INTRODUCTION 2011 will go down as the year housing issues gained the political and media prominence many of us feel they have long deserved, though not always in the way we would have wished. It has also been another challenging year for our industry. The ongoing lack of mortgage availability and a hiatus in planning policy combined to frustrate efforts to increase housing output. But looking positively, it could also go down as the year that saw solutions to remove these constraints start to emerge. To have the PM and Deputy PM launch the Government’s Housing Strategy (21st November) provides the strongest possible confirmation that housing supply is at the top of the Government’s policy agenda. From a Treasury perspective, home building is one of the few industries that can produce immediate results in terms of economic activity and jobs, and so has a central role to play in the Government’s growth agenda. The Housing Strategy contained a number of very positive moves that should, over time, start to bear fruit. In particular, the New Build Indemnity scheme was a bold and very welcome step. It is something we have worked very hard to achieve over many months and are now working full time with members, lenders and Government to agree the detail to enable an early 2012 launch. Implementing a scheme that can provide 95% LTV mortgages should make a real difference to a large number of customers who have been excluded from purchasing over the last few years because of their inability to afford the deposit currently required. There is a lot do to in a very short time frame and as ever the detail of how the scheme will function will be key. The publication of the final version of the NPPF is also imminent. Debate over the NPPF dominated much of the summer and autumn, with scaremongering by a powerful anti development lobby resulting in sensational and ridiculous reporting of the debate in the media. Hopefully Government will see through the smokescreen and realise that if all the measures it has unveiled are to work, it must produce a pro-growth planning system and a final NPPF document that resembles the balanced document it originally put out to consultation. If it does, then combined with other measures we have seen announced through the year, we may look back favourably on 2011 as being the year policies that make a tangible difference started to emerge. The Housing Strategy New Build Indemnity Scheme This was certainly the most high-profile announcement. Click here to view the HBF member briefing on the scheme. HBF and the Council of Mortgage Lenders (CML) have been involved in detailed discussions to bring 95% LTV mortgages into the market for new homes since we first proposed a scheme to them in April. However it became clear that it would be difficult for a scheme to work without Government intervention and so, having kept officials and Ministers fully briefed on our discussions, we decided in September to suggest to Government that they could play a direct role in the scheme. We set out our thoughts in our Autumn Statement submission, sending an advance copy to Government, and then held a series of meetings with officials from DCLG, Treasury and No.10. Government support for the scheme is a tremendous achievement for HBF.There is still an enormous amount to do, and we are working full time on the scheme. I particularly want to thank the small group of senior members who have helped us with their expertise and given up time to come to meetings or take part in conference calls, sometimes at a few hours’ notice. We are working towards an extremely valuable prize – a significant rise in new home completions, with all the jobs and economic activity that will bring to the industry and its suppliers. The key players involved – HBF and the home builders, CML and lenders, Government, FSA – are working towards a launch as early in the New Year as possible. Initially we hoped for January but realistically March is more likely. Because the local election “purdah” period begins on 22nd March, the Government is likely to want a formal launch by 21st March at the latest. After intense negotiations, I am pleased to advise that HBF has agreed to the appointment of Jardine Lloyd Thompson (JLT) to administer the Indemnity scheme. JLT’s role will be critical to the success of the scheme.We have already circulated all house builder members of HBF so that we can compile a list of companies that would like to participate in the scheme and we will continue to provide regular updates to members as the scheme develops. Get Britain Building This was the second big announcement for us in the Housing Strategy. It is early days yet but we do have some preliminary information on this £400m scheme.Modelled on the successful Kickstart scheme, the objective is to re-start activity on stalled sites with implementable planning permissions. The focus will be on providing development finance, either loans or equity stakes, with very little available for gap funding so as to generate housing completions over the next two financial years.While larger companies will not be excluded from bidding, it is anticipated that most demand will be from smaller and medium-sized firms. The Homes and Communities Agency (HCA) is planning to publish a Prospectus before Christmas seeking expressions of interest. Every effort will be made to simplify the scheme compared with Kickstart and there will be none of the many additional requirements imposed on Kickstart schemes (Code for Sustainable Homes, Building for Life scores, apprentices, etc.).When the Prospectus is published, HBF will notify all house builder members. As with the Indemnity scheme, we have circulated members asking for initial expressions of interest and we will of course keep members fully informed as the scheme is developed. S106 Agreements As part of its proposals to tackle stalled sites, the Government will consult early in 2012 on the possibility of allowing developers to