Meeting the UK’s housing demand

The UK has an ageing population: one in four people in the UK will be over 65 by 2050. Changes in age demographics should be reflected in the types of new homes built, particularly as there will be an increase in older people living alone.

Data from the 2021 census will provide a much-needed update to current assessments of demographic shifts, which affect how housing need is calculated. The Government should publish these data as soon as possible. This will shed some light on other demographic shifts, such as changes to rates of household formation and patterns of migration, which are particularly uncertain in the light of the COVID-19 pandemic and Brexit.

We welcome the Government’s target to deliver 300,000 homes per year and one million homes by 2025 to address the long-term undersupply of new housing. However, even with increased development through SMEs, ‘build to rent’, self-commissioned homes and local authorities, building will likely still fall short of the target. Without reducing the barriers to meeting housing demand—including skills shortages, lack of available land, resources for local planning authorities, the reduced role of SME housebuilders, inadequate support for social housing provision, and the barriers and delays in the planning system—it will not be possible to get close to this target.

The overall housing picture over the past 40 years shows: a doubling of the private rented sector, a halving of the social rented sector and relatively steady rates of home ownership following a peak in the mid-2000s.

The Government’s home ownership schemes come with an opportunity cost and evidence suggests that, particularly in areas where help is most needed, these schemes inflate prices by more than their subsidy value. In the long term, funding for home ownership schemes do not provide good value for money, which would be better spent on increasing housing supply.

Those living in the private rented sector are more likely to live in poor quality, overcrowded conditions than owner–occupiers, and often have limited forms of redress. Many tenants who would previously have been in social housing are now living in expensive private rented accommodation, with their rents subsidised by housing benefit, which is costing the Government around £23.4 billion per year. A transition to spending more on the social housing stock would address this problem over time and help meet the most critical needs.

We welcome the expansion of ‘build to rent’ where it contributes towards a net addition to housing supply. This emerging area of development will need to be kept under review.

There is a serious shortage of social housing, which is reflected in long waiting lists for social homes and a large number of families housed in temporary accommodation. The Government should set out what proportion of funding for the Affordable Homes Programme it believes should be spent on homes for social or affordable rent.

Right to Buy has left some councils unable to replace their social housing stock. Right to Buy must be reformed to help councils replenish their social housing stock: councils should keep more of the receipts from Right to Buy sales, have a longer period to spend the receipts, and there should be tighter restrictions on the conditions under which social homes can be bought.

There will need to be a mix of more suitable, accessible ‘mainstream’ housing and specialist housing for the elderly if the housing market is to be sustainable in the coming years as the population ages. Older people’s housing choices are constrained by the options available.

Little progress has been made on housing for the elderly. As demand changes as the population ages, a more focussed approach is needed. The Government must take a coordinated approach to the issue of later living housing, between departments and through the National Planning Policy Framework.

The role of SMEs in the housebuilding industry has seen a sharp decline: in 1988, SME housebuilders built 39% of new homes, by 2020 this had dropped to 10%. The Government should encourage SME housebuilders in order to diversify the market and maintain competition.

Local authorities should support SME housebuilders to navigate the planning process. One focus of the Government’s planning reforms should be to reduce planning risk by making decisions more predictable and reducing delays, which will benefit SMEs. The Government should work with local planning authorities to create a fast-track planning process for SMEs.

Wider adoption of the ‘master developer’ model, where larger sites are built out by a number of different housebuilders, would help SME housebuilders bid for more secure developments. The Government should require local planning authorities and Homes England to increase the percentage of homes on larger sites each year which are built by SME housebuilders.

Access to finance is one of the key barriers for SME housebuilders. The Government should work with lenders to encourage them to provide more support to SME housebuilders on commercial terms.

Uncertainty about the future planning system and delays to planning reforms have had a ‘chilling effect’ on housebuilding and created uncertainty for planners and housebuilders. The Government needs to set out its strategy for the planning system.

Only 40% of local plans are less than five years old or have been updated or reviewed in the past five years. The lack of local plan-making means the system is not ‘plan led’ and creates an uncertain environment for housebuilders. It also prevents councils from taking a strategic approach to development. We support the Government’s proposals to get councils to make local plans within the 30-month target. Meeting this target will require more planning skills and resources within local planning authorities

Local plans are currently too complex and detailed, which results in delays. Alongside introducing time limits on plan-making processes, the Government should produce standardised definitions and simplified guidance for local planning authorities. Simplification will also aid community engagement with local plans.

Whatever the nature of planning reforms, the Government’s proposals should ensure there is community engagement with the planning system. Engagement is necessary to ensure communities are on-board with changes in their local area and to prevent backlash. Digitalisation will help with transparency and engagement, but paper notices should also continue to ensure the system is inclusive. We also heard evidence that Neighbourhood Plans enable deliberation at the hyper-local level and have helped identify where more homes can be built.

Section 106 Agreements and the Community Infrastructure Levy help deliver necessary infrastructure and social housing; however, the current system adds complexity and uncertainty. More should be done to increase the predictability and transparency of these obligations.

Any new system to replace Section 106 Agreements and the Community Infrastructure Levy should provide safeguards to ensure that the resources raised are spent on the delivery of affordable homes or necessary infrastructure early on in the development and are tied to identified needs. We are concerned that the new Infrastructure Levy could have some of the same disadvantages as the Community Infrastructure Levy.

The availability of land is a significant barrier to meeting housing demand. We welcome the Government’s Brownfield Housing Fund and Land Release Fund. However, building on brownfield land is not a ‘silver bullet’, especially as the availability of brownfield land is disproportionately in areas with less pressure on the housing market.

Residential development on land around railway stations close to major cities would help meet housing demand. The Government should consider pilot schemes to facilitate this development. This would include releasing some Green Belt or agricultural land for development, any release of Green Belt land could be offset through land swaps.

We are concerned about the quality of homes delivered under the permitted development rights regime for conversions from office to residential properties. The Government has recently taken steps to impose minimum standards for conversions. If these steps do not lead to improved outcomes, the Government should not hesitate to introduce stricter rules.

There is an evolving crisis: local planning authorities do not have sufficient financial resources, and in many cases do not have the skilled personnel, to deliver a quality service in a reasonable timeframe. The Government needs to increase resourcing for local planning authorities consistently and for the long term. Additional resources should be targeted at improving local plan-making and processing planning applications more quickly. This should include through increasing planning fees to help cover the costs of the system.

We heard that the 35% uplift in housing targets in the 20 largest urban areas has affected the delivery of local plans and risks backlash from local communities. The Government should consider options to update the calculation of housing targets as soon as possible, to provide certainty to councils.

We heard evidence of the limited options available for local authorities to encourage developers to build homes on sites more quickly when they have planning permission. To address this problem, the Government must give local planning authorities better tools to encourage build out, particularly on large strategic sites. We note proposals to increase local planning authorities’ leverage, including setting a three-year time limit, and encourage the Government to consider this option.

Official figures for the construction industry should include those employed in factories related to construction. This would more accurately reflect productivity levels in the industry, particularly as the sector moves towards modern methods of construction.

The Construction Industry Training Board has not addressed construction skills shortages in an effective manner over many years. Reform is needed to address this issue. The Government should consider how the Construction Industry Training Board can upgrade its training offer for construction professionals. Failure to recruit and train the skills required to build new homes should cause the Government to consider potential alternative models for a national construction careers body.

Diversity remains a major issue in construction trades, with only 4% of trades roles held by women. It will be essential to draw on a wider talent base to meet the demand for skills.

The Government should enable local planning departments to have access to flexible resources, where skills from the private sector and other specialist areas are brought on for specific large sites.

Apprenticeships are vital to many built environment sectors and help develop talent for the future. The number of apprenticeships has fallen consistently since the Apprenticeship Levy’s introduction. We urge the Government to review the Apprenticeship Levy.

Introduction through technical qualifications at the age of 16 is too late to capture young peoples’ interest in the built environment. The Government should ensure wider and earlier engagement with built environment sectors across the curriculum, by introducing modules before and at GCSE level.

Local planning departments are severely underequipped in terms of design resources. Increased flexible resourcing for local planning authorities should include design skills.

We welcome the Government’s increased focus on the importance of beauty in building new homes. However, we are concerned that the proposed ‘fast-track for beauty’ would compromise the quality of some new builds.

The Government should establish a clear implementation timetable for the Future Homes Standard. Where possible, the number of homes built to the Future Homes Standard should be maximised.

We encourage the Government to promote local engagement with placemaking, including through the Office for Place. The Office for Place should help coordinate flexible resources for planning.

We commend the Government’s plans for a New Homes Ombudsman to handle complaints from those who buy new homes. The New Homes Ombudsman’s powers must be robust and adequately enforced.

MMC can help to alleviate skills shortages in construction. We welcome the creation of the Government’s MMC Taskforce, and encourage the Taskforce to focus on the potential for MMC to create more digital and manufacturing jobs in communities with high levels of unemployment.

MMC can help to deliver more new homes with a reduced number of defects. The Government and Homes England should help reassure consumers about the quality and safety benefits of MMC.

Evidence to our inquiry has shown how vital it is that that new homes are built to help meet housing demand. Building more homes will not address affordability pressures in the short term but is an essential first step to ensure that demand can be met in the long term. We heard that meeting future housing demand will require more homes of all kinds.

To meet that challenge, the sector needs certainty and a clear direction from the Government about reforms to the planning system and more resources to address chronic delays. It is also very important to address skills shortages in the construction and planning sectors and to allocate additional land for homes. Only if all the challenges we have identified are addressed will it be possible to boost housing supply and affordability and meet the Government’s targets in the years ahead.

We heard that the high costs of housing in the private rented sector (discussed below) inhibit people from saving the deposit necessary to move into home ownership. Given that average deposits are £59,000, “saving for a deposit is impossible for many renters on lower incomes”, especially as research before the COVID-19 pandemic showed that 45% of private renters in England did not have enough savings to pay their rent for more than a month if they lost their job. 78 The UK Collaborative Centre for Housing Evidence told us: “Although it may be the case that preferences have shifted towards renting in the short term as a lifestyle choice, the main constraint on achieving home ownership remains an inability to save the required deposit, a goal that becomes increasingly out-of-reach if house prices rise faster than savings.” 79 This also reflects tighter rules from mortgage lenders since the 2007/08 financial crisis. The House of Lords Economic Affairs Committee considered these issues in detail in its 2016 report, Building more homes . 80

The Minister agreed that there are “a significant number of people who would be able to afford a mortgage because the cost of the mortgage repayments would be less than their rent, but they cannot afford the deposit.” He was “alive to that particular challenge” and was exploring “what we can do to make sure that people who want to get on to the housing ladder and who are presently in the private rented sector have opportunities so to do.” 81

The increased cost of owning a home is reflected in the fact that, between 1991 and 2003, about 40% of people whose parents were homeowners had become homeowners themselves by the age of 30; this dropped to 25% between 2004 and 2017. Over the same period, the figures decreased from 19% to 9% for those whose parents were not homeowners. 82 Additionally, the “traditional preference” for couples to become homeowners before having their first child has been “undermined by rising unaffordability and housing uncertainty.” 83 This is particularly the case in London and the South East, where affordability pressures are most severe. Figure 6: Average UK house prices Source: Office for National Statistics, ‘UK House price Index: January 2021’: https://www.ons.gov.uk/economy/inflationandpriceindices/ bulletins/housepriceindex/january2021#uk-house-prices [accessed 16 December 2021]

Like many aspects of the housing challenge, age affects experience of the housing system. Older people are much more likely to be owner-occupiers and many no longer pay a mortgage. The Intergenerational Foundation told us that the amount of space that people have in their home is “very unevenly distributed between homeowners and renters, and thus between older and younger people” as “homeowners are more likely to be under-occupying”. 84 Government support for home ownership

Schemes to support home ownership have existed in various forms for many years: including loans, mortgage guarantees, savings accounts, and subsidies. While many commentators in the sector have generally favoured interventions to support home ownership in challenging market conditions, they emphasise the need for an overall increase in housing supply to reduce the call on public funds (including foregone taxation) and prevent subsidised home ownership from adding to house price inflation. 85

The Government’s flagship Help to Buy: Equity Loan scheme enables first-time buyers to obtain an equity loan from the Government of up to 20% (or up to 40% in London) of the market value of an eligible newbuild property, subject to regional maximum property price caps. Spending on this scheme is expected to total around £29 billion in cash terms by March 2023. 86 This scheme has supported over 300,000 house purchases, with first-time buyers making up 82% of these. 87 The National Audit Office has, however, identified an opportunity cost to this funding, as it is unavailable for other housing schemes or priorities, such as building more homes. 88

The Home Builders Federation told us that these schemes to support home ownership “improved visibility of effective demand” and “led to a sustained period of record investment in land and labour for future housing delivery, therefore increasing supply”. 89 However, Professor Christian Hilber, Professor of Economic Geography at the London School of Economics and Political Science, highlighted analysis which shows that “demand-side housing policies (such as the Help to Buy Equity Loan scheme) may increase housing construction, but only in locations where it is comparably easy to add new housing supply (such as near the English/Welsh border)”. He added that in areas where “jobs are located and housing is severely supply constrained (such as in Greater London)” the scheme has “led to a substantive increase in house prices, with no statistically significant effect on construction numbers.” 90 The Affordable Housing Commission concluded in March 2020 that “many” affordable for-sale and rent products “are clearly unaffordable to those on mid to lower incomes.” 91

The Government’s home ownership schemes come with an opportunity cost and evidence suggests that , particularly in areas where help is most needed, these schemes inflate prices by more than their subsidy value. In the long term, funding for home ownership schemes do not provide good value for money, which would be better spent on increasing housing supply. Private rented sector

In 2019/20, the private rented sector accounted for 4.4 million or 19% of households in England. 92 In the 1980s and 1990s, the proportion of private rented households was steady at around 9% to 11%. While the sector has doubled in size since the early 2000s, the rate has remained at around 19% or 20% since 2013/14. 93 As of 2019/20, private renters had on average lived in their accommodation for 4.3 years, which is considerably shorter than for social renters (12.2 years) or owner-occupiers (17.4 years). 94 Many more families with children are living in privately rented accommodation: 49.2% of children are born to families who are renting as people buy later or are not able to buy. 95 Affordability

Homes in the private rented sector have become increasingly unaffordable. In 1980, the average working-age family renting privately spent 12% of its income on housing; today it spends almost three times this proportion (32%). 96 Private renters in London spend an average of 42% of their household income on rent. 97 The unaffordability of housing can have significant social consequences, including for those on low incomes and key workers.

