The Autumn Statement (AS) announcements on housing and planning need to be taken together with the planning announcements in yesterday’s National Infrastructure Plan 2013. The following summary refers only to measures with an impact on private home building. So for example changes to Right to Buy are not covered.
The measures are focused on both short and medium to longer-term improvements in planning and housing supply. The measures are very much a response to what HBF and house builders have been telling Government. The planning reforms are targeted at speeding up decisions, having the right incentives for local authorities to prepare plans and make the right planning decisions, and greater certainty for developers.
The most important measures from a private housing perspective are probably the £1bn fund for large sites, measures to ensure Local Plans are put in place, actions to address the blockages caused by planning conditions and measures to tackle the delays caused by statutory consultees.
The Office for Budget Responsibility (OBR) has revised up its forecasts for GDP growth this year, to 1.4% from 0.6% at the time of the Budget, and 2.4% in 2014 (1.8%), although its forecasts for 2015 to 2017 are barely changed. The OBR report repeatedly talks about credit conditions, house prices and mortgage rates “beginning to normalise”.
It predicts house price inflation of 3.2% in 2013 (up from 1.9% at the time of the Budget), accelerating to 5.2% in 2014 (3.6%) and 7.2% in 2015 (4.0%).
The OBR has revised its approach to forecasting house price inflation. It used to take the average independent economic forecast for the next two years and thereafter simply assume house prices would rise in line with growth in average earnings. The latest Economic and Fiscal Outlook is accompanied by a very technical economic paper outlining the OBR’s new approach which combines a model of housing demand alongside the OBR’s views about housing supply.
The OBR says the housing market has picked up more strongly than expected in 2013. The OBR’s comments on Help to Buy are worth quoting:
“To the extent that Help to Buy lending is additional, our modelling suggests it would feed through roughly one-for-one into house prices in the short term, which we would then expect to feed through to a much smaller extent into house-building – underpinning our forecast for a strong recovery in residential investment. Help to Buy is a temporary scheme, which could imply a negative effect on the housing market when it is removed. In our central forecast, we have assumed that any withdrawal can take place without disruption, as we assume the economy and financial system will have recovered further in the intervening period.”
Investment in private housing is forecast to rise by 6.1% in 2013, 9.7% in 2014 and 10% in both 2015 and 2016.
The OBR expects ILO unemployment to fall to 7.0% in the second quarter of 2015. The Bank of England has indicated it will not consider beginning to raise interest rates until unemployment has fallen to 7.0%.
Treasury will introduce capital gains tax on future gains made by non-residents disposing of UK residential property from April 2015. A consultation on how best to introduce the new capital gains tax charge will be published in early 2014.
The government will create a £1 billion, 6-year investment programme to fund infrastructure to unlock new large housing sites, supporting the delivery of around 250,000 homes.
The large site fund was previously £250m, with three sites at present being progressed. The scheme provides for loans or equity stakes in sites of 1,500+ homes. Initially Government is initially looking to take forward nine new schemes, covering around 27,000 homes. The 250,000 target must be seen as a medium-longer term target as such schemes will clearly take some time to bring on stream and develop. There is likely to be an annual bidding round, with the HCA administering the scheme. The Government is keen to get LEPs involved, so £50m in 2015/16 is earmarked for LEP-supported schemes.
Local Growth Fund
The government will maintain a £2 billion Local Growth Fund. It will increase local authority Housing Revenue Account (HRA) borrowing limits by £150 million in 2015-16 and £150 million in 2016-17, allocated on a competitive basis and agreed by LEPs. The government will make £110 million of Regional Growth Fund available for the Local Growth Fund. The government will also make £50 million of funding available to LEPs through the Large Sites scheme.
The Government regards the HRA borrowing limit as a significant step in response to local authority pressure to allow additional borrowing to fund Affordable Housing. Housing supplied through this programme will be in addition to the HCA’s affordable housing programme. However the Government wants the additional HRA borrowing to result in value for money (more units for little money). It will be allocated through competitive bids and the Government wants to see local authorities working in partnerships with housing associations and private developers to leverage in more money, releasing public sector land and disposing of existing high-value council housing stock, all of which will increase value for money and ensure as little funding as possible goes onto public borrowing.
The government will explore options for effectively kick-starting the regeneration of some of the UK’s worst housing estates through repayable loans, especially in areas where there is potential land value to be unlocked. This is part of the Government’s wider efforts to use investment, loans and guarantees to achieve housing outcomes.
Private rented sector guarantee
The government will extend the availability of the Private Rented Sector Guarantee Scheme until December 2016. DCLG has had a high level of interest but more time is needed to progress schemes.
