to significantly improve its performance and told us that the senior team in the Planning Inspectorate was also alive to this need. In June 2018, in response to concerns about delays, the Secretary of State commissioned a review by Bridget Rosewell CBE of how the Planning Inspectorate deals with appeal inquiries. The Department told us that her report concluded there needs to be changes in the Planning Inspectorates’ processes. It expects that the Planning Inspectorate will develop an action plan promptly in response to the review’s findings.17
13We asked the Department for details on what it was doing to improve the Planning...
Concluded (the committee's words)
We asked the Department for details on what it was doing to improve the Planning Inspectorate’s performance. The Department responded that reforms need to focus on improving business processes with some investment in new technology and told us that it had agreed a £13 million performance recovery business plan. It gave us an example of a new portal to enable people to know whether their appeal had been accepted and was being looked at by an inspector.18 The Inspectorate is also recruiting more inspectors to help it deal with the backlog of appeals and has been running regular recruitment campaigns throughout 2018. The Department expects that the Planning Inspectorate will improve its performance by the end of 2019 and be able to decide appeals within 18 weeks on average but did not stipulate targets for other areas of the Inspectorate’s performance.19 15 Q 62 16 C&AG’s Report, paras 14, 2.11 17 Qq 75-80; C&AG’s Report, paras 14, 2.10 18 Qq 75-85,108; C&AG’s Report, paras 23, 3.14 19 Qq 76-79, 87, 90; C&AG’s Report, para 3.14 Planning and the broken housing market 11 2 Creating good places to live Paying for supporting infrastructure
14To create new homes and places for people to live, the supporting infrastructure such as...
Concluded (the committee's words)
To create new homes and places for people to live, the supporting infrastructure such as public and private transport, healthcare and schools must be in place. To pay for infrastructure for 200,000 new homes a year the Department estimates that around £12 billion should come from the public purse and the rest from developers, although this is a rough estimate.20 The Department told us that ensuring the capital funds from other government departments is aligned with house building is essential.21 Local authorities set out the need for infrastructure in their local plans but these plans cover a longer period than the government’s spending review and government departments are not required to align their investment strategies with local plans. This can create uncertainty for local authorities.22 The Department told us that it was working to achieve better alignment, for example by working more closely with the Department for Transport on investment decisions on projects that are important to housing development. The Department has also set up the Housing Infrastructure Fund, which will provide £5.5 billion in total between 2018–19 and 2023–24, to help local authorities pay for new infrastructure and provide new homes.23
15The Department, through the planning system, has provided local authorities with tools to get developers...
Concluded (the committee's words)
The Department, through the planning system, has provided local authorities with tools to get developers to contribute to the rest of the cost of infrastructure: section 106; and the Community Infrastructure Levy. We noted how frustrating it is for local communities when necessary infrastructure is delayed or not provided at all for new developments because local authorities have not been able to get contributions from developers through section 106 or the Community Infrastructure Levy.24 For example, the National Audit Office found that only 47% of local authorities had implemented the Community Infrastructure Levy as of January 2019. It also found that in some instances, developers can renegotiate their initially agreed contribution on the grounds of financial viability, local authorities may lack the skills to negotiate contributions from developers through section 106 agreements and there is little transparency of these negotiations and in how much developers contribute through section 106.25 The Department said it had heard that local authorities found the Community Infrastructure Levy too costly and complicated to implement and that in areas of low land values, local authorities found it was not worth the effort. It pointed out that the Community Infrastructure Levy tends to be introduced in areas with high land values.26
16We pressed the Department on what it is doing to improve section 106 and the...
