Barker Housing Supply Review

Government should establish a market affordability goal. This goal should be incorporated into the Public Service Agreement framework to reflect housing as a national priority.

Local authorities should charge more for second homes to improve efficiency of the use of stock.

Further research should be undertaken to improve the evidence base for housing policies, for example on the relationship between housing, economic growth and deprivation at a micro level.

Government should establish a review of the housing market to report in no more than three years time. The purpose of this review would be:
• To measure Government’s progress in implementing the recommendations set out in this Report; and
• To assess progress towards achieving a more flexible housing market and to identify any further obstacles.
This assessment might become a regular review of the UK housing market.
To assist any future reviews and to help improve the evidence base for assessing the effects of policy, Government should consider a range of data improvements to enhance understanding of the housing market, the effect of policy changes and planning processes.

Each region, through the Regional Planning Body (RPB) should set its own target to improve market affordability. Taken together, the regional targets should be consistent with the Government target (Recommendation 1), although individual regions will differ. There is also merit in RPBs specifying sub regional targets which may include floors and ceilings.
Indicative net housing targets for the region and local authorities should be produced, by the Regional Planning Executive (Recommendation 6), in order to aim to achieve this market affordability target. Government should provide regions with clear guidance on the methodology to achieve this. These housing targets would be set over a 5-10 year period as a trajectory. However, the targets and trajectory would not be fixed and would vary as a result of increased flexibility at the local authority level (Recommendation 9). They would also be revised in either direction if monitoring of the affordability target demonstrated that the region was not moving towards the desired outcome.

The Regional Planning Bodies and Regional Housing Boards should be merged to create a single body responsible for managing regional housing markets, delivering the region’s affordability target and advising on distributing resources for social and sub market housing. The Regional Planning and Housing Bodies (RPHBs) would continue to be responsible for the Regional Spatial Strategy and the integration of housing with other regional functions.
These merged bodies should be supported by a strong and independent Regional Planning Executive in each region which would be the expert analytical body responsible for:
• providing public advice to the RPHB on housing numbers and allocation of housing within the region in order to aim to achieve the region’s market affordability target;
• advising on other technical aspects of the Regional Spatial Strategy (RSS) and investment in social and sub market housing;
• identifying strategic growth areas and the need for special purpose vehicles;
• creating strong links with key stakeholders;
• monitoring the regional housing market and local authority performance on both completions and responsiveness to the market; and
• signalling the need for a review of the RSS where the market was not functioning well and the affordability target was unlikely to be met.
The regional planning executive would require new appointments, including a chief executive appointed through an independent public appointments process.

Government should set out guidance, accompanying a revised Planning Policy Guidance 3 (Housing) (PPG 3), for determining the scale and allocation of housing provision at the regional level to ensure that methodologies reflect a full consideration of the economic, social and environmental costs and benefits of housing at the regional and local level. This guidance should be based on the following principles:
• Transparency over the calculations, assumptions and policies that determine the scale and distribution of housing numbers, so that the trade offs between different outcomes are made explicit.
• Consistency in the approach of different regions to the use of information and to the weight given to different variables, in particular, consistency in the method used to translate the region’s affordability target into indicative housing targets across the region.
• Application of market information and signals, including house prices and house price growth and market affordability in decisions made about the scale and distribution of housing targets.
• Decisions about the scale and distribution of housing numbers that over-ride market information, should be based on sound evidence and should set out the costs associated with the decision.
• Decisions about the scale and distribution of housing numbers should be informed by sub-regional and Local Housing Assessments (which should include analysis of house price growth and affordability, as well as local housing need).

Government should set out guidance on the composition of Regional Planning and Housing Bodies. This guidance should include the following:
• Guidance on training and skills requirements for members of the Regional Planning and Housing Body to enable them to act in a regional (and supra-regional) capacity.
• Guidance on the optimal make up of the non-elected component. Although the ideal make up will differ from region to region, Government should specify the organisations and agencies that should be represented. The Review recommends that organisations and agencies responsible for planning and funding infrastructure and services should be on the Regional Planning and Housing Bodies.

