Introduction The political developments of the last few weeks have been both hectic and fascinating, and the resultant election outcome is clearly going to have an immediate and significant impact on our industry. Not surprisingly this update is dominated by the events and implications of this extraordinary period. Few could have predicted the election result we finally got and only time will tell how our first post-Second World War coalition Government will fare. As I write, the shock waves are still subsiding. We are truly negotiating uncharted waters and having to react to a very different world. That’s why I breathed a sigh of relief when Grant Shapps called me to say he was going to be keeping his pre election housing brief. We long complained about the last Government’s continual changing of Housing Ministers and the continuity his appointment provides will hopefully be vital in the coming months. The sense of change of recent weeks has been strengthened by the speed at which the new administration is seeking to make progress. Already we have seen a full 30-page coalition agreement on a policy programme for a five-year parliament, a Queen’s Speech of major legislative proposals, a first round of budgetary cuts for the current year and confirmation of an emergency Budget on 22 June. The suspension of HIPs, although welcomed generally within the industry, has seemed tame by comparison! The implications for house building are huge. The localism agenda for planning has been confirmed and will be taken forward in the Decentralisation and Localism Bill. More immediately, however, the Government has promised the rapid abolition of the Regional Spatial Strategies (RSSs) and their local housing targets in both their public announcements and subsequently in a letter to all Local Authority Planning Chiefs, without setting out clearly what the transitional arrangements will be for moving to the new system. Local Authorities, notably South Oxfordshire, are already reacting accordingly. One of our first actions has therefore been to write to new Ministers requesting a meeting to seek urgent clarification of the position. At the same time we have provided them with a briefing paper clearly setting out the key issues that have to be addressed as part of a robust transition plan if the Government is to avoid presiding over a further reduction in housing output. The emergence of the coalition has raised other issues. Given the Liberal Democrat manifesto we must be concerned about the possibility of the new Government introducing VAT on the sale of new homes, even though the Tories dismissed the idea during the election campaign. We have taken early action to lobby on this too. The initial spending cuts for 2010/11 have also raised concerns – including the implications for the Kickstart scheme which has become a victim of the Government’s wider need to make immediate and deep cuts across all its Departments – further details on this and the other issues to which I briefly refer follows below. The emergency Budget next month will be important, and beyond that discussions on the Comprehensive Spending Review for the 2011-14 period will have a significant bearing on the business outlook. It looks set to be an extremely busy and vital year ahead. KEY ISSUES New CLG Ministers and the Coalition Government It took rather longer than normal for Ministerial positions and responsibilities in the new Government to be confirmed - an inevitable consequence of the coalition building process. The new CLG Ministerial team is strong, with a great deal of relevant experience of the issues between them. Communities Secretary Eric Pickles has a background in Local Government and held the Communities brief for part of the last parliament. We have welcomed the appointment of Bob Neill as a junior minister responsible for planning – like Shapps, we know him well and he should have a good understanding of our issues. The Liberal Democrat member of the team, Andrew Stunell, has also held the Communities brief for his party and has a longstanding interest in housing and the sustainability of the built environment, while Baroness Hanham, CLG’s Lords’ Spokesman, again has front bench experience of the Department’s issues. Greg Clark as Planning Minister is the member of the team with least experience of the issues, with the exception of having once promoted a Private Member’s Bill to limit garden development (so-called ‘garden grabbing’). He is a rising star in the Conservative Party and is likely to have an important role in piloting the Decentralisation and Localism Bill through parliament. HBF will engage with all members of the CLG team and with both parties forming the coalition. It remains to be seen exactly how policy-making will work within the context of a formal coalition, but clearly any significant policy developments or responses to new issues will need to be acceptable to both coalition parties. We will therefore need to take full account of this consideration in all our representational work on your behalf. This will of course apply across the Government as a whole with the Liberal Democrats’ Vince Cable, Danny Alexander (following the resignation of David Laws) and Chris Huhne holding the important Cabinet positions respectively of Business Secretary, Chief Secretary to the Treasury and Energy and Climate Change Secretary. Engaging with the new Government will therefore involve new challenges in the way we work as well as a new set of policy issues. HBF immediate post election work HBF was very well prepared for the new Government, although the final form of the Government required a few last minute changes to our briefings. Our first step was to send a one-page briefing of our Day 1 housing supply priorities to the Eric Pickles and Grant Shapps within hours of their appointments. This was quickly followed by a briefing to the new Housing Minister on the cumulative burden of regulation (please click here to view). Both