What funding shift means for the role of planners in housing delivery

Extract from Planning Magazine
04 December 2015

New priorities for the government’s multi-billion pound housing budget, along with the Housing and Planning Bill, are likely to reduce the planning system’s role in providing affordable homes to rent, experts have said.

In last week’s spending review, chancellor George Osborne reaffirmed the government’s overriding objective of increasing homeownership. In his statement to Parliament, he said the housing budget would be doubled to more than £2 billion a year. “Above all, we choose to build the homes that people can buy,” Osborne said.

A five-point plan for housing in the spending review is intended to deliver 400,000 affordable housing starts by 2020/21, with funding pumped into low-cost homeownership products rather than affordable and social rented housing. “Affordable means not just affordable to rent, but affordable to buy,” Osborne told MPs.

Of those housing starts, the spending review said, 200,000 will be the Starter Homes pledged in the Tories’ general election manifesto, available at a 20 per cent discount to the under-40s, with a £2.3 billion fund to “support the delivery of up to 60,000 of these, in addition to those delivered through reform of the planning system”. Osborne also pledged 135,000 shared ownership houses and 10,000 more rented homes that will let tenants save for a deposit.

Experts said the spending priorities set out in the chancellor’s statement, combined with mandatory reductions in social rent levels from 2016/17 and yet to be announced regulations on the provision of Starter Homes via the Housing and Planning Bill, could significantly limit the number of social and affordable rent properties provided through planning obligations.

Housing and planning minister Brandon Lewis has acknowledged the effect of rent reductions. The bill also includes a clause to allow ministers to demand that councils include a certain proportion of Starter Homes on all reasonably-sized sites.

Commentators predicted that the changes could lead to a boom in housing needs assessments as councils start taking the Starter Homes initiative into account. They also said the Starter Homes’ proposed exemption from the Community Infrastructure Levy could prompt early charging schedule reviews. The forthcoming legislative changes – and the spending review’s affordable housing funding shift – are likely to mean that the planning system could have a reduced role in future provision of affordable rented homes, they said.

Richard Ford, partner at law firm Pinsent Masons, said local planners would need to show examiners that they have taken demand for Starter Homes into account and could face challenges if their housing need assessments are not updated. He said developers could claim that affordable housing policies are out of date and can be ignored if they do not include Starter Homes.

“Developers may argue that the whole plan is out of date because there is new demand for Starter Homes and more units should be allocated,” said Ford. “The opportunity for authorities to do new strategic housing market area assessments and viability work is now.” He added that section 106 deals are already beginning to be worded in anticipation of a need for future flexibility in the balance between affordable rent, shared ownership and Starter Homes.

Stephen Ashworth, partner at law firm Dentons, said: “When you introduce a new category of housing, it’s difficult to judge what the objectively assessed need for it will be. But Starter Homes are going to eat into something else. Councils will have to pre-empt the situation. By the time data has been put together and put out to consultation, you’re looking at a year to do it properly.”

Mike Kiely, chair of the board at the Planning Officers Society, predicted that the improved viability of affordable homes for sale – compared to properties sold to housing associations for rent – could lead to future section 106 deals with tenure mixes that seek 30 per cent Starter Homes and 20 per cent other affordable tenures.

However, he said the government seems to recognise that “almost a wholesale shift” would be required from “traditional forms of affordable housing to Starter Homes” to deliver the programme, which would further affect the planning system’s ability to deliver affordable rented properties. “By the time the bill is on the statute books, there will probably be three and a half years of this parliament left,” he said. “You would need 38 per cent of new homes to be Starter Homes at a rate of 150,000 a year.”

Ian Anderson, executive director at consultancy Iceni Projects, said he expects proactive councils to look increasingly to deliver affordable rented properties through their own land acquisitions and development vehicles. He queried whether affordable properties built for sale would have viability benefits over those built for rent.

“If landowners know that developers can come through with proposals that don’t include social rented units, that fundamentally changes site values,” he said. “Every scrap of brownfield in London and the South East is being looked at for housing, and I don’t think that the Starter Homes programme is going to lead to a material change in the number of homes delivered. I think it will only change the tenure of those homes.”

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