Local plans should be more realistic in their initial allocation of land, and more flexible at bringing forward additional land for development. When allocating land sufficient to meet their targets for additional dwellings, local authorities should allow for the proportion of sites that prove undevelopable, often as a result of site-specific problems. In drawing up their plans, local authorities should identify their own historic shortfall and allocate an equivalent amount of land to fill this implementation gap.
Local authorities should allocate a further buffer of land to improve their plan’s responsiveness to changes in demand. Additional land for development would be brought forward from this buffer when there was evidence of local housing market disequilibrium. It would be inappropriate to be unduly prescriptive at this stage about the appropriate size of this buffer, but it seems reasonable to assume that an additional 20-40 per cent of land sufficient to meet an authority’s housing target would provide enough headroom to respond to signals of market disequilibrium.
Developers should be able to submit applications for any site allocated in the plan, subject to the conditions of the revised sequential test being met. Once sufficient land is being developed to meet an authority’s housing target, then it could, as now, refuse additional applications. However, if predefined indicators of housing market disequilibrium were triggered then authorities would not be able to refuse additional applications on the grounds that their housing targets had been met. These triggers should include:
• worsening market affordability for newly-forming households and/or lowest quartile earners;
• local house price increases relative to the regional average;
• an increasing premium in land prices for residential use over other uses;
• employment growth significantly outstripping housing growth; and
• rising numbers of housing transactions.
The new Regional Planning Executives should play a central role in developing an evidence base and in advising on setting these triggers. Triggers should be sensitive to the differing circumstances of housing markets across the country, including those parts of the country where low demand for housing is leading to problems of dereliction.
Government should revise PPG 3 to set out how this process would work.

Planning guidance should be amended to advise regional and local planning authorities on assessing the value of land to society. This would enable planners to take account of the relative values that society places on different types of land use when allocating land in local development frameworks, recognising the inevitable difficulties of interpretation of this data.
The general principle of containing urban sprawl through greenbelt designation should be preserved. However, planning authorities should show greater flexibility in using their existing powers to change greenbelt designations where this would avoid perverse environmental impacts elsewhere. Any change in the designation of greenbelt land should require a strong evidence base, taking full account of the value that society attaches to different types of land use in an area.

Housing developments differ in their nature. It is not appropriate to apply the same planning process to all developments. The Government should introduce two additional routes for developers to choose between, when applying for planning permission:
• Outline only route – applicants would put forward an outline application which contained more detail than is currently required. Local councillors would grant outline permission, but the granting of outline permission would mark the end of both the formal consultation process and of councillors’ involvement. Any outstanding issues or reserved matters would be dealt with by planning officers.
• Design code route – applicants would put forward a proposal for development supported by a design code. Local councillors would satisfy themselves that the code had been drawn up in accordance with planning guidance on both design and community consultation and, if so, would adopt a Local Development Order (LDO) to cover the identified site. This would automatically waive the need for permission to be granted. Planning officers would then monitor to ensure that the conditions set out in the code were met.
To achieve these changes, PPG3 should be revised to:
• outline the choice of routes available to developers and the minimum requirements in each case;
• indicate that councillors should delegate the discharge of certain functions to officials;
• set out the principles which urban design codes should meet, including clear guidance on community consultation; and
• provide a mechanism for the use of LDOs to fast-track applications supported by a design code.

Government should take a rigorous approach to revising PPG3. Future revisions should be grounded in an evidence base and should be subject to scrutiny from a panel of housing and planning stakeholders, including the development industry. Restrictions on development should have an identifiable and evidenced benefit that outweighs their costs.

Government should allow Regional Spatial Strategies to deviate from PPG3 where there is clear evidence to support a different approach within the region. While the agreement of the Secretary of State should be essential, it should only be possible for Government to reject an application to deviate on the grounds that the evidence is not strong enough.

PPG3 should be revised to require local planning authorities to be realistic in considering whether sites are available, suitable and viable. Any site which is not available, suitable and viable should be disregarded for the purposes of the sequential test.