Toby Lloyd, Chair of the No Place Left Behind Commission and an Independent Housing Policy Consultant, said “The private rented sector is by far the most expensive, by far the lowest quality and by far the least popular. It is absolutely the worst possible tenure for almost everybody in it.” He added “Most people who are private renting would much rather be in something cheaper and higher quality. Who would not be? That means either social renting or owner occupation. It is absolutely the tenure of last resort.” 98 As renters age, there is also a concern that they will struggle to afford expensive private rents when their incomes drop at retirement and rents continue to rise. 99 Table 3: Average monthly housing costs by region 100 Region Average monthly cost of owning (Dec 2020) Average monthly cost of renting (Dec 2020) % difference Annual difference London £1,408 £1,791 -21% £4,608 South East £1,018 £1,232 -17% £2,580 East Anglia £739 £907 -19% £2,016 South West £1,018 £1,232 -17% £1,836 North West £576 £723 -20% £1,764 West Midlands £638 £756 -16% £1,416 North East £484 £599 -19% £1,380 East Midlands £632 £706 -11% £900 Yorkshire & the Humber £557 £628 -11% £864 Northern Ireland £445 £490 -9% £540 Wales £546 £665 -18% £1,428 Scotland £527 £683 -23% £1,872 Source: Which? Is it cheaper to own or rent a home? (10 April 2021): https://www.which.co.uk/news/2021/04/ is-it-cheaper-to-own-or-rent-a-home/ [accessed 16 December 2021]

The Affordable Housing Commission noted that “The private rented sector has grown, from housing 12% of people in the lower half of income distribution in 2000, to 22% in 2017”, which suggests that “as the social housing sector has shrunk, many people have made homes in the private sector, where housing is often less suited to tenants with complex needs.” 101 Research from 2017 found that four in ten council homes sold through Right-to-Buy were now in the private rented sector—with the highest proportion being 70.6% in Milton Keynes. 102 Dr Anna Minton, Reader at the School of Architecture, University of East London, said: “It has long been the case that as we moved from a policy of moving social housing tenants or council housing tenants into the private rented sector, housing benefit would pay their rents.” However, “the local housing allowance no longer covers rents in expensive parts of the country.” She suggested that this was “negative for the benefit bill” which is “soaring” and “high rents are putting upward inflationary pressures on the private rented market as a whole.” 103 Overall housing benefit spending in 2018/19 was £23.4 billion, with 4.6 million recipients paid an average of £5,035 each. 104

There were two important areas where the Committee did not take evidence but merit further investigation. First, there has been an increase in short-term lets through sites such as Airbnb. The Community Planning Alliance highlighted that the “Airbnb phenomenon” is adding affordability and availability problems, noting that “many cities (not just in the UK) are seeking to control the number of houses taken out of the local market.” 105 Between April 2016 and May 2019, the number of active listings on Airbnb tripled, from about 76,000 to more than 225,000. 106 Second, there are concerns about unoccupied homes: there were 479,000 empty homes in England in 2020. Local authorities in Yorkshire and the Humber tend to have a higher proportion of empty homes, as well as coastal areas and the South West. Quality and conditions

The expansion of the private rented sector has focused attention on the need to improve living conditions. In 2019/20, 23% of private rented homes did not meet the Decent Homes Standard, amounting to around 1.1 million homes. 107 This compares with 18% of owner–occupied homes and 12% of social-rented homes. 108 Some 7% of private renters live in overcrowded accommodation—compared with 1% of owner–occupiers—the highest it has been since 1995/96. 109 A total of 29% of private renters in receipt of Housing Benefit live in a non-decent home, compared with 21% of private renters not receiving Housing Benefit. Landlords

Most private rented homes are owned by private individuals. Savills highlighted that institutional ownership of private rented housing is “growing quickly, but from a very low base and is focussed on the development of new homes.” 110 When considering demand in the private rented sector, it is important to consider the demographics of private landlords. We heard that 94% of private landlords rent property as an individual, 4% as part of a company and 2% as part of some other organisation. 111 Moreover, 45% of landlords have just one rental property and a further 38% own between two and four properties. 112

Factors such as changes to pensions policy and Buy-to-Let lending rules have an impact on the number of properties in the private rented sector. Research by Dr Julie Rugg found that older landlords leaving the market are not being replaced in the same numbers by younger people. Nationwide Foundation warned that “In time this could well cause a pinch-point, where the number of landlords reduces along with a reduction of properties, or a concentration of properties into fewer hands.” 113 Build to rent

The ‘build to rent’ market of new homes and residential schemes being designed, built and managed specifically for rent is relatively new in the UK. This is a sector in which Savills predicts “delivery increasing significantly in coming years, potentially to two- or three-times recent levels.” 114

Most popular in cities, ‘build to rent’ represented 20% of London’s new housing supply in 2020. While the number of ‘build to rent’ properties currently available is small, with 20,800 across the UK, it is a growing area with the British Property Federation predicting the development of 200,000 ‘build to rent’ homes in the next two years. 115 The average rent on these developments is 8.4% higher than other rental homes in London. 116

Those living in the private rented sector are more likely to live in poor quality, overcrowded conditions than owner–occupiers, and often have limited forms of redress. Many tenants who would previously have been in social housing are now living in expensive private rented accommodation, with their rents subsidised by housing benefit, which is costing the Government around £23.4 billion per year. A transition to spending more on the social housing stock would address this problem over time and help meet the most critical needs.

We welcome the expansion of ‘build to rent’ where it contributes towards a net addition to housing supply. This emerging area of development will need to be kept under review. Social housing

Social housing rents are below market prices and are designed to help those whose needs are not served by the market. Social housing is still provided by local authorities but private registered providers, which are primarily housing associations but can include for-profit organisations, are now the main source. Box 2: Types of social housing Homes for social rent: rent levels are typically set at around 50–60% of market rents and seek to provide long-term security of tenure. Homes for affordable rent : a form of social housing introduced in 2011 which is allocated in the same way as social rented homes but the rent level can be up to 80% of market rent. Shared ownership : a programme which enables home buyers to buy a share of a property, usually between 25% and 75%, and pay a subsidised rent on the remaining share.

Four million households live in social rented housing in England, just under a fifth (17%) of all households. 117 In 2019/20, 10% (2.4 million) of all households rented from housing associations and 7% (1.6 million) from local authorities. 118 The proportion of households living in homes for social rent fell from 30% in 1980 to 17% in 2020. We heard that this fall in the number of homes for social rent is due to factors including Right to Buy sales and an inability to replace sold stock, conversions from social rent to affordable rent, and only a limited number of new homes being built for social rent. 119 The number of new social rent lettings made in 2019/20 was 25% lower than in 2012/13, while the number of new affordable rent lettings was 48% higher. 120 Building new social housing

Around 57,600 new affordable homes were delivered in 2019/20. Homes for affordable rent (at up to 80% of the market rate) were the most common type of new affordable housing being built or acquired in 2019/20, making up 47% of the total. 121 Figure 7 shows the additional affordable homes provided by tenure between 1991/92 and 2019/20. 122 There has been a steady decline in social rent as a proportion of new supply, from over 75% in 1991/92 to 11% in 2019/20. In 50 local authorities, no homes for social rent were built over the five-year period from 2015/16 to 2019/20. 123 Figure 7: Additional affordable homes provided by tenure Source: Department for Levelling Up, Housing and Communities, ‘Live Tables on Affordable Housing’: https://www.gov.uk/government/statistical-data-sets/live-tables -on-affordable-housing-supply [accessed 19 November 2021] Right to Buy

Figure 8 shows the number of new social housing completions (for social rent and affordable rent) as well as the number of homes lost through Right to Buy sales and the number of replacements (since 2012). It shows how much of the social housing stock has been sold through Right to Buy and how councils struggle to replace the stock lost through such sales. 124 The Campaign to Protect Rural England raised a particular concern about rural communities where the current replacement rate for social housing is one new home built in a rural area per eight homes sold, which leaves “limitations on the number of options available for those on low incomes who are seeking social rented housing in rural areas.” 125 Figure 8: New social housing completions Source: Department for Levelling Up, Housing and Communities, ‘Live Tables on Affordable Housing’: https://www.gov.uk/government/statistical-data-sets/live-tables-on-affordable-housing-supply [accessed 19 November 2021]

The Affordable Housing Commission found that Right to Buy, while popular with the public, has brought about the continued depletion of the social rented sector. 126 The Commission called for reforms to Right to Buy, so that local authorities have discretion to set discount rates, can control capital receipts, and ensure funds are recycled into new affordable homes. On our visit to Southwark Council, we heard about the importance of having flexibility to allocate Right to Buy receipts. 127

The Government made changes to Right to Buy in March 2021, which included: Extending the time for councils to spend Right to Buy receipts from three to five years Raising the cap on the percentage cost of new homes councils can fund from Right to Buy receipts from 30% to 40% Allowing receipts to be used for shared ownership and First Homes, as well as affordable and social housing Introducing a cap on the use of Right to Buy receipts for acquisitions. The impact of these changes will be monitored closely by councils and the Local Government Association. 128 Social housing need

As of March 2021, 95,450 families had been placed into temporary accommodation by local authorities. 129 There were 1,187,641 households on local authority housing waiting lists in 2021. 130 Research for the National Housing Federation and Crisis in 2018 identified a need for 145,000 new affordable homes per year, of which 90,000 for the next 15 years should be for social rent, 30,000 for affordable rent and 25,000 shared ownership homes. 131 These estimates are based on an analysis of the backlog of housing need at that time (e.g. overcrowded households, those facing serious affordability problems, homeless households in unsuitable accommodation), combined with projections of household growth. The research concluded that a subsidy of around £14.6 billion per year over 10 years would be required to build the new social rented homes. 132 In July 2020, the Commons Levelling Up, Housing and Communities Select Committee in its report Building more social housing concluded that the Government should introduce a large-scale social housebuilding programme. 133

Within its overall 300,000 housing target, the Government has not set targets for housing types and tenures, despite having made commitments on starter homes and increasing owner occupancy. Alex Morton, Head of Policy at the Centre for Policy Studies said, “There is a legitimate argument about how much affordable or social rent there should be. For political reasons people will always have different preferences” but “a group of people will always need affordable housing, which is a different market niche that can increase overall supply.” 134

Witnesses raised concerns about whether ‘affordable’ rents, set at around 80% of the market rate, were genuinely affordable, especially in high-cost areas. Between 2012 and 2018 over 111,000 social rent homes were converted to affordable rents. 135 The Nationwide Foundation said that “In areas where the housing market is overheated, our concern is that the government’s lack of an affordability definition is, in effect, pushing low-income households into poverty.” Affordable Homes Programme

The Government’s Affordable Homes Programme 2021–26 is an initiative to boost the construction of new affordable homes in England. Homes England will distribute £7.5 billion of the funding and the Government will negotiate with the Greater London Authority on the use of an additional £4 billion for London. The Government’s goal is to see 130,000 new affordable properties built outside London by 2026, with more built in London under the programme. 50% of the funding for the Affordable Homes Programme will be allocated to homeownership products, predominantly shared ownership, with an aim of building 57,000 homes for affordable ownership. The Government expects that the programme will also deliver around 30,000 new homes for social rent. 136 The Government has not, however, set targets for the delivery of homes by tenure type. 137 Research by the Chartered Institute of Housing has found that, of the £53 billion housing budget from 2019/20 to 2023/24, over three-quarters will be directed to private housing. That compares with £18 billion on affordable housing, where the 2021–26 Affordable Homes Programme is one of the most expensive policies. 138

Crisis recommended that the Government should “increase the proportion of the programme spent on social renting” which would “deliver more social housing over a shorter timescale than the scale of delivery currently envisaged, while Government works with the social housing and construction sectors … to scale up investment in delivery of homes for social rent.” 139 Shelter said that the programme’s “prioritisation of homeownership at the expense of genuinely affordable social rent homes means that in its current form it will not address the huge shortage of social housing in all the regions.” 140

The Local Government Association warned that the Government’s approach of “announcing new funding every five or so years” is “highly inefficient because it gives only short-term certainty over the future availability of grant.” They said that “A lack of certainty can lead to pronounced peaks and troughs in delivery, with ‘lumpiness’ that drives upper unit costs and has the knock-on effect of preventing innovation and investment in the housebuilding supply chain.” 141

As it has been some time since local authorities delivered large-scale housing development programmes, some councils have warned of a lack of skilled staff in several fields, such as project management, procurement, development and financial/business planning. The Minister told us that Homes England had set up the Local Government Capacity Centre, which is a ‘hub’ to provide interested local authorities with the skills and support to improve delivery of social housing. We discuss skills shortages further in Chapter 7.

Th ere is a serious shortage of social housing, which is reflected in long waiting lists for social homes and a large number of families housed in temporary accommodation. The Government should set out what proportion of funding for the Affordable Homes Programme it believes should be spent on homes for social or affordable rent.

Ri ght to Buy has left some councils unable to replace their social housing stock. Right to Buy must be reformed to help councils replenish their social housing stock: councils should keep more of the receipts from Right to Buy sales, have a longer period to spend the receipts, and there should be tighter restrictions on the conditions under which social homes can be bought. Homes for older people

One of the most important challenges in the coming years will be ensuring there is a good supply of suitable housing as the population ages. In the 10 years up to 2028, the number of households with people aged 75 and over living on their own is expected to increase by 461,000. 142 By 2032, the number of people over 80 is estimated to rise to 5 million, up from 3.2 million presently. 143 This demographic shift will clearly have a significant bearing on the housing market and the types of homes that will be required. The Lifestory Group, a later-living housebuilder, highlighted the need for “a diverse range of well designed, sustainable, later living homes delivered to provide older people with suitable housing choices”. They stressed that “failure to meet this demand will put greater pressure on already overstretched resources, including adult social care and the NHS.” 144 The Commons Levelling Up, Housing and Communities Committee published a report Housing for Older People in 2018. 145 Specialist housing

There was discussion among witnesses on how much meeting the demand of housing an ageing population should be through specialist housing for the elderly. Such specialist housing includes retirement properties, care homes and housing-with-care, which combines independent living with support and care.