Local authority housing
The government will launch a review into the role local authorities play in supporting overall housing supply (land, assets, borrowing, etc), though it will not look at their planning role. This is potentially very interesting, though no further details are available.
As announced in Budget 2013, the Government is conducting a feasibility study into the land auctions model. It will report on its findings at Budget 2014. HBF believes the concept, as proposed by the academic Tim Leunig, is unworkable. It would require the current planning system to be torn up, and it is fraught with practical implementation flaws, but the proposal refuses to go away.
The government will consult on measures to improve plan making, including a statutory requirement to put a Local Plan in place. The presumption in favour of sustainable development is a powerful incentive to have a local plan, but Treasury clearly believes stronger measures are needed.
At present there is no statutory requirement to have an adopted local plan. The plan-led system was introduced in 1991, yet we have seen persistent failure by many local authorities to put in place up-to-date, adopted plans. HBF estimates just over half of local authorities currently have an adopted plan, although many of these are out of date. By contrast the Government prefers to say that three quarters of local authorities have a ‘published’ local plan, ignoring the fact that many of these are not yet adopted. One key issue the consultation will need to address is the timescale over which a local authority can be said to have an adopted local plan. Other measures to improve local authority Local Plan performance are also under consideration.
The government will legislate to treat planning conditions as approved where a planning authority has failed to discharge a planning condition on time. The government will also consult on legislative measures to strengthen the requirement for planning authorities to justify any conditions that must be discharged before building can start. DCLG will consult on the proposals.
These proposals are a direct response to HBF representations, extending back to a letter to the Housing Minister in May 2012, about the escalating number of conditions and the unnecessary designation of many conditions as pre-commencement, thus delaying start on site, along with long delays in local authority discharge of conditions.
The “deemed discharge” would mean that the developer would submit the required evidence that a condition had been fulfilled, and if the local authority has not responded within a designated period (e.g. 8 weeks) the condition will be deemed discharged. However EU law is likely to impose some constraints on the use of this measure. It should be implemented during 2014.
On pre-commencement conditions, Government believes recent guidance is very clear and will have an impact. However it is proposing to introduce legislation to require a local authority to provide a written justification for any pre-commencement condition.
The government will consult on proposals to reduce the number of applications where unnecessary statutory consultations occur and pilot a single point of contact for cases where conflicting advice is provided by key statutory consultees.
Treasury believes this measure will provide real practical help to home builders. A consultation is expected very soon, with the measures in place in 2014. The idea is to reduce unnecessary statutory consultation. Treasury is also going to require greater transparency in the statistical reporting statutory consultees provide to Government. Where there is conflicting advice, the Government wants to see a clear route to resolving such conflicts, if necessary ending with PINS. Treasury say they will need the industry’s help in carrying this forward. Consultees will also be required to have a common service agreement.
S106 Affordable Housing contributions
The government will undertake a speedy consultation on a new 10-unit threshold for S106 affordable housing contributions to reduce costs for smaller builders.
Planning authority performance
The government will consult on increasing the threshold for designation under the Growth and Infrastructure Act from 30% to 40% of decisions made on time. The current 30% threshold appears to have had a dramatic impact. Whereas initially 20 local authorities were heading for “special measures”, in fact only one ended up with this status (Blabey). The Government believes raising it to 40% will have a similarly positive impact. There will be a consultation in due course with a view to implementation in October 2014.
New Homes Bonus (NHB)
The government will consult on measures to improve further the incentive of the New Homes Bonus, in particular withholding payments where local authorities have objected to development and planning approvals are granted on appeal.
HBF and members have long argued that it is surely wrong that a local authority can obstruct development by refusing permission, lose on appeal, and then be rewarded with money from the NHB. We therefore welcome this proposal. Government’s intention is to sharpen the incentives in the NHB. The Government hopes that this change will lead to fewer unjustified refusals, and therefore fewer appeals. DCLG has been undertaking a thorough review of the NHB following critical reports by the DCLG Select Committee and National Audit Office. The new measures will not take effect until 2015-16 NHB allocations.
The government wants to ensure that households benefit from development in their local area. Building on the measures it has already put in place at the local authority and community level (including the neighbourhood funding element of the Community Infrastructure Levy and the New Homes Bonus), the government will work with industry, local authorities and other interested parties to develop a pilot for passing a share of the benefits of development directly to individual households.
This is similar to the last of the Barker Review recommendations which was quietly shelved. The industry will no doubt be very wary of this suggestion as it is easy to see how it could be fraught with problems, put companies in a difficult position with local communities and increase the cost of development.
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