Government should assess whether consideration of appeals levels in the distribution of Planning Delivery Grant (PDG) could help correct the potential perverse incentive for local planning authorities to reject planning applications in order to meet their performance targets. In future, the PDG should take greater account of outcomes, as well as processes.

In order to allow local planning authorities to focus on key development decisions, resources need to be released or strengthened. This could be achieved in a number of ways:
• Government should review the scope to increase the range of permitted development rights for householder applications, whereby certain types of development are allowed to proceed without planning permission.
• In the meantime, local authorities should bear in mind their power to vary these rights, once the Planning Bill has become law, through establishing Local Development Orders.
• Government should also consider increasing planning fees as an additional means of increasing resources.
• When dealing with large-scale developments, local planning authorities should follow existing best practice and form dedicated project teams, bringing together key public sector stakeholders.
• Where it is not practicable for authorities to develop the capacity necessary to manage large-scale developments, they should have access to additional planning and legal expertise or resources. This could be achieved through the Planning Advisory Service developing a team of ‘trouble-shooters’.

Central government funding settlements for local authorities should be made more forward-looking. The Government should include in its calculations of Formula Spending Shares a variable to reflect expected housing growth in an area, drawing on housing targets set by the reformed regional planning process.

Building on the broadly positive response to its Local Authority Business Growth Incentive proposal, the Government should consider ways of incentivising local authorities to meet housing growth targets.
One way would be to disregard, for a period of possibly up to three years, some or all of the council tax receipts generated by new housing from the calculation of a local authority’s grant allocation. This additional revenue should not be ring-fenced.

All Government Departments and agencies should assess the demands implied by the Government’s housing targets in their spatial planning and funding decisions. Departments’ contributions to meeting ODPM’s housing targets should be recognised within their own priorities, including Public Service Agreements.
The Ministerial Committee on housing and growth issues across the wider South East (MISC22), chaired by the Prime Minister, should be expanded to cover housing delivery in general, and be used to facilitate cross-Departmental co-operation.
Those Departments with responsibility for allocating funds for infrastructure development, such as the Department for Transport, the Department of Health and the Department for Education and Skills, should take account of planned housing and population growth in making spatial allocations.

To minimise delays to development, infrastructure providers, such as the Highways Agency and water companies, should be involved from an early stage in developing both the regional spatial strategy and the local development plan:
• As part of the work involved in drawing up the local and regional plan, providers should be as clear as possible about the sort of infrastructure improvements that would be required. Having been involved in the drawing up of the local and regional plan, providers should reflect the outcome in their operations as far as possible. They should not seek to block applications for planning permissions compliant with local and regional plans, unless compelling changes in the situation – for example, a failure to agree a Section 278 agreement – justify a different approach.
• An infrastructure provider’s objection to a development should only be allowed to block the granting of planning permission if the benefits of the new development are clearly outweighed by the costs in infrastructure terms. Where infrastructure providers, such as the Highways Agency, have powers to direct refusal of planning permission, they should only exercise their powers in this way. Government should commit itself to only using these powers under the same restraint.
• To help mitigate the impact of infrastructure costs on developers’ cashflow, the Highways Agency should allow developers to begin building houses in parallel to road construction, even where the implications for congestion are such as to rule out allowing occupation until construction is complete.
• Ofgem and Ofwat should develop and publish guidance on establishing a fair price for developer charges for extensions or alterations to energy, water and sewerage networks required for new housing development. Where feasible, this should be achieved through promoting competition. In the absence of effective competition, water and energy network providers should advertise and exhibit a development-servicing plan, describing the area covered and assets used, and describing the basis on which a developer charge has been calculated.

English Partnerships (EP) should have a lead role in delivering development through partnering with public and private sector bodies in assembling complex sites, masterplanning, remediating land and developing supporting infrastructure. At the same time, Government should provide greater certainty as to the principles by which EP would, or would not, intervene, so as to avoid crowding out private sector activity, or stunting the development of new markets.
Devolved administrations may wish to assess the roles of their own housing and regeneration agencies in the context of this Review’s recommendations.