McCarthy Stone told us that there is a “structural shortage of suitable housing options for older people and more retirement communities are needed for the UK’s rapidly aging population.” 146 On the other hand, the Centre for Ageing Better told us that “only 5% of over-65s live in specialist housing, while the vast majority of older people live in mainstream housing and 80% wish to remain in their own homes as they age.” 147 They added: “Older people are a diverse group with varying needs and require a range of mainstream housing options, and specialist homes only form a small part of the solution.” 148

The Cambridge Centre for Housing and Planning Research said that between one quarter and one third of older people are consistently found to express interest in moving to a new house, but only 3.4% of older adults do so and most of them move within mainstream housing, rather than into specialised housing for older people. While this implies that there is “not currently huge demand for specialised housing options”, this low number of moves may be “constrained by the low supply of such homes and poor distribution throughout the country, as well as demand-side barriers. These figures suggest that moving to a new house may be popular in theory, but that older people are deterred from making such moves in practice.” 149

Around 7,500 new retirement properties were built in 2019. The current housing composition of the later living sector is: Retirement housing: 67.5% social rent (505,783 units) 21.3% private sale (159,687) 0.4% private rent (2,836) Extra care/housing-with-care: 7.7% social rent (57,690) 2.8% private sale (21,284) 0.2% private rent (1,722) 150 Box 3: International housing-with-care best practice Housing-with-care combines independent living with 24/7 onsite staffing, social care and communal facilities and services. In New Zealand, Australia and the USA at least 5–6% of the over-65 population has the option to live in housing-with-care. In the UK, this is just 0.6%. Following the introduction of sector-specific regulation and legislation, the housing-with-care sector in New Zealand has flourished. Five out of the top 15 residential housebuilders in the country are retirement community operators, including the top housebuilder, Ryman Healthcare. Source: Written evidence from the Associated Retirement Community Operators ( UKH0011 )

One innovative, community-led form of specialist housing is co-housing, “where citizens come together to design, develop and collectively manage housing to meet their needs.” 151 In co-housing residences, each resident has their own private home whilst sharing a range of communal facilities including a common house for eating and activities, gardens, small-scale energy generation and car-pools. The UK Co-housing Network told us: “Co-housing classically, but not exclusively, is an attractive option for an ageing population as they seek to live independently in a mutually supportive smaller home, within a sociable community.” Intergenerational cohousing, where older and younger people live alongside each other, has been “shown to be a way where those with equity may leverage up those starting out to share life, skills and resources.” 152 Box 4: New Ground co-housing community, High Barnet The UK’s first senior cohousing community, New Ground in High Barnet, opened in 2016 with 26 women members. Two thirds of the group are aged over 70 and a third are over 80. Almost all of the women previously lived alone. The group live in a new, purpose-built block of flats with gardens. Occupants live in their own accommodation but share common areas including a common room, guest room, laundry and gardens. 17 flats are owner-occupied; 8 are for social renters on assured tenancies. In the Netherlands, with a population of around 17 million, there are at least 300 older people’s co-housing communities. Source: Maria Brenton, UK Cohousing Senior Cohousing Ambassador, Maria’s blog: https://www.owch.org.uk/news-articles/2021/9/30/marias-blog [accessed 22 December 2021] Under-occupation of housing

There was a debate among witnesses about older people under-occupying larger, family homes. On the one hand, we heard that a “lack of retirement housing” is “one of the key factors contributing towards older people staying in large, unsuitable houses for longer instead of downsizing.” 153 This can cause “stagnation in the housing market, as it prevents younger buyers from trading up to larger houses, which in turn prevents first-time buyers from entering the housing market at all” and can “result in older people needing to spend more time in hospitals and care homes as their homes do not meet their needs”. 154 McCarthy Stone said that it is “becoming increasingly clear that there is a large bottleneck at the top of the housing market, particularly with the abundance of older people who want to downsize and are not able to.” 155

The Minister said: “There is an opportunity to encourage downsizing and the growth of the later-living sector in order to free up the two and three-bedroom semis in the middle of the market so that those properties can be moved into.” 156

On the other hand, the Cambridge Centre for Housing and Planning Research said that while “Older households are often accused of ‘hoarding’ space that could be used for families”, “this does not reflect the multiple uses of space amongst older people, many of whom now work into retirement, care for grandchildren, and house multiple generations of their families at various points.” 157

Barriers to older people ‘down-sizing’ or ‘right-sizing’ can include: emotional bonds; fear of change; the cost of Stamp Duty Land Tax which increases with property price and so with size; reluctance to lose a principal financial asset; and a lack of choice in appropriate accommodation to move to. 158 We also heard that some housing schemes for the elderly are based on unfair terms and can result in additional costs. The Nationwide Foundation wrote that most lower-income older households “own their own homes, but they experience problems of non-decent housing as they do not have surplus income to spend on costly repairs and adaptations. This means that their homes do not meet their changing, and often deteriorating, health and mobility needs.” 159 Government response

The Minister said that this is an “area that we [the Government] need to focus on for good economic, social welfare and green reasons.” 160 The Minister said it requires discussion with other Government departments, including the Department for Health and Social Care and HM Treasury.

The Government has committed that 10% of homes built through the Affordable Housing Programme will be for specialist or adaptable living, which would deliver around 20,000 properties. However, witnesses raised the concern that this should not be at the expense of funding for social housing.

There will need to be a mix of more suitable, accessible ‘mainstream’ housing and specialist housing for the elderly if the housing market is to be sustainable in the coming years as the population ages . Older people’s housing choices are constrained by the options available.

Little progress has been made on housing for the elderly. As demand changes as the population ages, a more focussed approach is needed. The Government must take a coordinated approach to the issue of later living housing, between departments and through the National Planning Policy Framework. 60 Department for Levelling Up, Housing and Communities and Ministry of Housing, Communities & Local Government, ‘Live tables on housing supply: indicators of new su pply’ (30 September 2021): https://www.gov.uk/government/statistical-data-sets/live-tables-on-house-building [accessed 4 January 2021] 61 Savills and LDS, ‘A review of the availability of development sites for SME housebuilders in England and Wales’ (9 November 2021): https://ldsyoursite.com/savills-sme-housebuilders-report-demonstrates-huge-potential [accessed 16 December 2021] 62 Written evidence from McCarthy Stone ( UKH0040 ) 63 Savills and LDS, ‘A review of the availability of development sites for SME housebuilders in England and Wales’ 64 Written evidence from UK Collaborative Centre for Housing Evidence ( UKH0055 ) 65 Written evidence from Cambridge Centre for Housing and Planning Research ( UKH0028 ) 66 British Property Federation, ‘UK build-to-rent housing supply grows in 2020 despite Covid-19’ (8 February 2021): https://bpf.org.uk/media/press-releases/uk-build-to-rent-housing-supply-growsin-2020-despite-covid-19/ [accessed 24 November 2021] 67 Ministry of Housing, Communities and Local Government, Independent review into scaling up selfbuild and custom housebuilding: report (21 August 2021): https://www.gov.uk/government/publications/independent-review-into-scaling-up-self-build-and-custom-housebuilding-report [accessed 26 November 2021] 68 Department for Levelling Up, Housing and Communities and Ministry of Housing, Communities & Local Government, ‘Live tables on housing supply: indicators of new supply’ 69 Written evidence from the Ministry of Housing, Communities and Local Government ( UKH0042 ) 70 Ministry of Housing, Communities and Local Government, English Housing Survey Headline Report 2019–20 (December 2020): https:// assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_ data/file/945013/2019–20_EHS_Headlin e_Report.pdf [accessed 24 November 2021] 71 Written evidence from Savills ( UKH0080 ) 72 Ministry of Housing, Communities and Local Government, Public attitudes to house building (October 2019): https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/841815/BSA_House_building_report. pdf [accessed 24 November 2021] 73 Ministry of Housing, Communities and Local Government, English Housing Survey Headline Report 2019–20 (December 2020): https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/945013/2019–20_EHS_He adline_Report.pdf [accessed 24 November 2021] 74 The affordability ratio is measured as the ratio of median price paid for residential property to the median workplace-based gross annual earnings for full-time workers. Written evidence from the Intergenerational Foundation ( UKH0022 ). See also Colin Wiles, Stockpiling Space: How the pandemic has increased housing inequalities between older and younger generations (2021), p 46: https://www.if.org.uk/wp-content/uploads/2021/04/Stockpiling- Space_How-the-pandemic-has-increased-housing-inequalities_FINAL.pdf [accessed 24 November 2021]. 75 Q 7 (Professor Christine Whitehead) 76 Written evidence from the Intergenerational Foundation ( UKH0022 ) 77 Office for National Statistics, ‘UK House price Index: October 2021’: https://www. ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/october2021 [accessed 16 December 2021] 78 Written evidence from Rentplus-UK Ltd ( UKH0073 ), see also Shelter, ‘Almost half of working renters only one paycheque away from losing their home’ (19 September 2019): https://england.shelter.org. uk/med ia/press_release/almost_half_of_working_renters_only_ one_paycheque_away_from_losing_their_home [accessed 24 November 2021] 79 Written evidence from UK Collaborative Centre for Housing Evidence ( UKH005 5 ) 80 Economic Affairs Committee, Building more homes (1st Report, Session 2016–17, HL Paper 20) 81 Q 103 (Rt Hon. Christopher Pincher MP) 82 Written evidence from Understanding Society, the UK Household Longitudinal Study, University of Essex ( UKH0026 ) 83 Ibid. 84 Ministry of Housing, Communities and Local Government, English Housing Survey Headline Report 2019–20 (December 2020): https://assets.publishing.service. gov.uk/government/uploads/system/uploads/attachment_data/file/945013/2019–20_ EHS_Headline_Report.pdf [accessed 24 November 2021] 85 Written evidence from Professor Christian Hilber ( UKH0116 ) and the Intergenerational Foundation ( UKH0022 ) 86 House of Commons Library, Extending home ownership: Government initiatives, Briefing Paper Number 03668 , 30 March 2021 87 Written evidence from Home Builders Federation ( UKH0044 ) 88 National Audit Office, ‘Help to Buy: Equity Loan scheme—progress review’ (June 2019): https://www.nao.org.uk/report/help-to-buy-equity - loan-scheme-progress-review/ [accessed 24 November 2021] 89 Written evidence from Home Builders Federation ( UKH0044 ) 90 Written evidence from Professor Christian Hilber ( UKH0116 ) 91 Affordable Housing Commission, ‘Making Housing Affordable Again: Rebalancing the Nation’s Housing System: The final report of the Affordable Housing Commission’ (March 2020): https://www .affordablehousingcommission.org/news/2020/3/23/making-housing-affordable-again-rebalancing-the -nations-housing-system-the-final-report-of-the-affordable-housing -commission [accessed 24 November 2021] 92 Ministry of Housing, Communities and Local Government, English Housing Survey Private rented sector 2019–20 (July 2021): https://assets.publishing.service.gov.uk/government/uploads /system/uploads/attachment_data/file/1000052/EHS_19-20_PRS_report .pdf [accessed 24 November 2021] 93 Ibid. 94 Ibid. 95 Citizens Advice, ‘Families with children hit by insecurity in the private rented sector’ (3 January 2017): https://www.citizensadvice.org.uk/about-us/about-us1/media/press-releases/families-with-children-hit-by-insecurity-in-the-private-rented-sector/ [accessed 2 December 2021] 96 Written evidence from UK Women’s Budget Group ( UKH0046 ) 97 Ministry of Housing, Communities and Local Government, English Housing Survey Private rented sector 2019–20 98 Q 19 (Toby Lloyd) 99 Q 20 (Toby Lloyd) 100 These figures represent estimates for given one-year periods and illustrate outgoings as at December 2020, they exclude other associated financial calculations such as capital gains, tax impacts and the costs of maintenance. On balance, the figures in the table are likely to underestimate the long-term financial advantages of buying compared to renting in the current state of the housing market. They may not be representative of the relative costs of renting and buying in the past or in the future. 101 Affordable Housing Commission, Making Housing Affordable Again: Rebalancing the Nation’s Housing System: The final report of the Affordable Housing Commission 102 Inside Housing, ‘Revealed: the scale of ex-RTB home conversions to private rent’ (7 December 2017): https://www.insidehousing.co.uk/insight/ insight/revealed-the-scale-of-ex-rtb-home-conversions-to- private-rent-53525 [accessed 2 December 2021] 103 Q 1 9 (Dr Anna Minton) 104 Office for Budget Responsibility, ‘Welfare spending: housing benefit’: https://obr.uk/forecasts-in-depth/tax-by-tax- spend-by-spend/welfare-spending-housing-benefit/ [accessed 24 November 2021] 105 Written evidence from the Community Planning Alliance ( UKH0082 ) 106 ‘Revealed: the areas in the UK with one Airbnb for every four homes’, The Guardian (20 February 2020): https ://www.theguardian.com/technology/2020/feb/20/revealed-the-areas -in-the-uk-with-one-airbnb-for-every-four-homes [accessed 16 December 2021] 107 Ministry of Housing, Communities and Local Government, English Housing Survey Headline Report 2019–20 108 Ibid. 109 Data is based on the “bedroom standard”, the difference between the number of bedrooms needed to avoid undesirable sharing (given the number, ages and relationship of the household members) and the number of bedrooms actually available to the household. See Ministry of Housing, Communities and Local Government, Ministry of Housing, Communities and Local Government, National statistics overview: English Housing Survey 2019 to 2020: headline report (17 December 2020): https://www.gov.uk/government/statistics/english- housing-survey-2019-to -2020-headline-report [accessed 24 November 2021]. 110 Written evidence from Savills ( UKH0080 ) 111 Written evidence from National Residential Landlords Association ( UKH0072 ) 112 Ibid. 113 Written evidence from Nationwide Foundation ( UKH0084 ) and Nationwide Foundation, Property supply to the lower end of the English private rented sector (June 2021): https://nationwidefoundation.org.uk/wp- content/uploads/2021/06/Sustainable-Priva te-Rented-Sector-FINAL.pdf [accessed 24 November 2021] 114 Written evidence from Savills ( UKH0080 ) 115 British Property Federation, ‘UK build-to-rent housing supply grows in 2020 despite Covid-19’ (8 February 2021): https://bpf. org.uk/media/ press-releases/uk-build-to-rent-housing- supply-grows-in-2020-despite-covid-19/ [accessed 24 November 2021] 116 JLL, Evaluating Build to Rent performance (September 2018): https://www.jll.co.uk/conten t/dam/jll-com/documents /pdf/research/emea/uk/jll-residential-insight-build-to-rent .pdf [accessed 24 November 2021] 117 Ministry of Housing, Communities and Local Government, National statistics overview: English Housing Survey 2019 to 2020: headline report (17 December 2020): https://www.gov.uk/government/statistics/english- housing-survey-2019-to -2020-headline-report [accessed 24 November 2021] 118 Ibid. 119 For example, Committee visit to Southwark (Appendix 4), Q 18 (Alex Morton) and Q 69 (Grant Butterworth) 120 Ministry of Housing, Communities and Local Government, Statistical Release : Housing Social Housing Lettings: April 2019 to March 2020, England –April 2021 Update : https://assets.publishing.service.gov.uk/government /uploads/system/uploads/attachment_data/file/981724/Social_Housing_Lettings _in_England_April_2019_to_March_2020.pdf [accessed 24 November 2021] 121 The term ‘affordable housing’ covers social, affordable and other low-cost rental housing as well as affordable home ownership products. In this context, ‘new’ homes include both new builds and acquisitions. House of Commons Library, What is affordable housing? Briefing Paper, Number 07747 , 19 April 2021 122 Department for Levelling Up, Housing and Communities and Ministry of Housing, Communities and Local Government, ‘Statistical data set: Live tables on affordable housing supply’ (18 November 2021): https:// www.gov.uk/government/statistical-data-sets/live-tables-on- affordable-housing-su pply [accessed 24 November 2021] 123 Ministry of Housing, Communities and Local Government, Statistical release Housing Affordable Housing Supply: April 2019 to March 2020, England (December 2020): https:// assets.publishing.service.gov.u k/government/uploads/system/uploads/attachment_ data/file/940517/AHS_2019–20.pdf [accessed 24 November 2021] 124 It is not possible fully to calculate net additions as no data exist on conversions or change of use. The House of Commons Communities and Local Government Committee recommended that these data be regularly published. Housing, Communities and Local Government Committee, Building more social housing (Third Report, Session 2019–21, HC 173) 125 Written evidence from CPRE the countryside charity ( UKH0029 ) 126 Affordable Housing Commission, Making Housing Affordable Again: Rebalancing the Nation’s Housing System : https://nationwidefoundat ion.org.uk/ wp-content/uploads/2020/03/Making-Housing-Affordable-Again.-The-Affordable- Housing-Commission.pdf [accessed 24 November 2021] 127 See Appendix 4 128 Written evidence from the Local Government Association ( UKH0043 ) 129 Ministry of Housing, Communities and Local Government, National statistics overview: English Housing Survey 2019 to 2020: headline report (17 December 2020): https://www.gov.uk/government/stati stics/english-housing -survey-2019-to-2020-headline-report [accessed 24 November 2021] 130 Department for Levelling Up, Housing and Communities and Ministry of Housing, Communities & Local Government, ‘Live Table 600: Numbers of households on local authorities’ housing waiting lists by district 31 March 1997–2021’: https ://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment _data/file/995281/Live_Table_600_June_2021_revisions.ods [accessed 25 November 2021] 131 Professor Glen Bramley, Crisis and National Housing Federation Housing supply requirements across Great Britain (November 2018): https://www.crisis.org.uk/media/239700/crisis_housing _supply_requirements_across_great_britain_2018.pdf [accessed 25 November 2021] 132 Ibid. 133 Housing, Communities and Local Government Committee, Building more social housing (Third Report, Session 2019–21, HC 173) 134 Q 15 (Alex Morton) 135 Written evidence from Crisis ( UKH0052 ) 136 Ministry of Housing, Communities and Local Government, ‘£8.6 billion for affordable homes to give boost onto housing ladder’ (31 August 2021): https://www. gov.uk/government/news/86-billion-for-affordable-homes-to- give-boost-onto-housing-ladder [accessed 24 November 2021] 137 Written evidence from Crisis ( UKH0052 ) 138 The HRAs hold the council’s income from rents and services charges collected from tenants, and spends this money exclusively on building and maintaining housing. Written evidence from Optivo ( UKH0068 ) and Chartered Institute of Housing, Rethinking social housing: final report , (June 2018): https://assets- eu-01.kc-usercontent.com/c783d326-05c6-0106–90ef-624f23b543bd/e99612d4-0483–48d8-b281-dd97268bb9fa/ Rethinking%20social%20housing%20report.pdf [accessed 24 November 2021] 139 Written evidence from Crisis ( UKH0052 ) 140 Written evidence from Shelter ( UKH0065 ) 141 Written evidence from the Local Government Association ( UKH0043 ) 142 Written evidence from National Association of Local Councils ( UKH0016 ) 143 Office for National Statistics, ‘Living longer: caring in later working life’ (15 March 2019):- https://www.ons.gov.uk/ peoplepopulationandcommunity/birthsdeathsandmarriages/ageing/articles/livinglongerhowourpopulationischangingandwhyitmatters/2019–03-15 [accessed 24 November 2021] 144 Written evidence from Lifestory Group ( UKH0021 ) 145 Communities and Local Government Committee, Housing for older people (Second Report, Session 2017–19, HC 370) 146 Written evidence from McCarthy Stone ( UKH0040 ) 147 Written evidence from Centre for Ageing Better ( UKH0051 ) 148 Ibid. 149 Written evidence from Cambridge Centre for Housing and Planning Research ( UKH0028 ) 150 Written evidence from McCarthy Stone ( UKH0040 ), see also Knight Frank, Seniors Housing Development Update 2021 : https://www.knightfrank.com/research/report-library/ seniors-housing-development-update-2021–8317.aspx [accessed 24 November 2021] 151 Written evidence from UK Cohousing Network ( UKH0033 ) 152 Ibid. 153 Written evidence from the Intergenerational Foundation ( UKH0022 ) 154 Ibid. 155 Written evidence from McCarthy Stone ( UKH0040 ) 156 Q 90 (Rt Hon. Christopher Pincher MP) 157 Written evidence from Cambridge Centre for Housing and Planning Research ( UKH0028 ) 158 House of Commons Library, Housing an ageing population: a reading list, Briefing Paper, Number 09239 , 3 June 2021 159 Written evidence from Nationwide Foundation ( UKH0084 ) 160 Q 90 (Rt Hon. Christopher Pincher MP) < Back Next > © Parliamentary copyright 2021 A-Z index Glossary Contact us Freedom of Information Jobs Using this website Copyright Privacy notice Cookie policy Cookie Manager House of Lords - Meeting housing demand - Built Environment Committee Accessibility Email alerts RSS feeds Contact us Home Parliamentary business MPs, Lords & offices About Parliament Get involved Visiting Education House of Commons House of Lords What's on Bills & legislation Committees Publications & records Parliament TV News Topics Meeting housing demand Contents Chapter 4: SME housebuilders