were circulated to key officials in CLG, Treasury, BIS and the Better Regulation Executive. I have also suggested to Grant Shapps the idea of setting up some form of Government/industry stakeholder group. Given the range of enormous challenges the industry faces, we need close, regular dialogue with the Minister and senior officials from across Government. We also sent a paper about the implications of VAT on housing (please click here to view) to George Osborne, Chancellor, and David Gauke, Exchequer Secretary to the Treasury, and we have expressed concern to Treasury ministers and CLG and Treasury officials about the potential impact of significantly higher rates of Capital Gains Tax on residential land values and thus supply. We have formally written to Greg Clark MP, the new Planning Minister, seeking urgent clarification of how housing delivery is to be measured with no regional housing targets, and asking him to address urgently the potential hiatus that could be caused by the lack of a transition plan to help us get to the radically different planning policies of the current Government from that of the previous Government (please click here to view). We then wrote again to Pickles, Shapps and Clark seeking an urgent meeting following the letter Pickles sent late last week to Local Authorities restating the Government’s commitment to ‘rapidly abolish’ the RSSs. There is more detail on the new Government’s Localism proposals in the Planning section below. Since the Election, we have had a number of meetings with officials at CLG and Treasury. It is difficult for them, so early in the new Government, to give us clear guidance about Ministers’ intentions. However we have been given some early clues, and most importantly we have been able to explain the issues that we regard as top priorities for housing supply. But I think we can confidently reach a number of important early conclusions. First, the Government has hit the ground running. Ministers are looking for quick wins, and Treasury has embarked on a rapid programme of “fiscal consolidation” (tax increases and spending cuts to you and me). HIPs were abolished within days. Kickstart funds have been cut and more cuts are likely. It has also been announced that in 2010-11 “CLG and its Arms Length Bodies will be expected to make overall ‘in year’ efficiencies of 10 per cent in their running costs. (This will be in addition to the existing target saving of 3 per cent on operating costs as well as a 2 per cent cash standstill).” And the Communities Secretary’s letter to Local Authorities highlighting the commitment to rapidly abolish RSSs was sent only 16 days after the Coalition Agreement was signed (please click here to view). Second, this is a very radical Government. Their localism agenda, strongly supported by both the Conservatives and Lib Dems, poses enormous challenges for the industry. Planning will be devolved not just to Local Authorities, but to local communities and neighbourhoods. As policy detail and timescales become clearer, we will of course keep HBF members informed. It is already obvious to me that HBF’s communications with member companies are going to be even more important than usual over the next few months. Spending cuts – impact on HCA initiatives There are £214m of Kickstart 2 schemes not yet contracted. These funds have been immediately cut by £50m. However deep cuts at CLG mean the balance (£164m) is also at risk. We have been assured we will know the full extent of the cuts at the Budget on 22 June, at which time member companies should be informed about the future of their individual Kickstart 2 schemes. In addition £100m has been cut from the 2010-11 National Affordable Housing Programme (NAHP), along with a £50m cut in this year’s Housing Market Renewal programme. HBF’s monthly meetings with the HCA on HomeBuy Direct and Kickstart are on hold until the future of HCA programmes is clarified at the Budget. I should add that we have heard nothing about the future of the HCA itself. Members who heard Grant Shapps speak before the Election will be well aware that he was concerned about the size of the HCA and its wide range of programmes. The Coalition Agreement and Queen’s Speech – Localism. please click here to view). Ministers have announced their intention to abolish the Regional Spatial Strategies (RSSs) (please click here to view) and their housing targets rapidly. They have however only committed to reforming the planning system in the longer term and have said they will bring forward a Decentralisation and Localism Bill as part of its first session legislative programme please click here to view. Only high level details of the Bill’s likely provisions are available at the time of writing, but these very clearly reflect most of the key proposals in the Conservative Party’s three policy green papers of the last year on localism, housing and planning. Conservative and Liberal Democrat thinking is very similar in this field and we can therefore expect a strong coalition drive to take the Bill through parliament. The Bill is, however, a very wide-ranging piece of legislation involving considerable complexity and so it may not be introduced to parliament until the autumn. In the meantime we will be seeking to contribute to thinking on the key details of how a locally based planning system could be made to work effectively with a view to influencing the drafting of relevant provisions. Late last week, Eric Pickles wrote to all Local Authorities reaffirming the Government’s commitment to quickly scrapping the RSSs (please click here to view), a commitment he has told them to take into ‘material planning consideration’ when making decisions on applications. The danger is that this will lead to unhelpful speculation, rumour and a hiatus in the proper planning of land for housing. Without any of the necessary details, the recent announcements of major planning reform have already led to many Local Authorities