A Community Infrastructure Fund (CIF) of £100-200 million should be established within ODPM. Regions should be encouraged to submit bids for support towards the up-front costs of medium-sized utilities and transport infrastructure schemes, which would bring forward otherwise unviable development. Bids for support towards gap funding schemes, such as the ringmaster approach for transport infrastructure, should be particularly welcome. In these instances, Government should seek to operate clawback mechanisms where this is practicable.
To enable local and regional authorities to maximise the impact of the CIF by leveraging in private sector capital, ODPM should publish a delivering development toolkit to provide guidance for local and regional authorities seeking to access the fund. Drawing on experience in the growth areas and elsewhere, this would provide practical guidance on:
• models for partnership between the public and private sector;
• ways in which the public sector input into new developments can be co-ordinated; and
• options for recovering the up-front costs of gap funding from subsequent developments.

Central and regional government should be more strategic in its use of area-based special purpose vehicles to deliver housing development. Where problems of land acquisition, servicing and infrastructure provision are identified through the regional planning process, Government should engage with English Partnerships to identify the most appropriate vehicle for delivering development. Greater use should be made of both Urban Development Corporations and New Towns, taking advantage of their ability to deliver both additional housing and the infrastructure necessary to support it.
New guidance on the circumstances to which different vehicles are most suited, and on using compulsory purchase powers, should be included in the proposed delivering development toolkit.

Section 106 should be reformed to increase the certainty surrounding the process and to reduce negotiation costs for both local authorities and developers.
If the Government accepts the recommendations outlined in Chapter 4 concerning the capture of development gains:
• Section 106 should be ‘scaled back’ to the aim of direct impact mitigation and should not allow local authorities to extract development gain over and above this, except as indicated below. ODPM should issue guidance, or new legislation, to this end.
• Section 106 should retain its current affordable and/or social housing requirements as set out in Circular 6/98, and other specific regional guidance.
• Local authorities should receive a direct share of the development gain generated by the Planning-gain Supplement in their area, to compensate for a reduced Section 106. Local authorities should be free to spend this money as they see fit. This share should at least broadly equal estimates of the amount local authorities are currently able to extract from Section 106 agreements.
If the Government decides to maintain the current fiscal framework as it is, then it should press ahead with the Section 106 reforms, on which it has recently consulted, that aim to introduce an optional planning charge in place of a negotiated agreement. However, this would be second best and leaves open the possibility of prolonged and costly Section 106 negotiations for large developments.

Government should consider the extension of the contaminated land tax credit and grant scheme to land that has lain derelict for a certain period of time. This should be done on the basis that extra public money levered into the market through such a scheme would encourage genuine new investment in brownfield remediation and not simply subsidise development that would take place in any case.

Government should use tax measures to extract some of the windfall gain that accrues to landowners from the sale of their land for residential development.
Government should impose a Planning-gain Supplement on the granting of planning permission so that landowner development gains form a larger part of the benefits of development.
The following principles might be considered:
• Information would need to be gathered as to the value of land proposed for development in each local authority. Sources of data could include actual transactions and/or Valuation Office Agency estimates as to the land prices in various local authority areas.
• Government would then set a tax rate on these values. This tax should not be set so high as to discourage development, but at a rate that at least covers the estimated local authority gain from Section 106 developer contributions and provides additional resources to boost housing supply.
• The granting of residential planning permission would be contingent on the payment of the Planning-gain Supplement of the proposed development.
• Government may want to consider the operation of a (substantially) lower rate for housing development brownfield land, and the possibility of varying rates in other circumstances, e.g. for areas where there are particular housing growth strategies, or where other social or environmental costs may arise.
• A proportion of the revenue generated from the granting of planning permissions in local authorities should be given directly to local authorities. Government should also amend the operation of Section 106 planning obligations, as set out elsewhere in Chapter 3, to take account of this new charge.
• The Government may want to consider allowing developers to pay their Planning-gain Supplement in instalments over reasonable time periods so as to ensure that housebuilder cash flow pressures are sufficiently accounted for.
The introduction of a tax would need to be accompanied by transitional measures to ameliorate the impact on developers already engaged in land sales contracts that were drawn up before this charge was introduced, or for those who hold large amounts of land already purchased, but where planning permission has yet to be secured.