A prevalent and concerning trend in the development of new homes has been the sharp decline in SMEs housebuilders: in 1988 SME builders constructed 39% of new homes; by 2020 this had dropped to 10%. 161 While the industry as a whole has grown in recent years, housing delivery has increasingly relied on a smaller number of large developers, as shown in Figure 9. 162 The number of SME housebuilders has approximately halved since 2007; many have been acquired by larger builders over the years or ceased operations. 163 When discussing this sharp decline, the Minister said: “we have to get those numbers back up.” 164 Figure 9: Output by size of housebuilder Source: Savills and LDS, A review of the availability of development sites for SME housebuilders in England and Wales (2021): https://ldsyoursite.com/savills-sme-housebuilders-report- demonstrates-huge-potential [accessed 16 December 2021]

In this chapter, we consider how to ensure SME housebuilders can contribute to meeting housing demand. We look at the three major challenges identified by SMEs—planning, land availability and funding—and discuss how they may be addressed. Advantages of a diverse and competitive housebuilding market

The loss of SME housebuilders has clearly affected the industry’s ability to meet its housebuilding targets. The Home Builders Federation calculated that returning to the number of home builders operational in 2007 could help boost housing supply by 25,000 homes per year. Even a return to 2010 levels could help increase output by 11,000 homes per year. 165

The House of Lords Economic Affairs Committee’s 2016 report, Building more homes , concluded: “The large private builders operate a business model which makes commercial sense for them but does not deliver an increase in the supply of new homes on the scale required. The market has oligopolistic characteristics: the eight largest builders build more than 50% of new homes and smaller builders find it difficult to operate.” 166 These characteristics still dominate the housebuilding landscape. The largest four developers complete around 60,000 homes annually, approximately one third of the total. 167 Brian Berry, Chief Executive Officer of the Federation of Master Builders, told us: “If we are going to deliver [more homes], we need to increase capacity in the housebuilding industry. We need to create a more diverse housebuilding industry. We need to overcome the barriers that SME housebuilders face.” 168

We heard that, in addition to providing competition for the volume housebuilders, there were advantages to ensuring that SME housebuilders could continue to develop homes. Brian Berry told us: “Local housebuilders tend to live in the community in which they are building, so their reputation is at stake. They make sure that the homes they build are of high quality. Consumers are reported as being twice as satisfied with the quality of homes built by local housebuilders as compared with those built by one of the volume housebuilders.” 169

As most SME developers live and work within their community, they also contribute to shaping local communities. The Land Promoters and Developers’ Federation said: “In recent years, housing development has become focused within a fewer number of larger builders, hence housing design has tended to become more standardised and housing layouts can take a strikingly similar form.” 170 Addressing the barriers

SME housebuilders consistently identify three main barriers to development: planning, land availability and funding. The Government is aware of these barriers, as identified in their submission to our inquiry. Planning system

Complexity and delays in the planning system, which we discuss in detail in Chapter 5, act as a barrier to SME housebuilders in particular. In addition, smaller builders have a particular struggle with the uncertainty of decision making including with respect to Section 106 obligations. LDS, a company which provides sales guarantees to SME housing developers, said that while it is “understandable that planning authorities are rigorous in process, for many SMEs, the planning system itself is a deterrent.” 171 Research by the Home Builders Federation found that 48% of SME housebuilders say the planning system is constraining their output. 172

We heard that delays in securing planning permission have a significant impact on SMEs who, unlike the big developers, are often not able to use funds raised from one site to fund another and lack internal capital. The Home Builders Federation said: “Over the past 30 years, the process of obtaining planning permission has become riskier, costlier, and more complex.” They added: “While larger companies can mitigate risk across dozens of sites in some cases, small firms encountering delays on one or two sites will be the difference between a year of growth and a year of contraction.” 173 As we discuss in Chapter 5, appeals processes are increasingly being used, especially in areas with no local plan. The Home Builders Federation said: “For SME developers in particular, the expensive and drawn-out appeals process can cripple the balance sheet and cash-flow, delay important business decisions and stifle opportunities for growth and housing.” 174

The Minister told us that one of the aims of the Government’s proposed planning reforms is to “make sure that the planning rules would be sufficiently predictable to make it much more attractive for land to come forward, particularly for SME developers”. He added “it would therefore encourage them to get into the marketplace to develop.” 175 The Minister recognised the impact of planning delays on SMEs; he said SMEs “do not have the bandwidth to wait around for a long time, which the present system tends to encourage”. 176 This could be addressed through enabling a system of ‘pre-packaged’ planning permissions for small sites and providing a fast-track for SMEs.

The UK Collaborative Centre for Housing Evidence suggests that reducing planning risk and delay could have wider benefits for the sector, as it would reduce the ability of large developers to control the supply of new homes within a local market to maintain house prices. 177

T he role of SMEs in the housebuilding industry has seen a sharp decline: in 1988, SME housebuilders built 39% of new homes, by 2020 this had dropped to 10%. The Government should encourage SME housebuilders in order to diversify the market and maintain competition.

L ocal authorities should support SME housebuilders to navigate the planning process. One focus of the Government’s planning reforms should be to reduce planning risk by making decisions more predictable and reducing delays, which will benefit SMEs. The Government should work with local planning authorities to create a fast-track planning process for SMEs. Land availability

In addition to planning risk, a major challenge facing SME housebuilders is the limited number of small sites for development. Brian Berry told us “If you want more diversity and creative design, you must provide that land.” 178 In order to address this barrier, he pointed to the need for local plans to identify more small sites, rather than just large strategic developments. He said: “Local authorities find it easier to deal with one larger housebuilder compared to lots of local housebuilders … It is too easy for local authorities to rely on volume housebuilders to provide the homes needed.” 179

We asked Homes England what they are doing to help SME housebuilders access suitable land for development. They told us that for Homes England sites over 500 homes, they typically pursue a ‘master developer’ model and split the site into smaller land parcels which are then sold and developed separately, giving SME developers a realistic prospect of a successful bid. 180

An additional way of increasing the availability of small sites is to grow the number of self-commissioned new homes. Around 13,000 homes are self-commissioned in the UK each year. 181 In some markets, such as Austria, Germany, Poland and Japan, self-commissioned housing is the dominant form of housebuilding. 182 An independent report, commissioned by the Government, on scaling up self-build and custom housebuilding by Richard Bacon MP was published in August 2021. 183 The report recommended a new Custom and Self-Build Housing Delivery Unit within Homes England to enable the creation of serviced building plots on small and large sites and support the delivery of custom and self-build housing at scale.

W ider adoption of the ‘master developer’ model, where larger sites are built out by a number of different housebuilders, would help SME housebuilders bid for more secure developments. The Government should require local planning authorities and Homes England to increase the percentage of homes on larger sites each year which are built by SME housebuilders. Finance

Access to finance is one of the key barriers for SME housebuilders who often have limited cash resources. As the Minister identified, SME housebuilders “tend to live hand to mouth; they build to sell to get the cash in to build again.” 184

Homes England told us that they provide debt and equity finance through programmes such as the £4.5 billion Home Building Fund, which was announced in November 2020. Homes England’s aspiration is for the programme to deliver more than 73,500 homes; this finance has already supported 306 SMEs who hold contracted or approved deals. However, we heard that the value of loans agreed through the Home Building Fund reduced by 44% last year. 185 The Government has also set up the ENABLE Build Guarantee with the British Business Bank which will make available up to £1 billion of guarantees to support finance for smaller housebuilders. 186 The Minister said that Homes England supports SMEs through “resources and expertise to help SMEs, essentially, grow their businesses and help them to learn the softer skills that you need to build a business from a smaller scale to a slightly larger scale.” 187

The Home Builders Federation recommends that the Government provides guarantees to lenders to help bridge the gap between current lending terms and enable higher loan-to-cost ratios (perhaps from 60% to 80%). It suggests that the Government should take action to help lenders identify and address the “structural issues” that prevent SMEs accessing finance on reasonable terms. 188

A ccess to finance is one of the key barriers for SME housebuilders. The Government should work with lenders to encourage them to provide more support to SME housebuilders on commercial terms. 161 Savills and LDS, A review of the availability of development sites for SME housebuilders in England and Wales (2021): https://ldsyoursite.com/savills-sme-housebuilders-report-demonstrates-huge- potential [accessed 16 December 2021] 162 Ibid. 163 Ibid. 164 Q 87 (Rt Hon. Christopher Pincher MP) 165 Home Builders Federation, Reversing the decline of small housebuilders: Reinvigorating entrepreneurialism and building more homes (2017): https://www.hbf. co.uk/documents/6879/HBF_SME_Report_2017_Web.pdf [accessed 26 November 2021] 166 Economic Affairs Committee, Building more homes (1st Report, Session 2016–17, HL Paper 20) 167 Written evidence from Home Builders Federation ( UKH0044 ) 168 Q 67 (Brian Berry) 169 Q 62 (Brian Berry) 170 Written evidence from Land Promoters and Developers’ Federation ( UKH0092 ) 171 Written evidence from LDS ( UKH0100 ) 172 Written evidence from Home Builders Federation ( UKH0044 ) 173 Ibid. 174 Ibid. 175 Q 93 (Rt Hon. Christopher Pincher MP) 176 Ibid. 177 Written evidence from UK Collaborative Centre for Housing Evidence ( UKH0055 ) 178 Q 86 (Brian Berry) 179 Q 76 (Brian Berry) 180 Written evidence from Homes England ( UKH0115 ) 181 Written evidence from UK Cohousing Network ( UKH0033 ) 182 The Bacon Review, House: How putting customers in charge can change everything (2021): https://assets.publishing.service.gov. uk/government/uploads/system/uploads/attachment_data/file/1013928/Bacon_ Review.pdf [accessed 2 December 2021] 183 Ministry of Housing, Communities and Local Government, Independent review into scaling up self- build and custom housebuilding: report (21 August 2021): https://www. gov.uk/government/publications/independent-review-into-scaling-up-self- build-and-custom-housebuilding-report [accessed 26 November 2021] 184 Q 94 (Rt Hon. Christopher Pincher MP) 185 Written evidence from LDS ( UKH0100 ) 186 British Business Bank, ‘British Business Bank ENABLE Build programme launches, offering further support for smaller housebuilder finance’ (7 May 2019): https://www.british- business-bank.co.uk/press-release/british-business-bank-enable- build-programme-launches-offering-further-support-for-smaller-housebuilder-finance/ [accessed 26 November 2021] 187 Q 107 (Rt Hon. Christopher Pincher MP) 188 Home Builders Federation, Reversing the decline of small housebuilders: Reinvigorating entrepreneurialism and building more homes < Back Next > © Parliamentary copyright 2021 A-Z index Glossary Contact us Freedom of Information Jobs Using this website Copyright Privacy notice Cookie policy Cookie Manager House of Lords - Meeting housing demand - Built Environment Committee Accessibility Email alerts RSS feeds Contact us Home Parliamentary business MPs, Lords & offices About Parliament Get involved Visiting Education House of Commons House of Lords What's on Bills & legislation Committees Publications & records Parliament TV News Topics Meeting housing demand Contents Chapter 5: Planning

Planning performs an important function by enabling central and local government to determine how many homes should be built, ensure they are of the right type and in the right places, and identify areas to be protected and areas to be developed. The planning system balances wider considerations such as transport, employment, health, sustainability, and climate change, with housing demand and urban development, subject to public consultation. Throughout our inquiry, however, we heard that the planning system acts as a barrier to meeting housing demand by increasing delays, adding costs and causing uncertainty, and raising barriers—particularly for SMEs.