require local authorities to reconsider Section 106 agreements signed before April 2010. At present, Section 106A(4) of the 1990 Act (as amended) allows the Secretary of State to specify a period within which a planning obligation may be modified or discharged. As a default this period is five years. The proposals therefore suggest that this should be reduced to two years. It is, of course, currently possible to modify or discharge an obligation by agreement with the local authority. The proposed change would give applicants the right for such modifications to be considered and an appeal process where applications for modification are refused. Other measures Other new measures announced in the Strategy with implications for home builders included: A competition to promote large-scale projects where there is clear local support and private sector appetite – a prospectus will be published in 2012An advisory group of experts to look at how to unlock key surplus public sector sites (chaired by Tony Pidgley, Chairman, Berkeley Group)An independent review of barriers to investment in the private rented sector. The National Planning Policy Framework The public and overt political debate on the NPPF has, as we expected, quietened down since the close of the public consultation on 17th October. The Government received 14,500 submissions in response to the consultation, around 4,000 of which we understand are substantive, raising individual points. DCLG now has the task of working through these and considering the comments and suggestions made. The Government will also need to consider the reports of both the Environmental Audit and Communities Select Committee inquiry reports on the Framework – both of which HBF’s John Slaughter gave oral evidence to. At the time of writing, the Communities Committee’s report is still awaited. The Environmental Audit Committee’s main recommendation to Government was, perhaps unsurprisingly, for a clearer and enhanced definition of sustainable development giving greater weight to the environmental dimension of sustainability From our discussions with both Ministers and civil servants it appears that there is little appetite in Government for a further round of consultation or delay to the publication of the framework. The Prime Minister and Chancellor have reaffirmed their commitment to the general thrust of planning reform in both the Housing Strategy and the Autumn Statement. This is very welcome, but our concern remains that apparently small drafting changes to the NPPF text could nevertheless in practice make a significant difference to its effectiveness. In the light of the public debate, the three big issues facing Government remain transition, whether to re-introduce a form of brownfield first policy and the definition of sustainable development. The position on transition is the greatest immediate concern. Ministers have made a public commitment to provide a transitional arrangement for local authorities, whereby the ‘presumption in favour’ would be delayed for a period to allow Local Authorities to get plans in place, but they have so far not provided any detail on their thinking. However, it is of considerable concern that we have recently seen a number of appeal decisions refused on the basis of prematurity pending the emergence of the local development plan. While the decisions have, in the main, been on larger sites we are becoming concerned that such an approach would lead to a further hiatus as those Authorities who are most opposed to development choose to do nothing and fight appeals based on prematurity. We are, of course, discussing the problems of prematurity with Government in order to seek to avoid such a situation arising. We have made our concern about the risk of a prematurity-related hiatus during transition very clear to Government in both letters to ministers and meetings with officials and will continue to do so. On timing, the Government is maintaining its objective of the final NPPF being published by the end of March and before then if possible. It has resisted pressure from anti-NPPF campaigners for a second consultation to consider revisions made and so the position should be clearer in the first quarter of 2012. ECONOMIC AFFAIRS Stamp Duty In the Autumn Statement, the week after the Housing Strategy, the Treasury announced that the SDLT temporary £250,000 threshold for first-time buyers will end on 24 March 2012, after which the threshold will revert to £125,000. Treasury analysis showed that the higher threshold had been ineffective in increasing the number of first-time buyers entering the market. Whilst we had argued for this concession to remain and are disappointed that it is to be removed I think we have to look at the Government’s approach in the round and recognise the significant help it is providing to new home demand with the New Build Indemnity Scheme reported above. Regulatory Burden The Government’s Red Tape Challenge seeks views on the thousands of statutory instruments (SI) affecting industry. Early in the New Year, a list of around 400 SIs covering “housing, planning and construction” will be released, allowing five weeks for comment. This could provide us with a valuable mechanism to reduce the regulatory burden on new home building, so we are keeping closely in touch with officials at the Better Regulation Executive. Immediately after the Christmas break, HBF will notify all members about the housing, planning and construction sub-categories and seek to draw up a list of industry experts able to examine the 400 SIs. They will be notified as soon as the Challenge list is posted. All industry comments will be reviewed by a Government Star Chamber which will start with the question: “Why do we need this regulation at all?” The work of the Local Housing Delivery Steering Group continues. We are particularly pleased with the progress being made by the sub-group looking at the viability testing of local plans. We hope a draft