stopping or deferring the production of their already delayed development plans. By way of example, South Oxfordshire announced that it was to halt work on its Core Strategy. Their announcement underlined precisely our concerns and why we have been stressing to the Conservatives for months the urgent need for a transition plan to bridge the radically different approaches of the previous and current Government. Where applications are already in the system some Local Authorities are again delaying their processing, especially in areas where allocations of greenfield sites had to be made to meet five-year land supply - requirements based on RSS numbers. Inevitably, therefore, we will want to provide evidence of the problems of delay and confusion brought about by the Government’s general announcements and we will need your assistance in the collation of actual examples of where delays are occurring - please feedback examples to our planning team of Andrew Whitaker (andrew.whitaker@hbf.co.uk) or James Stevens (james.stevens@hbf.co.uk). Of course we have a number of concerns with the new Government’s longer term proposals for the planning system, but our focus currently is pressing for clarity on what is going to happen in the immediate future. Clearly change was coming – Shapps detailed his localism proposal many times in the run up to the election and it is an ethos that runs right through the Conservative party’s beliefs - but no one is as yet quite sure of the details of the changes, nor how or when they will be implemented. Home Information Packs As one of its quick wins, the Government has moved very fast to suspend the requirement for a Home Information Pack (HIP) when selling a home in England and Wales. It is good news that HIPs have been suspended so quickly. Although the industry has taken the requirement to provide packs very seriously, there is no doubt that they have not been valued by customers and many feel HIPs have hindered the housing market generally by discouraging speculative marketing – an essential part of any efficient market. Final abolition of HIPs will be included as part of the Decentralisation and Localism Bill. While HIPs are no longer required in England and Wales, however, the separate requirement for Home Packs in Scotland continues to apply and will not be affected by the new Bill. TECHNICAL AFFAIRS Zero Carbon The coalition has said that part of its programme for Government will be to promote continuous improvement in the energy efficiency of homes. While both parties already had ambitious policies to improve the efficiency of the existing housing stock, we know they also both support the objective that new homes should achieve a zero carbon standard from 2016 onward. Indeed Grant Shapps confirmed last week his intention to nail down the definition of a zero carbon home within weeks Our work on zero carbon remains important, therefore, and we will continue to support the work of the Zero Carbon Hub to this end. There is nevertheless an opportunity to discuss the important details of how the zero carbon objective can be achieved practically and affordably with new Ministers who have the chance to consider the issues freshly not having been immersed in the complexities before now. We shall therefore be seeking early discussions with a view to making constructive progress in refining the policy in a helpful way. HBF Sustainability Group There are a lot of regulatory and policy issues which arise from the Government’s Sustainability Agenda. So much so that this has become a major area of challenge for housebuilders. Current issues like Zero Carbon Homes, Code for Sustainable Homes, Sustainable Urban Drainage (SUDs) and Water Efficiency all fall into this agenda as well as emerging issues like Flood and Water Management Bill and Embodied Carbon. HBF has therefore set up a Sustainability Group to take responsibility for work in this area and communicate these issues to the wider HBF membership. The work of this group will also put us in a better position to influence Government policy in areas surrounding sustainability. The first meeting of this new group will be in early June and we will be able to report the progress in future updates. CONSULTATIONS HCA Proposed Core Housing Design and Sustainability Standards Consultation The HCA’s important consultation on proposals for new core standards for publicly funded or assisted new homes closes this month. The outcome could have major implications for members, potentially extending well beyond the costs of providing social housing and the development brief for HCA sites. In particular, we are very mindful of the risk that any new standards will be picked up more generally in their policies by Local Planning Authorities. We have held a number of discussions with members on the HCA proposals and representatives of some of our larger members recently met the HCA team responsible to set out the issues for industry. We are now working on a substantive HBF response with the aim of securing future standards that are properly fit for purpose, while being affordable and consistent with market requirements. I would encourage as many of you as possible to make your own responses to the HCA and we will be making our template response available to you to assist you in doing so. The consultation runs until 17 June. Consultation on the Code for Sustainable Homes and the Energy Efficiency standard for Zero Carbon Homes The consultation which closed on 24th March 2010 covered both policy and technical changes being considered within the Code. Views were also sought within the consultation on the proposed energy efficient performance standard which came out of the group set up at the request of the Housing Minister last July. We await the results of this consultation. The earliest any changes to the code could be implemented is October 2010. Planning consultations HBF has recently responded to the plethora of consultation documents released