Over the last 30 years, successive governments have expressed concern with the planning system and its ability to deliver the number of homes needed; our inquiry is not the first to consider these issues. Dame Kate Barker’s first report on housing supply, published in 2003, said “The long-term upward trend in house prices and recent problems of affordability are the clearest manifestations of a housing shortage in the UK”. 189 Subsequent major reviews of these issues include: the 2004 Barker report on housing supply, the 2006 Barker Review of land use and the 2018 Letwin review of ‘build out’ rates, the rate at which agreed developments are completed. Parliamentary reports include the 2018 Lords Economic Affairs Committee’s Building more homes report and, more recently, the Commons Levelling Up, Housing and Communities Committee’s report on the Planning White Paper. 190 The thorough exploration of these issues raises questions as to why the planning system’s impact on meeting housing demand has not been successfully addressed.

The Government published the National Planning Policy Framework in 2012 to try to simplify the system and speed up decision making. 191 This was followed by successive updates, the latest in July 2021. A White Paper, Fixing our Broken Housing Market, published in 2017, included plans for a new housing delivery test, more freedoms to maximise density on existing brownfield land, new quality standards, measures aimed at closing the gap between planning permissions granted and homes built, and changes to the system of developer contributions 192 . These reforms were not brought forward in legislation.

Most recently, the Government published its White Paper on reforms to the planning system in England, Planning for the Future , in August 2020. 193 The proposals included a further commitment to the national target of 300,000 more homes per annum by setting binding housing targets for local authorities and ensuring that authorities have a valid local plan in place with a five-year supply of land. The Government is still considering the 44,000 responses to the White Paper consultation. There is some discussion about the political viability of these reforms, given responses to the proposals. This chapter discusses some of the key elements of these proposals and considers alternative solutions.

A common theme among witnesses was a concern about the ‘chilling effect’ that uncertainty about planning reforms is having on the system over and above the hurdle the present system imposes on the construction industry. When the future of planning is uncertain, landowners are reluctant to sell land for development, developers are reluctant to submit plans that they may have to change later, and councils are hesitant about drafting or approving new local plans. The proposals in the White Paper amounted to the most radical change of the system since 1947, so continuing uncertainty about which elements of these proposals will be implemented has left both developers and councils unable to make the commitments required for the Government to meet its ambitious housing targets.

U ncertainty about the future planning system and delays to planning reforms have had a ‘chilling effect’ on housebuilding and created uncertainty for planners and housebuilders. The Government needs to set out its strategy for the planning system. Local plans and zoning

Under the current planning system, local planning authorities are required by the National Planning Policy Framework to prepare a local plan for their area. This may involve a single local authority preparing a local plan for its own area or a group of local authorities working together to prepare a local plan for their combined areas. The local plan guides decisions on future development proposals. Local plans set out a long-term framework for the future development of an area. They define: the priorities for an area, strategic policies, housing needs, and land allocations, amongst other areas. The National Planning Policy Framework states that if a plan is absent or out of date, a ‘presumption of favour of sustainable development’ is introduced, which reduces councils’ say over individual developments. Local plans are examined by the Planning Inspectorate to assess whether they have been prepared in accordance with various duties.

In March 2020, the Government set a deadline of December 2023 for all authorities to have up-to-date local plans in place. 194 As of 2020, only 40% of local plans were less than five years old or have been updated or reviewed in the past five years. Only 30% of local plans would be considered valid if using the Government’s definition that the council must be able to demonstrate that it has sufficient land identified in the plan for five years of housing development. Over 80% of local planning authorities will need to review an existing plan or adopt a new plan, to meet the Government’s proposed deadline of December 2023. 195

The widespread absence of up-to-date local plans suggests that the current system is not ‘plan-led’ and relies on consideration of individual cases and appeals. This limits community engagement with the vision for local areas’ development, increases uncertainty for the local community and developers, and adds to the costs of development. Witnesses raised the concern that councils are often not provided with additional resources, for example for schools and medical facilities, when additional homes are built and more people move into the area. We heard that blockers to local plans include: delays and changes to central government infrastructure projects, repeated rounds of public consultation, local elections leading to policy change, and Natural England decisions on environmental matters, amongst others.

O nly 40% of local plans are less than five years old or have been updated or reviewed in the past five years. The lack of local plan-making means the system is not ‘plan led’ and creates an uncertain environment for housebuilders. It also prevents councils from taking a strategic approach to development. We support the Government’s proposals to get councils to make local plans within the 30-month target. Meeting this target will require more planning skills and resources within local planning authorities The Government’s proposals

The Planning White Paper set out an ambition for homes to be built more quickly through designating ‘zones’ in local plans and cutting down the time taken to develop a local plan. These simplified local plans would place land in three categories: growth areas, renewal areas and protected areas (see Box 5). Box 5: Zoning proposal definitions Growth areas: places “suitable for substantial development”, including new settlements and urban extension sites, and areas for redevelopment, such as former industrial sites or urban regeneration sites. Proposals in these areas would automatically be granted outline planning permission for the principle of development, with full permission achieved through streamlined and faster consent routes. Renewal areas: places “suitable for development”, including gentle densification and infill of residential areas, development in town centres, and development in rural areas that are not annotated as growth or protected areas. Specified forms of development that meet the design and other conditions of the local plan would receive automatic consent. Other proposed developments would have a faster planning application process. Protected areas: places “which, as a result of their particular environmental and/or cultural characteristics, would justify more stringent development controls to ensure sustainability”. These would include Green Belt and Areas of Outstanding Natural Beauty, amongst others. Proposals in these areas would follow the current process. Source: Ministry of Housing, Communities and Local Government, White Paper: Planning for the future

The White Paper sets the ambition that this system of zoning would halve the time to acquire planning permission on larger sites. The proposals include a statutory duty for local planning authorities to adopt a new local plan within 30 or 42 months of the new legislation being introduced. Proposals consistent with local zone requirements and local design guidelines would be granted quasi-automatic permission once some conditions have been met, such as environmental protection requirements. Community engagement in the process would, therefore, come largely at the early plan development stage. Improving local plan making

We received a significant volume of evidence which recommended reforms of the local plan-making process, but which stopped short of the zoning proposals in the Government’s White Paper. These suggestions included: Make the preparation and adoption of 10-year local plans mandatory, to set out clearly the housing numbers required (including affordable homes) and subject to rolling (at least five yearly) reviews 196 Strategic oversight of local plans through introducing regional plans 197 Meaningful sanctions, which are enforced, for those who continually fail to provide a local plan 198 Simplification of the plethora of strategic plans required and their competing timeframes; it is hard for a local plan to consider a 15–20 year timeframe when utility companies only have a 5year plan 199 Simplification of the requirements on the local plan-making process Increase resources for councils, to enable them to recruit the necessary skills and expertise to deliver a local plan (we discuss this further in Chapter 6).

This pointed towards the need for local plans to be simplified and standardised. The Minister told us that the Government aims to “simplify the process and make it much more outcome driven rather than process or step oriented.” 200 We heard that in a many cases local plans are held up by a complex array of challenges, including land supply, changing targets, biodiversity requirements and other environmental protections. 201 Additionally, practices differ between authorities on the mapping and terminology used. Savills told us that standard templates would help meet the Government’s objective of shorter local plans that take less time to agree. 202 Savills said this would also help promote more straightforward local plans which are more accessible to the public.

Local plans are currently too complex and detailed, which results in delays. Alongside introducing time limits on plan-making processes, the Government should produce standardised definitions and simplified guidance for local planning authorities. Simplification will also aid community engagement with local plans. Community engagement

Community engagement is necessary to enable people to shape the places in which they live. We heard of the benefits of promoting community engagement with new housebuilding and development. Victoria Hills, Chief Executive Officer of the Royal Town Planning Institute, said the COVID-19 pandemic has led to an increased emphasis on local communities: “If there was ever a time to engage with the community about the quality of homes and the quality of their living environment, their access or not to green space, this is it.” 203

If the Government goes ahead with the Planning White Paper’s proposals to introduce a zone-based planning system, the new scheme will have a significant impact on how communities engage with the plans that shape their communities. Rather than having a say over each case, communities will be asked to agree a local plan which allocates areas for development. The Government says: “There will be a continuing role for public consultation as part of the planning application process. Even where the broad principle of development is agreed through the plan, all the details would still need to be consulted on with communities and statutory consultees and approved by officers or committees where appropriate.” 204 The Government’s proposals to support ‘street plans’, which will grant street-wide permission to homeowners to densify suburban streets where a large majority of residents vote for it, were announced after we concluded our evidence collection. 205

We heard how difficult it can be to ensure that a wide range of voices is heard on proposed developments. The Royal Institute of British Architects said that “Older homeowners are more likely to be politically engaged and vote in local elections” and are “more likely to believe that too many homes are being built in their area compared to renters and younger people.” 206 On the other hand, the Centre for Ageing Better suggested that moving planning to digital platforms risks “disenfranchising older people who are disproportionality impacted by social and digital exclusion.” 207 The Planning White Paper said “New digital engagement processes will make it radically easier to raise views about and visualise emerging proposals whilst on-the-go on a smart phone”. 208 Professor Flora Samuel recommended “A clear, holistic, map-based system that looks at community assets and needs”, adding that “Technology will allow for the emergent field of adaptive planning using real time and constant data input to assist with the making of transparent, evidence-based and democratic decisions.” 209 Neighbourhood planning

Neighbourhood planning is a right for communities to shape the way their local area is developed through the use of Neighbourhood Development Plans. Introduced through the Localism Act 2011, Neighbourhood Development Plans become part of the wider local plan and are used to determine the outcome of planning applications. The aim of Neighbourhood Plans is to allow communities to have more influence over their local area. These plans cannot influence or block development set out previously by the Local Plan. Neighbourhood Plans are led and produced by an authorised local community organisation such as a parish or town council, or a neighbourhood forum, and are usually subject to a local referendum.

We welcome the Minister’s comments in favour of neighbourhood plans and agree with his assessment that they tend to engage with the local community more closely than other planning tools. He added: “They can help identify, in a much more collegiate, consensual way, where additionality of homes in local communities might be placed. Local people tend to get … more involved in them.” 210

Research for the Government of 135 neighbourhood plans has shown that far from being protectionist, neighbourhood plans had contributed 18,000 units over and above local plan allocations. 211 Whilst a small sample, more than 2,400 communities across England have started the neighbourhood planning process, this suggests that community engagement can promote more homes being built.

Witnesses raised the concern that neighbourhood plans tend to be in place in more rural communities. Pooja Agrawal, Chief Executive Officer at Public Practice, said that “neighbourhood plans are more successful outside urban areas, so they tend to be in rural and parish areas”. 212 Grant Butterworth, Head of Planning at Leicester City Council, added that they “work well or are very active where you have a mobilised and motivated local community who want generally to protect their environment through a neighbourhood plan.” 213

Victoria Hills said that embracing neighbourhood plans would require more resourcing of local planning authorities: “Many of the planning departments … are so busy—they are on their knees already, just doing the statutory stuff—that it is very hard then to throw yourself in and engage with the community or a neighbourhood forum on their specific plan.” 214

Whatever the nature of planning reforms, the Government’s proposals should ensure there is community engagement with the planning system. Engagement is necessary to ensure communities are on-board with changes in their local area and to prevent backlash. Digitalisation will help with transparency and engagement, but paper notices should also continue to ensure the system is inclusive. We also heard evidence that Neighbourhood Plans enable deliberation at the hyper-local level and have helped identify where more homes can be built. Infrastructure funding and land value capture

There has long been debate over how to capture the increases in land value that result from planning permission and housing development, and how to ensure that communities have the infrastructure they require. Like much of the housing challenge, this plays out differently in areas with different affordability pressures, land availability and land values: land values available for capture are systematically greater in the wider south east and south west of the country than they are in the north. We heard mixed views on the current arrangements and the Government’s proposed changes.

Section 106 Agreements are legally enforceable obligations negotiated between a developer and the local planning authority as a condition of planning permission to provide complementary investment in the local community. These negotiations are complex and are often renegotiated throughout the development process. The most common contribution under a Section 106 Agreement is the provision of social or affordable housing. Infrastructure developments funded by Section 106 Agreements include highways, public transport, education, community and cultural facilities, and environmental mitigation for the development. The obligations may be provided by the developers ‘in kind’—by the developer directly building or providing the necessary infrastructure to fulfil the obligation, for example by building affordable homes—or in the form of financial payments. Section 106 Agreements raise revenue for infrastructure mainly associated with a particular planning decision and its acceptability, so tend to be most common with larger developments.