The provision of subsidised housing should be increased. At least 17,000 additional houses are required each year compared with current provision to keep up with demographic trends. Addressing the backlog of housing need would raise this to 23,000 per annum (assuming substitution from sub-market to market housing, as market affordability improves).
Based upon current costs of provision, additional investment building-up to £1.2 to £1.6 billion per annum would be needed to support this expansion, not all of which will be from Government.

Government should explore the scope to achieve both greater RSL efficiency and higher funding through debt finance, to increase the level of housing through the most cost effective means.

Government should explore moving to an alternative scheme to Right to Buy and Right to Acquire, which is provided at lower cost and enables greater recycling of revenues to increase the social housing stock.

Government should deliver its proposals to promote greater interaction between institutional investors and the residential property market, through the introduction of tax transparent property investment vehicles.

PPG 3 should require local planning authorities to have regard to the impact on competition when allocating sites in their Local Development Frameworks. For example, if there is a choice between allocating a number of small sites or a single large site for development, competition considerations would favour a larger number of smaller sites.
When granting planning permission on large sites, local planning authorities should discuss build-out rates. To encourage faster build-out, planning authorities should use their discretion in setting time limits on planning permissions and seek to agree an expected build-out rate, as a condition of planning permission.
If the rate of build-out has not increased appreciably by 2007, subject to conditions in the housing market, Government should review all available policy options to address this issue.

The housebuilding industry must demonstrate increased levels of customer satisfaction:
• The House Builders Federation should develop a strategy to increase the proportion of house buyers who would recommend their housebuilder from 46 per cent to at least 75 per cent by 2007. Over the same period, levels of customer satisfaction with service quality should rise from 65 per cent to at least 85 per cent.
• The House Builders Federation should develop a code of conduct by the end of 2004 for new house sales in full compliance with the framework provided by the Office of Fair Trading’s Consumer Codes Approval Scheme. This code of conduct should require fair contracts complying with the Unfair Terms in Consumer Contracts Regulations 1999.
If progress is unsatisfactory, or if consumer satisfaction levels do not rise substantially in the next three years, the Office of Fair Trading should conduct a wide-ranging review of whether the market for new housing is working well for consumers.

The House Builders Federation, in conjunction with National House-Building Council (NHBC), ConstructionSkills and other interested parties, should develop a strategy to address barriers to modern methods of construction. This strategy should be developed to fit alongside existing initiatives, working closely with Government to identify further measures that can be taken. A range of approaches should be explored, in particular actions by industry and changes to NHBC policy and practice, as well as representations to Government on areas such as changes to Building Regulations.

The Construction Industry Training Board (CITB)-ConstructionSkills and the House Builders Federation should work together to develop a strategy for substantially increasing the take-up of apprenticeships from the current level of three apprentices per 100 workers, to bring the UK to the levels of leading international comparators, such as the Netherlands and Germany. The development of this strategy should also explore whether the appropriate number and range of courses exist, and whether housebuilders are investing sufficiently in their own workforce training, as well as addressing the skills needed for modern methods of constructions.
In the short term, Government should consider increasing support for skills in the construction sector, alongside any increases in the training levy.
If skills constraints are not adequately addressed by March 2007, Government should conduct a review of the effectiveness and impact of CITB-ConstructionSkills in the housebuilding industry.

The industry should work together with the Commission for Architecture and the Built Environment (CABE) to agree a code of best practice in the external design of new houses. Where planners and housebuilders disagree on specific design issues, they should seek arbitration, possibly through CABE, to resolve these matters.

The House Builders Federation, in consultation with its members, should draw up a best practice guide for voluntary compensation schemes to directly compensate those immediately affected by the transitional effects associated with development. This might include cash payments to individual households.