of guidance will be available for wider circulation and comment in the near future. We will keep you informed. FirstBuy The scheme is beginning to build up momentum. HBF continues to hold monthly member meetings with the HCA. Credit Directive The EU Directive on Credit Agreements Relating to Residential Property could bring shared equity second-charge mortgages under full FSA regulation, contrary to the wishes of the Treasury and lenders. HBF is working with Treasury officials and our European body, the UEPC, to try to ensure the Directive drafting does not produce this adverse result. New Home Valuation Forum HBF recently organised a meeting of the Forum, which includes representatives from RICS, major valuation firms, the CML, lenders and home builders, to discuss the links between various standards and policies and new home valuation. The group looked in particular at the impact of Affordable Housing, sustainability (Part L and zero carbon) and the Flood and Water Management Act (FWMA) on new home valuations. Industry experts on sustainability and the FWMA outlined the consumer implications of these policy areas to members of the Forum. CLG Select Committee John Stewart gave evidence to the Select Committee Inquiry into the Financing of New Housing Supply on 21st November. Budget date announced Chancellor George Osborne announced earlier this month that Budget 2012 will take place on Wednesday 21st March 2012. WIDER INDUSTRY ISSUES Consumer Code The Board of the Consumer Code is undertaking a consultation on the Code that has now been in operation for coming up for two years. Members interested in commenting should contact John Stewart (john.stewart@hbf.co.uk) for a copy of the consultation questions. Growing Places Fund The Government has launched a new Growing Places Fund the objective of which is to provide funding for infrastructure investment needed to unlock development. £500M of new money has been allocated to the Fund and initial bids are to be made by the Local Enterprise Partnerships by 20th December. The Fund has a particular focus on unlocking residential development and we would therefore encourage you to engage with the relevant LEPs where you think the Fund may be able to assist in bringing forward sites. The Fund will help with immediate investment requirements, but is also designed to create local revolving funds for meeting similar infrastructure needs in future. We hope therefore that this will become a useful initiative for the industry over time. Zero Carbon Work continues on the zero carbon policy, with the Zero Carbon Hub playing an important role in focusing on practical, implementational issues and in bringing the parties together. Although good progress has been made in clarifying the main elements of the zero carbon definition, the Hub’s timeline group has raised its concern that overall progress towards the 2016 objective is threatened by the position on two key issues – SAP and Allowable Solutions. For our part, we have made our concern about both the delay to the consultation on the latest version of SAP and its more structural weaknesses increasingly clear to Government. Without a properly functional version of SAP the industry will not be able to take the best and most effective steps to meeting future Part L requirements and this problem could potentially undermine the zero carbon policy as a whole given the very high levels of performance being sought. We are also concerned that progress on Allowable Solutions has slowed, but now understand that further Government announcements are likely to be delayed until the time of the Budget because of the Treasury policy implications. Feed-in Tariff The Government has recently issued a consultation proposing a reduction of approximately 50% in the level of the Feed-in Tariff for household scale photo voltaic installations from next spring. This proposal has led to a furious reaction from the micro-generation industry, but the Government seems committed to making this change in order to keep the scale of payments (funded from consumer electricity bills) within budget. The reduced tariff is likely to affect the price of PV and may disrupt development of the UK supply chain. If this creates any issues for you it would be helpful if you could let us know. Building for Life We are currently working with our Building for Life partners – Design Council CABE and Design for Homes - to consider how the Building for Life initiative can best play a positive role in facilitating development and discussions on urban design under the new planning system. As part of this process the partners are looking at how the Building for Life criteria can be updated, simplified and made more user-friendly in order to assist dialogue with planners and local communities. The partners are agreed that the criteria can best be used as a structure to inform dialogue rather than as a form of regulatory standard. The potential for Building for Life in the new planning system is currently being researched and we will keep you in touch with the results of this process. PLANNING ISSUES Localism Act Following the granting of Royal Assent the Localism Bill has now become an Act of Parliament. However, the actual coming into force of the various Sections will take place over time. While some of the provisions came into force immediately there will be a further tranche of clauses implemented in January and a further round on the common commencement date of 6th April 2012. The most prominent section to come into force immediately is Section 110. This introduces the duty to co-operate between Local Authorities, particularly with regard to the production of development plans. However, there is currently some confusion among those authorities who are currently progressing their plans under the existing regime who claim that this new duty does not apply to them. Thus we are currently stuck between a number of authorities who wish to move forward under localism (and not be bound by the Regional Strategies) and the new system which requires Local Authorities to ensure that their own plans are consistent with one another. Speaking of which, the abolition of regional strategies (Section 109 of the Act) has been partly implemented through the repeal of the requirement to produce such strategies. However, the actual withdrawal of the existing strategies will not happen until the consultation on the environmental impact of their abolition has ended and the Government has considered the responses to that consultation. Bearing this in mind the formal abolition is unlikely before the April commencement date. There are, of course, a huge number of associated regulations necessary to implement much of the primary legislation and the Government continues to consult on these as they are drafted. Current consultations address details of neighbourhood planning and proposed changes to the Community Infrastructure Levy, requiring a meaningful proportion to be spent within the vicinity of the development itself. HBF continues to respond on behalf of the industry, taking advice and guidance from members around the country at regional meetings and through our more formal committee structures. You can, of course, contact our staff at any time regarding any of the issues raised by such consultations. Planning guidance Following the précis of planning policy from all the current PPGs and PPSs in to the draft NPPF Government is now starting to look at the 8,000+ pages of associated guidance. HBF has been working alongside other parties, led by the Royal Town Planning Institute, to agree what existing guidance should be retained, reviewed or repealed. The work to date has demonstrated that there is a clear need for some guidance, mostly to ensure consistency of implementation of policy. However, there is some confusion over the difference between interpretation of policy, planning guidance, advice notes and best practice notes. Merely placing existing documents into these clear categories is proving more challenging than it might seem. TECHNICAL NEWS Flood and Water Management Act (FWMA) The Welsh consultation on mandatory adoption arrangements for new foul sewers and lateral drains and Mandatory Build Standards for new gravity foul sewers and lateral drains has been launched by the Minister for Environmental and Sustainable Development John Griffiths. Welsh Ministers are responsible for the regulation of water and sewerage undertakers who operate wholly or mainly in Wales. As a result, this consultation excludes those parts of Wales served by Severn Trent Water and includes those parts of England served by Dŵr Cymru Welsh Water. The Welsh Government is seeking views on the following proposals: Transition from current to new adoption arrangementsMandatory build standards for newly-built gravity foul sewers and lateral drains Draft Regulations to ensure the completion of the adoption process Impact Assessment for the Mandatory Build Standards prior to a final version. The consultation closes on 23 January 2012. The consultation document and details of how to respond are available here: http://wales.gov.uk/consultations/environmentandcountryside HBF will be arranging a meeting for members to discuss this and formulate a response early in the New Year. We still await the English consultations for; Mandatory build standards for adoptable drainage private sewers (MBS)SUDs standards These are likely to contain some differences from the Welsh consultation and we would like to see these before we return our response to the Welsh consultation. Any members interested in attending member meetings should contact either rosie.hinchliffe@hbf.co.uk for the English consultations and/or Richard.price@hbf.co.uk for the Welsh consultation. Building Regulations Part L 2013 proposed consultation The consultation documents for Building Regulations Part L should be released shortly. It is expected that the revised Part L will be issued in October 2012 for implementation in April 2013. Other Building Regulations Other Sections of the Building Regulations are also currently being reviewed by DCLG and as such we can expect to see further consultations published very shortly. These are likely to cover issues including security, changing places and structural eurocodes; an evaluation of Part P (electrical safety); and a rationalisation of Parts M (access), Part K (protection from falling) and Part N (glazing). All of these will be light touch consultations in comparison to Part L but we still need to look at them very carefully and respond accordingly. HBF will inform members once the consultations are released and arrange dates for workshops to discuss and formulate a response. Waste and Resources Action Programme (WRAP) HBF has recently been working with WRAP on a leaflet entitled ‘A blueprint for reducing waste and cutting costs’. It contains five corporate-level actions and ten site-based actions employed by UK house builders to reduce the cost of waste. Copies of this leaflet are available on the HBF website please click here. And finally… I hope you find this report informative. It reflects the number of complex issues we are dealing with, but also the significant political interest in our sector, something that must be welcomed. As always, should you require any further 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 at HBF. With the range of ongoing issues so extensive, I am sure next year will be equally as frenetic as this. Please be assured that HBF will continue to robustly represent your interests in all relevant areas as we strive to create a climate in which our businesses can succeed. Thank you for your support throughout 2011. All the team here at HBF are truly appreciative of the input and help you give us in a variety of areas. All that remains is for me to do is wish you a very peaceful Christmas and a happy, healthy and prosperous New Year. I will update you again in February.