Since 2010, some developments have been subject to a Community Infrastructure Levy. The Community Infrastructure Levy is an optional locally determined, fixed-rate development charge which is levied in terms of pounds per square metre. Different areas of a planning authority and types of development can have different charging rates. The Community Infrastructure Levy sits alongside Section 106 Agreements, can be used for non-site-specific infrastructure and is intended to fund development across a wider area. Adoption of the Community Infrastructure Levy has grown since its introduction; by the end of 2019 almost half of local planning authorities had adopted one. 215 Table 4: Illustrative Community Infrastructure Levy rates by local authority 216 Local authority Residential charges per sq/m* Date adopted Bolton £45 13/05/2013 Breckland £60 and £0 15/04/2013 Brentwood £200 27/10/2016 Guildford £500, £400, £300, £150 and £100 19/01/2015 Islington £250 and £300 26/06/2014 Newcastle upon Tyne £60, £30 and £0 02/11/2016 Richmondshire £120, £50 and £0 24/10/2016 Selby £50, £35 and £10 03/12/2015 Southend-on-Sea £60, £30 and £20 23/07/2015 Wandsworth £575, £265, £250 and £0 11/07/2014 *The rates vary depending on the charging zone. These rates exclude charges for retirement housing, student accommodation, affordable housing and hotel developments. Source: Planning resource, CIL Watch: who’s charging what? (2 December 2021): https://www.planningresource.co.uk/article/1121218/cil-watch-whos- charging-what [accessed 16 December 2021]

Developer contributions paid through Section 106 Agreements and the Community Infrastructure Levy were valued at £7 billion in 2018/19 (an increase of 9% from 2016/17 in real terms). This included both financial and in-kind contributions. In 2020, 47% of local authorities received contributions from developers through the Community Infrastructure Levy. 67% of contributions went into affordable housing (providing 44,500 new affordable homes), with 53% of developer contributions agreed in London and the South East. 217 The Chartered Planners in Academic Practice Group estimates that Section 106 Agreements and Community Infrastructure Levy captured approximately 30% of development value on greenfield sites from landowners/developers and another 20% was captured by national capital gains and stamp duty land taxes. 218 These estimated contributions are gross values and do not include projects where the Section 106 contribution is rendered unviable.

Figure 10 shows the proportion of homes for social rent which were funded by rents from existing tenants, Section 106 Agreements and grant funding. It illustrates the increased reliance on Section 106 Agreements over time. Figure 10: Social rent supply by funding source and proportion delivered by all Section 106 Agreements Source: Written evidence from Shelter ( UKH0065 ) Limitations of section 106

Witnesses told us of limitations to the Section 106 system in terms of how the Agreements are reached and administered and how the resulting money is spent. On many sites, local planning authorities do not to receive the agreed Section 106 obligations as developers routinely submit ‘viability assessments’, support a claim that an existing Section 106 obligation is economically unviable and should be overturned. These viability assessments and the subsequent negotiations are not made public, as the developers argue that they contain commercially sensitive information. The Local Government Association has said that councils often do not have sufficient skills and capacity to evaluate viability appraisals, while the large developers are well resourced. 219 This increases the risk of development for both the developers and the council, as it is not certain what the final Section 106/ Community Infrastructure Levy contribution for the site will be. Local planning authorities have reported a slowing in the delivery of Section 106 Agreements, with 51% of authorities receiving 50% or less of the planning obligations negotiated two years previously (up from 36% in 2016/17). 220

While large developers welcome the flexibility of Section 106 Agreements and are well-placed to navigate the system, we heard their concerns about significant delays caused by the current process. 221 Some of these delays may be unavoidable—those that are an inherent aspect of the negotiation of planning obligations—but there are also avoidable delays. These can be caused by limited capacity, skills and resources within the local planning authority or even as a negotiation tactic. 222 Such delays have the most significant impact on SME housebuilders, who do not have the planning skills nor the capital to invest in housebuilding projects where the timelines and returns are uncertain. A Federation of Master Builders’ survey in 2020 found that 55% of respondents thought the Community Infrastructure Levy and Section 106 Agreements rendered sites unviable, and thought “that Community Infrastructure Levy is arbitrary and unpredictable between different authorities” due to viability concerns and exemptions. 223 The Government’s proposals

The Planning White Paper proposed a new fixed-rate all-encompassing Infrastructure Levy to replace Section 106 Agreements and the Community Infrastructure Levy. The Government has said that the proposed levy will be “simpler, more transparent, and more consistent in delivering more of the infrastructure and affordable housing that existing and new communities require. It will be set in a way which delivers at least as much—if not more—onsite affordable housing than at present.” 224 The Minister thought that more “ammunition” should be put into the hands of local planning authorities to ensure that developers meet their contributions. 225

The proposals were originally for a mandatory nationally set value-based flat rate charge, but the department has since indicated that the rates will be set locally. The proposed new Infrastructure Levy would be charged as a fixed proportion of the development value above a threshold, and would be levied at the point of occupation, to be charged on the final value of a development. Councils would be allowed to borrow against Infrastructure Levy revenues in the interim to facilitate infrastructure investment. We heard that the proposals in the White Paper do not provide enough detail on how the levels will be set and delivered and that the Government was going to need to address how the proposals would work in practice. 226 The Minister noted areas where the Government has taken concerns on board, including on the need for any new levy to be more localised than under the proposals in the White Paper. 227

Land values necessarily have a significant impact on land value capture; areas with lower land values will not be able to collect as much value, under the existing or proposed system. Lancashire Council said: “The levy seeks to benefit from increases in land value, but value uplift in some areas will be insufficient to fund the required infrastructure. The areas most in need of new housing and infrastructure could be deemed unviable”. 228

There was a concern among witnesses that the proposed levy would reduce the on-site delivery of affordable housing. A survey of social housing providers found that only 4% of respondents believed that planning proposals would deliver more homes for social rent. 229 Through the provision of on-site contributions, Section 106 Agreements have delivered mixed communities. Optivo warned that a simple monetary contribution would “fail to encourage the creation of mixed communities to which governments have been committed for at least 30 years”, adding that “If the new system is to work, it must be designed to incentivise, or better ensure, on-site delivery.” 230

We were told that more thought should be given to how a levy paid at the point of occupation addresses the Government’s concern that infrastructure comes too late in the build out process. Jonathan Manns, Executive Director of UK and Monaco at Rockwell Property, gave an example: “A new road would be required to make a development acceptable. However, the money for that road would come in only when the tax is paid when the homes are sold. You would presumably be in a situation where you are asking local authorities to borrow against anticipated future receipts from a tax, which requires local authorities to make assumptions about what those receipts will be, but also in effect requires them, as opposed to the developer, to carry the development risk for the scheme, which opens up risks such as: what if the developer does not build out the entire site, or what if the values that are achieved are not as were anticipated?” 231

S ection 106 Agreements and the Community Infrastructure Levy help deliver necessary infrastructure and social housing; however, the current system adds complexity and uncertainty. More should be done to increase the predictability and transparency of these obligations.

A ny new system to replace Section 106 Agreements and the Community Infrastructure Levy should provide safeguards to ensure that the resources raised are spent on the delivery of affordable homes or necessary infrastructure early on in the development and are tied to identified needs. We are concerned that the new Infrastructure Levy could have some of the same disadvantages as the Community Infrastructure Levy. Land availability and land costs

Several witnesses told us that a key factor not just making it difficult to build more homes, but in influencing the quality and size of new homes, was the supply and price of land. Many reports in recent years have considered these issues and made recommendations on how they might be addressed—including the 2004 review of housing supply and 2006 review of land use planning by Dame Kate Barker, and Sir Oliver Letwin’s independent review of build out, published in 2018. 232 The House of Lords Economic Affairs Committee’s 2016 report, Building more homes , addressed and made recommendations on how to ensure more homes are built on public land and encourage more building by local authorities and housing associations. 233 The Commons Levelling Up, Housing and Communities Committee’s report, The future of the planning system in England , published in June 2021, called for a review of the Green Belt. 234 In this section we focus on two areas with a focus on housing demand: brownfield development and development around train stations. Brownfield development

A brownfield site is an area that has been used for development before. Such sites are usually in towns and cities and were previously used for industrial or commercial purposes; because of this, some are contaminated. The Minister told us that a focus on brownfield development is “a way of making sure that we meet our 300,000 homes per year target by 2025. We think it is a sensible target and we will focus on brownfield and provide the toolkits to local authorities to remediate brownfield sites”. 235 Analysis by the CRPE found that registers prepared by local planning authorities show that brownfield plots available and suitable for housing could provide over 1,061,000 homes. 236 A major problem, however, is that the availability of brownfield land does not map well onto housing affordability issues. As shown in Figure 11, less brownfield land tends to be available in unaffordable regions. Because of the costs of preparing sites for development, brownfield land is often more expensive to build on, which is not reflected in the market price of homes. These pressures can render some brownfield land unviable even when government support is available, and can make the planning and development process slower and more costly. Figure 11: Regional comparison of household projections and estimated housing capacity on brownfield sites Source: Lichfields, Brownfield Land Solution? https://lichfields.uk/media/1828/456376.pdf [accessed 19 November 2021]

To help offset some of these problems, the Government has introduced funding to support development on brownfield land: The Home Building Fund will provide £2.95 billion of loan funding supporting small and medium enterprises, custom builders and modern methods of construction to build housing, including some on brownfield land The £400 million Brownfield Housing Fund has been allocated to seven mayoral combined authorities, enabling 26,000 new homes on brownfield land The £75 million Brownfield Land Release Fund will accelerate the release of local authority-owned brownfield land for housing in areas not eligible for the Brownfield Housing Fund (£25 million is ringfenced for self- and custom-build projects may be on brownfield and greenfield sites that meet gateway criteria) The Housing Infrastructure Fund has allocated £4.3 billion for provision of infrastructure for housing projects, including some on brownfield. Half of the projects funded have 50% or more of the housing area on brownfield. 237

The UK Collaborative Centre for Housing Evidence suggested that “the appropriateness of proposed sites for new housing (i.e. technical impact assessments) should be completed during the local plan process, rather than as part of the planning application process”, which would enable developers to identify more brownfield sites.

Th e availability of land is a significant barrier to meeting housing demand. We welcome the Government’s Brownfield Housing Fund and Land Release Fund. However , building on brownfield land is not a ‘silver bullet’, especially as the availability of brownfield land is disproportionately in areas with less pressure on the housing market. Development around railway stations

One proposed solution is to permit development on undeveloped land close to train stations which provide a service to a major employment centre within a reasonable time—45 minutes, for example. 238 The most powerful arguments for such a solution are that housing tends to be most unaffordable close to hubs of employment and that rail provides the fastest means of access to larger cities and, by a large margin, has the lowest carbon footprint of any mode of travel. Maximising the use of existing rail infrastructure provides a low-carbon option for urban expansion and providing new homes. It would reduce the tendency to long-distance commuting, which has been accentuated by the COVID-19 pandemic. In contrast to building new rail links, expanding the capacity of existing rail links is relatively cheap and can be done through complementary investment in stations or by upgrading signalling and increasing frequency and speed where necessary. This model could be extended to other railway stations, such as parkways.

Research for the Centre for Cities concluded that the release for development of all land within 800 metres of any stations with a service of around 45 minutes to a major city, if that land had no marker of amenity or environmental value, would provide an additional 47,000 hectares in just five city-regions. 239 Setting aside 10% of this total for new accessible green space and building at a density of 50 homes to the hectare would provide land for 2.1 million new homes. While such a proposal would take some Green Belt land, the proportion it would apply to is small: for the five metropolitan regions included in the study this would cover just 1.8% of existing Green Belt land. Box 6: Development of land around the Manchester city region As an example, for the Manchester city region, there are 242 qualifying commuter stations. The total area of buildable land within 800 meters of these stations is 10,977 hectares. Allowing for 10% of this buildable land to be devoted to publicly accessible open space, there would be 9,879 hectares for new housing development. Assuming a density of 40 homes per hectare, this would enable the creation of 395,200 homes. Source: Centre for Cities, Homes on the Right Tracks report Homes on the right tracks: Greening the Green Belt to solve the housing crisis (September 2019): https://www.centreforcities.org/wp-content/uploads/2019/09/Homes- on-the-Right-Tracks-Greening-the-Green-Belt.pdf [accessed 2 December 2021]

Residential development on land around railway stations close to major cities would help meet housing demand. The Government should consider pilot schemes to facilitate this development. This would include releasing some Green Belt or agricultural land for development, any release of Green Belt land could be offset through land swaps. Permitted development rights

Permitted development rights are rights to make certain changes to a building without needing to apply for planning permission. They derive from a general planning permission, rather than from permission granted by a local planning authority. These permissions can apply to a range of developments, but this section focuses on homes.