Concluded (the committee's words)
We pressed the Department on what it is doing to improve section 106 and the Community Infrastructure Levy, in particularly what it is doing to help local authorities have the skills to negotiate effectively with developers. The Department was clear that it was for the individual local authority to decide whether it wants to implement the Community Infrastructure Levy. However, it told us that it was introducing and consulting on several 20 C&AG’s Report, paras 2.13, 2.16 21 Q 127 22 C&AG’s Report, paras 2.13, 2.15 23 Q 127; C&AG’s Report, para 2.17 24 Q 125 25 C&AG’s Report, para 2.18, Figure 12 26 Q 126, C&AG’s Report, Figure 12 12 Planning and the broken housing market reforms which aim to simplify the process and bring more transparency.27 These reforms included: getting local authorities to be clearer in their local plans about what they need from developers through section 106; creating a standard methodology for how viability is calculated to help prevent developers reducing contributing using viability arguments particularly after the Section 106 agreement is signed by both parties; and requiring local authorities to publish the benefits from section 106. However, the National Audit Office found that it will take several years for these reforms to take effect in full.28 Affordable housing
17Communities need housing with a mixture of tenures and that includes affordable housing.
Concluded (the committee's words)
Communities need housing with a mixture of tenures and that includes affordable housing. The Department told us that affordable housing was an important component of the target of 300,000 new homes a year. It acknowledged that it will need to sustain and increase the numbers of affordable housing built to help it achieve the target. While it emphasised the importance of affordable homes in achieving the target, it was not able to give us an expected number and told us it would need to consider this in the spending review.29 We asked whether the Department should have a social housing policy which would run parallel to the house building strategy. The Department responded that it had the affordable homes programme, which gives grants to housing associations to build more affordable housing.30
18We asked the Department what it was doing to help make affordable housing genuinely affordable,...
Concluded (the committee's words)
We asked the Department what it was doing to help make affordable housing genuinely affordable, particularly in London where social housing is key.31 The Department acknowledged problems of affordability and told us of several ways it is encouraging more affordable housing, for example, through the Affordable Homes Programme. Its reforms to the planning system aim to deliver more homes in areas of high unaffordability, such as London and the South East. It expected 50% of the affordable housing programme to be spent in London, compared with past figures of more like 40%. It also told us how it had lifted the Housing Revenue Accounts cap to enable local authorities to come forward with housing.32
19At local level, local authorities detail the numbers of types of affordable housing needed in...
Concluded (the committee's words)
At local level, local authorities detail the numbers of types of affordable housing needed in their local plans including social housing, affordable rent, built to rent, and that provided by Housing Associations.33 However, these planned numbers can be undermined as developers renegotiate section 106 agreements to provide less affordable housing than originally agreed with local authorities. The Department noted that its reforms to section 106 agreements would help the provision of affordable homes.34 Build quality
20We were concerned about poor quality in the building of new homes and of office...
Concluded (the committee's words)
We were concerned about poor quality in the building of new homes and of office accommodation converted into residential accommodation through permitted development rights. The Department stressed that it was critical that quality was good 27 Qq 36, 125-126, 128; C&AG’s Report, paras 2.22-2.23 28 Q16; C&AG’s Report, para 2.23 29 Q 13 30 Qq 13-15 31 Q 20 32 Qq 25, 34 33 C&AG’s Report, para 1.8 and figure 5 34 C&AG’s Report, para 1.8 and figure 5 Planning and the broken housing market 13 enough. It agreed that there are issues—particularly when dealing with large office blocks— that the number of homes created out of that office block can be too high, with inadequate space standards and build quality. The Department told us that it has committed to a review of permitted development rights which turn commercial properties into residential accommodation. This review will look at the quality of those homes and what should be built.35
21In terms of new builds, the Department acknowledged that it did not have a specific...
Concluded (the committee's words)
In terms of new builds, the Department acknowledged that it did not have a specific programme to address concerns about the quality of new builds. The Department told us that, instead, it is focusing on the quality and safety of high-rise residential buildings after the Grenfell fire. It pointed to some initiatives which aim to improve the quality of design of new homes, including revising the Department’s design guide, although these do not address the quality of the final build.36 35 Qq 115-116 36 Q 109-112 14 Planning and the broken housing market
Evidence
Oral evidence sessions 1
- 29 Apr 2019No witnesses recordedparliament.uk ↗
Correspondence 1 letter
- 11 Jun 2019Letter from Melanie Dawes to Chair, regarding planning for new homes - dated 6 June 2019To committee