in the last few months of the last Government. Draft Planning Policy Statements on Planning for a Low Carbon Future, Planning for a Natural and Healthy Environment and the proposed new policy document for planning obligations might all never see the light of day in their current form. However, the fundamental issues they raise will all need to be addressed by the new Government just as much as the last one, regardless of where we end up with the Code for Sustainable Homes, Community Infrastructure Levy or the broader reform of the planning system. Similarly, our work with the Penfold Review team, which is due to publish it’s final report on non planning consents in the summer; implementation of the Killian Pretty recommendations on application procedures; and other research projects such as mediation in the planning process; improving the connection between planning and building control; and proposals for training in development economics in the wider planning sector continue to be pursued. OTHER ISSUES Gas flues in ceilings The HSE/Gas Safe working group is progressing towards finalising the proposed technical bulletin TB008 document which is expected to be issued around September 2010. The work of this group still needs the approval of the Minister responsible for the HSE Burden of Regulation Before the Election, HBF’s Burden working group arranged an especially valuable briefing for officials at the Department for Business, Innovation and Skills (BIS) and the Better Regulation Executive. We are now assembling regional data with a view to preparing an HBF paper setting out the issue for the new Government. The Burden group has also been holding meetings with the HCA to discuss its new area-wide viability model. In future, this model could potentially play a significant role in decisions about local tariffs, affordable housing demands, grant levels, etc, so we want to make sure the model is as robust as possible. We have also held discussions with the Three Dragons about their viability model. Regulation of Second-charge Mortgages As noted last month, Treasury has concluded second-charge mortgages should be regulated by the FSA, a move supported by the FSA and CML. Therefore we have arranged a preliminary meeting with officials at the FSA to explain the impact this would have on house builders’ ability to offer shared equity, and to begin exploring how the industry might respond. As always, we will keep you informed of any progress. Flood and Water Management Act The Flood and Water Management Bill (FWMB) has now become an Act of Parliament having progressed through both the House of Lords and the Commons on the 8th April. HBF is currently in discussions with DEFRA regarding FWMB and the forthcoming consultations on Mandatory Build Standards (MBS) and the Sustainable Urban Drainage (SUDs) standards. These consultations are expected to be released later this year. HBF will be setting up workshops to look at these forthcoming consultations. Anyone wishing to take part in these should contact dave.mitchell@hbf.co.uk Building Regulations Revisions to the Building Regulations Part F (means of ventilation), Part J (Combustion appliances and fuel storage) and Part L (conservation of fuel and power) were all released on 1st May 2010 and will take effect from 1st October 2010. We still await official confirmation of what transitional arrangements will be in place The relevant documents can be found on the planning portal please click here to view. The most significant changes surround Part L (conservation of fuel and power).The annual CO2 emission rate for dwellings built to this revised regulation requires a 25% improvement on the current standard. This is the flat rate approach which was the Government’s preferred option in the consultation. Another change is that the notional dwelling used in calculating the SAP will now include for a party wall u value of zero. This means that the 25% improvement mentioned above is in addition to insulating the party walls on semi detached dwellings, terraced dwellings and flats. This makes these dwellings (which thermally, were always difficult to make comply) even more difficult. This also adds an additional cost for these dwellings which are generally at the lower end of the market. CO2 emission rate calculations (SAP) along with proposed specifications will have to be submitted to building control prior to commencement of work under these revised regulations. There is still the requirement for an as built calculation to be submitted before a completion certificate is issued. Although a version of the new SAP calculation software is available, we understand that the final approved software will not be available until around the end of August/beginning of September. We are currently talking to CLG about this and the problems it creates for housebuilders and I have also written to Andrew Stunell, the Minster responsible for Building Regs to highlight the issue. AND FINALLY… I am sorry this report is somewhat longer than usual but I hope you will understand the reasons why. It is clearly going to be a very busy few months ahead. HBF is at its most effective when we work closely with members to provide information on the key industry issues to the relevant parties in Westminster and beyond. Never has this been more critical than currently, with the immense political and policy changes that we are going to see from the new government. Please be assured that HBF will continue to robustly represent home builders with the decision makers as they look to formulate their new policies, and use the effective channels of communications that we have developed over many years to push for practical change. I hope you have found this report useful and as ever, should you require more information on anything or indeed wish to let us have your views on any of the items please don’t hesitate to contact me or any of the team here at HBF. I will update you again in a few weeks.