Nearly 73,000 new homes were added to the housing stock through change of use permitted development rights between 2015/16 and 2019/20. Of these, 64,798 (89%) were created through office to residential conversions. This permitted development right was introduced as a temporary measure but made permanent from April 2016. While this has provided new homes, often in areas of most housing need, it has proved controversial. The Royal Institution of Chartered Surveyors reported in 2018 that the quality of office to residential schemes ranged from high to extremely poor, with permitted development rights schemes being “significantly worse” than those which had been through the full planning process. 240 Councillor Dr Ed Turner, Deputy Leader of Oxford City Council and Member of the Economy, Environment Housing Board at the Local Government Association, pointed to the overall housing targets being a key driver for change of use conversions: “you can quietly extend permitted development rights, nobody really notices and you fulfil some of those objectives. That is not good for building the right sort of housing that we need.” 241 The Royal Institute of British Architects raised the concern that conversions from office to residential use under permitted development rights enable developers to avoid contributions to local infrastructure through Section 106 charges. The Local Government Association calculated that contributions for around 13,500 affordable homes have been missed through permitted development rights. 242

To offset some of these concerns, legislation came into force in June 2020 requiring residential conversions to have “adequate natural light in all habitable rooms”. Further legislation came into force in April 2021 to require all new homes created under permitted development rights to comply “as a minimum” with the nationally described space standards. The Commons Levelling Up, Housing and Communities Committee is currently undertaking an inquiry into permitted development rights. 243

We are concerned about the quality of homes delivered under the permitted development rights regime for conversions from office to residential properties. The Government has recently taken steps to impose minimum standards for conversions. If these steps do not lead to improved outcomes, the Government should not hesitate to introduce stricter rules. 189 Dame Kate Barker, Review of Housing Supply: Securing our Future Housing Needs: Interim Report – Analysis (December 2003): http://news.bbc.co.uk/1/shared /spl/hi/uk/03/budget/documents/pdf/barker_review_foretoch3_396 .pdf [accessed 25 November 2021] 190 Economic Affairs Committee, Building more homes (1st Report, Session 2016–17, HL Paper 20) and Housing and Communities and Local Government Committee, The future of the planning system in England (First Report, Session 21-22, HC 38) 191 Department for Communities and Local Government, ‘National Planning Policy Framework’ (27 March 2012): https://www.gov.uk /guidance/national-planning-policy-framework [accessed 24 November 2021] 192 Ministry of Housing, Communities and Local Government, Policy paper: Fixing our broken housing market (7 February 2021): https://www.gov .uk/government/publications/fixing-our-broken-housing-market [accessed 24 November 2021] 193 Ministry of Housing, Communities and Local Government, White pater: Planning for the future ( August 2020): https://assets .publishing.service.gov.uk/government/uploads/system/uploads/attachment_data /file/958420/MHCLG-Planning-Consultation.pdf [accessed 29 November 2021] and Department for Levelling Up, Housing and Communities and Ministry of Housing, Communities and Local Government, Closed consultation overview: Planning for the future (4 February 2021) https://www.gov.uk /government/consultations/planning-for-the-future [accessed 24 November 2021]. 194 Ministry of Housing, Communities and Local Government, ‘Councils urged to ensure Local Plans are up to date’ (19 January 2021): https://www.gov.uk/government/news/councils -urged-to-ensure-local-plans-are-up-to-date [accessed 24 November 2021] 195 Written evidence from CPRE the countryside charity ( UKH0029 ) and the Countryside Charity, ‘Planning under fire as our new research shows issues with local plans’ (20 May 2020): https://www.cpre.org.uk/about-us/cpre-media /only-third-councils-have-up-to-date-local-plan/ [accessed 24 November 2021] 196 Written evidence from Chartered Planners in Academic Practice Group ( UKH0062 ) 197 Including Q 73 (Grant Butterworth), written evidence from the CPRE Countryside Charity ( UKH0029 ), Royal Town Planning Institute ( UKH0094 ), and UK2070 Commission ( UKH0075 ) 198 Written evidence from Lifestory Group ( UKH0021 ) and Barratt Developments ( UKH0099 ) 199 Written evidence from Cornwall Council ( UKH0063 ) 200 Q 95 (Rt Hon. Christopher Pincher MP) 201 Written evidence from the Cambridge Centre for Housing and Planning Research ( UKH0028 ) 202 Written evidence from Savills ( UKH0080 ) 203 Q 42 (Victoria Hills) 204 Written evidence from the Ministry of Housing, Communities and Local Government ( UKH0042 ) 205 Housing Today, ‘Gove says government will legislate for ‘street votes’’ (30 November 2021): https://www.housingtoday.co.uk/news/gove-says- government-will-legislate-for-street-votes/5114990.article [accessed 16 December 2021] 206 Written evidence from the Royal Institute of British Architects ( UKH0053 ) 207 Written evidence from the Centre for Ageing Better ( UKH0051 ) 208 Ministry of Housing, Communities and Local Government, White paper: Planning for the future 209 Written evidence from Professor Flora Samuel, University of Reading, and the Quality of Life Foundation ( UKH0025 ) 210 Q 99 (Rt Hon. Christopher Pincher MP) 211 Final Report to the Ministry of Housing, Communities and Local Government , Impacts of Neighbourhood Planning in England (May 2020): https://assets.publishing.service. gov.uk/government/uploads/system/uploads/attachment_data/file/929422/ Impacts_of_Neighbourhood_Planning_in_England.pdf [accessed 25 November 2021] 212 Q 68 (Pooja Agrawal) 213 Q 68 (Grant Butterworth) 214 Q 40 (Victoria Hills) 215 Ministry of Housing, Communities and Local Government, The Incidence, Value and Delivery of Planning Obligations and Community Infrastructure Levy in England in 2018–19 (August 2020): https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/907203/The_Value_and_Incidence_ of_Developer_Contributions_in_England_201819.pdf [accessed 25 November 2021] 216 This table represents a sample set of Community Infrastructure Levy rates by local authority. It is the Committee’s own analysis of selected authorities to illustrate a range of charges across the country. For the full data on each local authority and their Community Infrastructure Levy status. 217 Ministry of Housing, Communities and Local Government, The Incidence, Value and Delivery of Planning Obligations and Community Infrastructure Levy in England in 2018–19 and written evidence from the Chartered Planners in Academic Practice Group ( UKH0062 ). 218 Written evidence from the Chartered Planners in Academic Practice Group ( UKH0062 ) 219 Written evidence from the Local Government Association to the House of Commons Housing, Communities and Local Government Committee ( FPS056 ) 220 Ministry of Housing, Communities and Local Government, The Incidence, Value and Delivery of Planning Obligations and Community Infrastructure Levy in England in 2018–19 221 Ibid. 222 Ibid. 223 Written evidence from Federation of Master Builders ( UKH0058 ) 224 Written evidence from the Ministry of Housing, Communities and Local Government ( UKH0042 ) 225 Q 96 (Rt Hon. Christopher Pincher MP) 226 See Q 73 (Brian Berry), Q 38 (David Bainbridge) and Q 37 (Victoria Hills). 227 Q 96 (Rt Hon. Christopher Pincher MP) 228 Written evidence from Lancashire County Council ( UKH0108 ) 229 Affordable Housing Commission, The Planning White Paper and affordable housing: The views of social landlords (November 2020): https:// nationwidefoundation.org.uk/wp-content/uploads/2020/11/Planning-white-paper- and-affordable-housing-surveyfinal-1.pdf [accessed 25 November] 230 Written evidence from Optivo ( UKH0068 ) 231 Q 37 (Jonathan Manns) 232 Dame Kate Barker, Review of Housing Supply: Securing our Future Housing Needs: Interim Report – Analysis (2003): http://news.bbc.co. uk/1/shared/spl/hi/uk/03/budget/documents/pdf/ barker_review_foretoch3_396.pdf [accessed 22/12/2021], also Dame Kate Barker, Barker Review of Land Use Planning Final Report - Recommendations (December 2006): https:// assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_ data/file/228605/0118404857.pdf [accessed 25 November] and Ministry of Housing, Communities and Local Government, Independent review of build out: final report (29 October 2018): https://www.gov.uk/government/ publications/independent-review-of-build-out-final-report [accessed 25 November] 233 Economic Affairs Committee, Building more homes (1st Report, Session 2016–17, HL Paper 20) 234 Housing and Communities and Local Government Committee, The future of the planning system in England (First Report, Session 2021-22, HC 38) 235 Q 101 (Rt Hon. Christopher Pincher MP) 236 Written evidence from CPRE the countryside charity ( UKH0029 ) 237 Supplementary written evidence from the Department for Levelling Up, Communities and Local Government ( UKH0112 ) 238 Written evidence from Centre for Cities ( UKH0114 ). See for example: Barney Stringer, ‘Is the Green Belt sustainable?’ (17 June 2014): https://barneystringer.wordpress.com/2014/06/17/is-the-green-belt- sustainable/ and Professor Paul Cheshire, ‘Building on Greenbelt land: so where?’ (9 July 2014): http://spatial-economics.blogspot.co.uk /2014/07/building-on-greenbelt-land-so-where.html [accessed 25 November 2021]. 239 That is excluding building on National Parks, Areas of Outstanding Natural Beauty, Sites of Special Scientific Interest (SSSIs) or any public recreational areas, for example. Centre for Cities, Homes on the right tracks Greening the Green Belt to solve the housing crisis (September 2019): https://www.centreforcities.org/wp-content/ uploads/2019/09/Homes-on-the-Right-Tracks-Greening-the-Green- Belt.pdf [accessed 25 November 2021] 240 RICS, Extending permitted development rights in England: the implications for public authorities and communities (May 2018): http://offlinehbpl.hbpl .co.uk/NewsAttachments/RLP/RICSExtendingPermittedDevelopmentRights.pdf [accessed 25 November 2021] 241 Q 68 (Cllr Dr Ed Turner) 242 Local Government Association, LGA - Over 13,500 affordable homes lost through office conversions (11 January 2020): https://www.local.gov.uk/about/news /lga-over-13500-affordable-homes-lost-through-office-conversions [accessed 25 November 2021] 243 Housing, Communities and Local Government Committee, Inquiry: ‘Permitted Development Rights’: https://committees.parliament.uk/work/1131 /permitted-development-rights/ [accessed 29 November 2021] < Back Next > © Parliamentary copyright 2021 A-Z index Glossary Contact us Freedom of Information Jobs Using this website Copyright Privacy notice Cookie policy Cookie Manager House of Lords - Meeting housing demand - Built Environment Committee Accessibility Email alerts RSS feeds Contact us Home Parliamentary business MPs, Lords & offices About Parliament Get involved Visiting Education House of Commons House of Lords What's on Bills & legislation Committees Publications & records Parliament TV News Topics Meeting housing demand Contents Chapter 6: Local planning authorities

Local government plays an instrumental role in efforts to meet housing demand, including through allocating sites in local plans, negotiating social housing and infrastructure contributions, and engaging with local communities. Local planning authorities hold significant discretion over the planning system. We heard that local planning authorities are under-resourced and unable to undertake the skilled planning required to meet the Government’s housing targets. This chapter considers these resource shortages, issues relating to setting housing targets for local areas, and how to address slow build out rates. Capacity and resourcing

We heard that local planning authorities have a lack of skills, capacity and resourcing in their planning departments, which has led to delays, poor decision-making and greater reliance on the appeals process. Government spending on planning fell from £1.13 billion in 2010/11 to £961 million in 2017/18, a reduction of 14.6%. 244 More than half of this is recouped in income (mostly fees), which means that total net public spending on planning is now £400 million per year. 245 In practice, this has reduced councils’ abilities to undergo the complex negotiations required to agree a local plan, process applications effectively and in good time, and negotiate Section 106 Agreements and other matters with developers. Grant Butterworth characterised these shortages as a “crisis” in local planning authorities. 246 The Home Builders Federation said, “Chronic under-resourcing and under-staffing in local planning authorities is leading to discrepancies, administrative errors and additional delays for developers”. 247 McCarthy Stone said “The average time taken to determine our applications from validation is about 46 weeks, some 33 weeks more than the statutory 13-week period for determination”. 248

Research by the RTPI estimated that an additional £500 million of spending on local authority planning departments would be needed over the next four years to address significant delays. 249 In their report on the August 2020 Planning White Paper, the Commons Levelling Up, Housing and Communities Committee supported this recommendation. 250 Analysis by the RTPI suggests that there could be a good return on such spending, as “local authorities can generate income but they need authority, expertise and capacity to do so (for example local authority led development … land value capture, raised planning fees).” 251

Witnesses set out how increased funding for local planning authorities could be resourced. We heard that planning fees do not recover the costs of running the process, requiring an additional £180 million of public subsidy. 252 Councillor Dr Ed Turner said that in other areas of local authority activity councils “retain the ring-fenced budget, you are not allowed to cross-subsidise other services, but you charge what the service costs.” He said, given the “acuteness of the situation”, increasing planning fees so they cover the costs of the system “would be the right way to enable us to get in some of the expertise we need, at least in the medium and longer term.” 253 Berkeley Homes suggested that some Help to Buy funding could be reallocated to local authority planning resources, which would do more to ensure that sites are built out. 254

The Minister said that the Government would “look at the resourcing that local planning authorities have to ensure they have the wherewithal to execute [their] responsibilities”. 255

There is an evolving crisis: local planning authorities do not have sufficient financial resources, and in many cases do not have the skilled personnel, to deliver a quality service in a reasonable timeframe. The Government needs to increase resourcing for local planning authorities consistently and for the long term. Additional resources should be targeted at improving local plan-making and processing planning applications more quickly. This should include through increasing planning fees to help cover the costs of the system. Housing targets and the ‘standard method’

Local plans include an assessment of housing need in each district, which is based on a ‘standard method’ for calculating housing need set by central government. The standardised housing need assessments are based on projected household growth (2014 projections), an affordability adjustment for the area and a cap. Prior to the introduction of the National Planning Policy Framework, targets were based on projected household growth only.

The Government proposed a new formula for assessing housing need in August 2020, which would change the baseline measure of household projections, amend the affordability adjustment and remove the cap. 256 There was significant opposition to these changes on the ground that they could promote more development on greenfield land, rather than in urban areas. 257 The Government backtracked on these proposals and instead introduced the ‘new standard method’ which increased the existing housing targets by 35% in the 20 largest towns and cities in England. 258

The Minister told us that the 35% uplift was designed to ensure a focus on brownfield development: “We think it is a sensible target and we will focus on brownfield and provide the toolkits to local authorities to remediate brownfield sites.” 259 We discuss Government support for brownfield development in Chapter 5.

We heard concerns from councils about their ability to meet the new housing targets. Grant Butterworth said in Leicester, due to the limited number of sites in the city district, the council had agreed with neighbouring districts to accommodate their unmet need of around 7,000 homes (of a total housing need assessment of 30,000 homes). However, with the new assessment, the figure for unmet need is now 18,000 homes. He predicted that the 35% uplift is “going to cause huge issues” because the “pressure on the districts around the large cities is going to grow and grow.” 260 The West of England Combined Authority wrote that “A further potential consequence of the Bristol 35% uplift will be to make the community acceptance of the housing numbers in the Spatial Development Strategy (and Local Plans) more challenging, particularly if, as anticipated, some of this growth uplift is distributed beyond the Bristol boundary.” 261

Like other aspects of the housing challenge, a standardised approach to setting housing targets has a different effect in the north of England and areas with lower land values and less pressure on affordability. Lancashire County Council argued that the baseline calculations under the standard method, even with the update, “produce significantly increased housing numbers in the south and south east of the country, whilst setting low and decreasing baseline numbers in the north.” 262 In these areas, the councils’ local plan targets are higher than those set by central government—for example in Blackburn with Darwen the local plan has identified 625 sites but the new standard methodology calculated a need for only 154 sites. 263 Lancashire County Council said that this can make it harder to gain public approval of local plans and does not match the Government’s ‘levelling up’ agenda. 264 Figure 12 shows that overall, housing completions are more likely to outperform needs assessments in the North and North East than the South East and London. 265 Figure 12: Overall completions relative to housing need or number of homes planned for Source: Written evidence from Home Builders Federation ( UKH0044 )

Currently, these assessments are based on household formation figures from 2014. Especially given the potential impact of Brexit and the COVID-19 pandemic, it is unlikely that these 2014 estimates will still be valid by the time the homes are built. The Minister told us that the ONS is due to review its household formation estimates in 2023 and “there may be an opportunity then to look at the numbers again.” 266 This leaves local planning authorities with more uncertainty.

W e heard that the 35% uplift in housing targets in the 20 largest urban areas has affected the delivery of local plans and risks backlash from local communities. The Government should consider options to update the calculation of housing targets as soon as possible, to provide certainty to councils. Build out and delivery

On many sites with planning permission, particularly large sites, homes take a significant time to build out. Research by Litchfields found that the average time from outline decision notice to first dwelling completions on sites of 500+ homes was around three years. 267 Figure 13 shows the stages for delivery of large, strategic housing sites. 268

There was some disagreement among witnesses about the causes of these delays: developers told us that planning processes were too slow and councils felt they did not have the tools to encourage developers to deliver homes once they had been given planning permission. The Local Government Association emphasised that 9 out of 10 planning permissions are approved and there are more than 1.1 million homes which have been granted planning permission in England in the last decade but are yet to be built. 269 Figure 13: Timeline for the delivery of strategic housing sites Source: Lichfields, Start to Finish: What factors affect the build-out rates of large scale housing sites?

Sir Oliver Letwin’s review of build out, published in 2018, considered the significant gap in many developments between housing completions and the amount of land allocated in areas of high housing demand. The review concluded that there was “no evidence” that major developers were carrying out ‘landbanking’—i.e. buying undeveloped land purely as an investment with no specific plans for its development. As we heard on our visit to the St Modwen Kingsgrove development, developers are not going to build homes faster than they can sell them. 270 The recommendations in Sir Oliver Letwin’s report included proposals for new planning rules that would require developers to offer a range of different property types on sites with more than 1,500 homes. Other recommendations included a new National Expert Committee to advise councils, incentives for housebuilders and more powers for councils to undertake their own developments.

Some councils which had an up-to-date plan thought they were unfairly penalised when they did not meet housing targets, as they did not have the appropriate tools to incentivise the build out of homes that have been approved. The Government monitors local authorities’ performance against housing targets over a three-year period through the Housing Delivery Test. Authorities that fall below 75% of their target are subject to the ‘Presumption in Favour of Sustainable Development’, which tilts the balance towards granting development. The Minister told us that the aim of the Housing Delivery Test is to “generate transparency about how local authorities are doing in encouraging development and make sure they are engaging with land promoters, developers and communities to get the right number of properties in their communities built.” 271 Cllr Dr Ed Turner said “if you do not have the mechanisms to ensure that build-out can happen, that is rather unfair. It is perfectly reasonable to hold local authorities to account when it comes to allocating land in a plan”, but it was not reasonable to hold the “local authority to account where units are not being built out, where you do not have any tools, or a very limited range of tools, to ensure that the development comes forward”. 272

The Local Government Association set out proposals to help councils encourage faster build out rates: a ‘stalled sites’ council tax premium for developers for sites that are not built out after three years a streamlined compulsory purchase process to acquire (at pre-uplift value) stalled sites or sites where developers do not build out to agreed rates powers to direct diversification of housing on sites.

On this issue, the Commons Levelling Up, Housing and Communities Committee recommended the implementation of clear timelines for build out (18 months for commencement and a further 18 months to complete the development, subject to size and complexity) and give powers to local planning authorities to levy council tax on undeveloped sites. The Commons Levelling Up, Housing and Communities Committee also recommended that the Government should produce a strategy for increasing the extent of multi-tenure construction on large sites in line with the 2018 Letwin review and explore the greater use of Development Corporations.

We heard evidence of the limited options available for local authorities to encourage developers to build homes on sites more quickly when they have planning permission. To address this problem, the Government must give local planning authorities better tools to encourage build out, particularly on large strategic sites. We note proposals to increase local planning authorities’ leverage, including setting a three-year time limit, and encourage the Government to consider this option. 244 National Audit Office and Ministry of Housing, Communities & Local Government, Planning for new homes , 8 February 2019 (Session 2017–19, HC 1923): https://www.nao.org.uk/wp-content/uploads/2019/02/ Planning-for-new-homes.pdf [accessed 25 November 2021] 245 Written evidence from Royal Town Planning Institute ( UKH0045 ) 246 Q 72 (Grant Butterworth, Leicester City Council) 247 Written evidence from Home Builders Federation ( UKH0044 ) 248 Written evidence from McCarthy Stone ( UKH0040 ) 249 Written evidence from the Royal Town Planning Institute ( UKH0045 ) 250 Housing, Communities and Local Government Committee , The future of the planning system in England (First Report, Session 2021–22, HC 38) 251 Written evidence from the Royal Town Planning Institute ( UKH0045 ) 252 Written evidence from the Local Government Association ( UKH0043 ) 253 Q 72 (Cllr Dr Ed Turner ) 254 Written evidence from Berkeley Homes ( UKH0070 ) 255 Q 101 (Rt Hon. Christopher Pincher MP) 256 Ministry of Housing, Communities and Local Government, ‘Consultation outcome: Government response to the local housing need proposals in ‘Changes to the current planning system’’ (1 April 2021): https://www.gov.uk/government/consultations/changes-to- the-current-planning-system/outcome/government-response-to-the-local- housing-need-proposals-in-changes-to-the-current-planning-system [accessed 25 November 2021] 257 Ibid. 258 Department for Levelling Up, Housing and Communities and Ministry of Housing, Communities and Local Government, ‘Housing and economic needs assessment’ (16 December 2020): https://www.gov.uk/guidance/housing-and-economic-development-needs-assessments [accessed 25 November 2021] 259 Q 101 (Rt Hon. Christopher Pincher MP) 260 Q 67 (Grant Butterworth) 261 Written evidence from West of England Combined Authority ( UKH0027 ) 262 Written evidence from Lancashire County Council ( UKH0108 ) 263 Ibid. 264 Ibid. 265 Written evidence from Home Builders Federation ( UKH0044 ) 266 Q 101 (Rt Hon. Christopher Pincher MP) 267 Lichfields, Start to Finish: What factors affect the build-out rates of large scale housing sites? (February 2020): https://lichfields.uk/media/5779/start-to-finish _what-factors-affect-the-build-out-rates-of-large-scale -housing-sites.pdf [accessed 25 November 2021] 268 Ibid. 269 Written evidence from the Local Government Association ( UKH0043 ) 270 See Appendix 5 271 Q 98 (Rt Hon. Christopher Pincher MP) 272 Q 68 < Back Next > © Parliamentary copyright 2021 A-Z index Glossary Contact us Freedom of Information Jobs Using this website Copyright Privacy notice Cookie policy Cookie Manager House of Lords - Meeting housing demand - Built Environment Committee Accessibility Email alerts RSS feeds Contact us Home Parliamentary business MPs, Lords & offices About Parliament Get involved Visiting Education House of Commons House of Lords What's on Bills & legislation Committees Publications & records Parliament TV News Topics Meeting housing demand Contents Chapter 7: Skills shortages

Skills shortages affect a range of sectors relating to the delivery of new homes, including construction, design, planning and green skills. While there are wider structural issues with the labour market, shortages in housebuilding sectors are particularly severe. This chapter discusses where skills shortages are most acute; the effectiveness of various government initiatives to meet skills gaps; future demand for skills; and how to incentivise more young people to join the workforce and retain existing members of the workforce through career development and lifelong learning. Construction

The construction sector employs over 10% of the country’s workforce. 273 In 2019, the sector contributed £117 billion to the UK economy, representing 6% of the UK’s total economic output, and accounted for 300,000 businesses, which was 13% of the UK’s total. 274 The Government’s Employer Skills Survey in 2019 found that skills shortages accounted for 36% of all construction vacancies and 48% of all manufacturing and skilled trades vacancies. 275 An ageing workforce contributes to this: 35% of the workforce are over 50. Only 20% of workers are aged below 30, a 2.5% reduction from five years ago. 276 This will require the sector to recruit an additional 217,000 workers, or more than 43,000 per year. 277 The types of jobs needed span a range of manual trades, as well as including emerging jobs in digital and manufacturing. In 2019, Build UK identified the roles with the most severe shortages as: construction and building trades supervisors; general labourers; quantity surveyors; construction project managers; bricklayers; civil engineers; and carpenters and joiners. 278 The figures of those working in the construction industry do not include those employed in factories. 279

The 2016 Farmer review, Modernise or Die , examined labour force and skills issues in the construction sector. 280 It identified major structural problems including manpower shortage, the cyclical nature of the industry, a widening skills gap, a poor reputation, inadequate training and a lack of policy and industry oversight. The review’s findings informed the 2018 Construction Sector Deal, part of the Government’s Industrial Strategy. This sought to improve the productivity of construction through measures including investing in modern methods of housebuilding, increasing the number of apprenticeships and creating a National Retraining Scheme for the workforce to reskill.

Of ficial figures for the construction industry should include those employed in factories related to construction. This would more accurately reflect productivity levels in the industry, particularly as the sector moves towards modern methods of construction. Perceptions

We heard about the need for the sector to promote the advantages of a career in construction. Mark Enzer, Head of the National Twin Programme at the Centre for a Digital Built Britain, and Chief Technical Officer at Mott MacDonald, thought that the industry needs to harness a new narrative: “to show how every job that is contributing to the built environment is contributing to better outcomes for people, society and nature. It is something that is worth being part of.” 281

Greater awareness of the financial rewards of a career in a trade might help with recruitment. The Centre for Vocational Education Research found in 2020 that men with a higher technical (level 4) qualification earn on average £5,100 more at age 30 (£37,000) than those with a degree (level 6), at £31,900. 282 Surveys of those in the industry suggest that 65% of respondents said that good pay was an appealing aspect of working in construction and 74% were attracted by the physical, outdoor nature of the work and the fact that it is not office-based. 283

We heard of innovative digital projects designed to attract young people into construction. The Chartered Institute of Building devised ‘Craft your future’, a construction game for 12- to 14-year-olds, which takes place in Minecraft and presents users with a variety of construction problems. 284 Emphasising that construction is a sector that will rely on advanced digital skills in the future may help to attract children with an interest in computer science and other technical subjects, who may not previously have considered construction. Construction Industry Training Board

The Construction Sector Deal committed to reforming the Construction Industry Training Board (CITB) so that it is “more strategic and focussed on future skills needs”. The CITB is funded by a levy paid by all construction employers, which is intended to support training, develop qualifications, offer apprenticeships and promote the industry as a career. Consultation on Levy Proposals for 2022–25 for registered employers took place in Spring 2021, a year later than planned due to the pandemic. Only 0.4% of employers registered with CITB responded to the proposals. 285

Following a Government review in 2017, the CITB no longer provides training directly. 286 Its current responsibilities include providing grants for apprenticeships; hosting the industry’s career portal, ‘Go Construct’; hosting Onsite Experience Hubs, which prepare new entrants from different professional backgrounds to work in construction; and developing Occupational Traineeships with Further Education Colleges to prepare participants for work and apprenticeships.

The CITB has attracted criticism for failing to meet skills shortages. In October 2021, the National Federation of Builders published a paper calling for a fundamental restructuring of the body, including stripping CITB of its levy-raising powers. 287 The paper found that industry confidence in the CITB as “credible and reputable, adding value to the industry” in 2020 was 26%, down from 35% in 2019. It concluded that the CITB’s responsibilities should be redeployed to existing and new organisations, and the existing company put to competitive tender to ensure a focus on accountability and value for money. The National Federation of Builders proposed setting up a new national construction careers body that would be sponsored by the Department for Education. 288

Th e Construction Industry Training Board has not addressed construction skills shortages in an effective manner over many years. Reform is needed to address this issue. The Government should consider how the Construction Industry Training Board can upgrade its training offer for construction professionals. Failure to recruit and train the skills required to build new homes should cause the Government to consider potential alternative models for a national construction careers body. Trade skills shortages

Firms are struggling to recruit electricians, roofers, bricklayers, plasterers, carpenters, plumbers and safety inspectors. According to the ONS, there were 48,000 UK construction vacancies between April and October 2021—the most vacancies in 20 years. This contrasts with the pre-pandemic level of 27,000 between December 2019 and February 2020. 289 In the second quarter of 2021, 76% of roofing contractors reported experiencing difficulties with recruitment. 290

SMEs are particularly affected by trades shortages; the Federation of Master Builders’ quarterly State of Trade Survey identified the following gaps during the second quarter of 2021: 53% of SME builders were struggling to hire carpenters/joiners 47% were struggling to hire bricklayers 36% were struggling to hire general labourers 31% were struggling to hire plasterers. 291 Career progression and employment models

A lack of career progression in construction was raised as a major barrier to staff retention in the workforce. Table 5 shows how earnings tend to plateau for skilled construction and trades roles after 20 years in the industry. Table 5: Hourly salary rates for skilled construction and building trades Age range Median hourly rate* (£) 18–21 8.20 22–29 11.73 30–39 13.41 40–49 13.32 50–59 13.59 60+ 13.64 *The median hourly rate is likely to vary around the country. This table illustrates the tendency for earnings to plateau. Source: Written evidence from Construction Industry Training Board ( UKH0103 )

The construction sector is dominated by self-employed contractors. Self-employed workers comprise nearly 40% of the construction workforce, as opposed to under 15% across all industries. 292 Women are more likely than men to work as employees and less likely to be self-employed: in 2021, 88% of women in the construction sector were employees, compared with 80% of men. 293 The Construction Leadership Council’s Industry Skills Plan recommends increasing the rate of direct employment in the construction sector to modernise and improve skills, concluding that it is “an enabler of apprenticeships, digital upskilling and competence”. 294 On the other hand, this can be difficult for SMEs who may need to draw on a more flexible set of skills throughout a project. Off-payroll working rules, known as IR-35, determine the tax contributions for self-employed workers. 295 These rules were altered in April 2021 and may also have an impact on the ability to hire skilled resources on building sites. 296

We heard that most developers tend to bring in trade-specific subcontractors on a project-by-project basis, creating a cycle of high levels of turnover, with ‘layoffs’ taking place between projects. There is little incentive for companies to invest in and train their workforce under this model. LDS confirmed to us: “the business model for most SMEs is to acquire staff or sub-contractors on a site-by-site basis”. 297 Shelter told us that: “Insolvencies and drops in available work mean many … workers lose employment and/or leave the sector to train in another industry.” 298 While some smaller housebuilders take on their own staff, as we learned at our site visit to St Modwen Properties, this remains a rarity.

Several witnesses called for appropriate mandatory continued professional development to enhance the skills of those already in the workforce. 299 This ‘lifelong learning’ will be necessary to keep the workforce up to date with the skills it needs. We heard that this would raise standards and improve the safety-critical aspects of construction. Some larger housebuilders provide continued development and training. Persimmon’s training includes accreditation programmes for site managers and contracts managers; full IT training for employees who regularly use IT applications; regular sales and customer service training for relevant staff; and course/exam fees, study leave and day release for recognised professional qualifications. 300 Diversity

The construction industry is male dominated: only around 4% of trades roles are held by women. 301 Only 8% of all construction apprenticeship starts are undertaken by women. 302 Representation of people from a Black, Asian and minority ethnic background (BAME) is also poor: only around 5% of the construction workforce in the UK identify as BAME; this drops to 1% among senior industry roles. 303 It will be necessary to attract people from a wider, more diverse talent pool to address skills shortages in the construction industry.