The Parliamentary Under-Secretary of State, Department for Communities and Local Government and Northern Ireland Office (Lord Bourne of Aberystwyth) (Con)
My Lords, with the permission of the House, I shall repeat a Statement that was made in the House of Commons by the Secretary of State. The Statement is as follows:
“With permission, Mr Speaker, I would like to make a Statement on the latest stage of our work to fix this country’s broken housing market.
As I told the House in February when I published our housing White Paper, successive Governments, all the way back to the Wilson era, have failed to get enough new homes built. We are making some progress in tackling that—189,000 homes were delivered last year and a record number of planning permissions were granted. But if we are going to make a lasting change—building the homes we need to meet both current and future demand—we need a proper understanding of exactly how many homes are needed and where.
The existing system for determining this is simply not good enough. It relies on assessments commissioned by individual authorities according to their own requirements and carried out by expensive consultants using their own methodologies. The result is an opaque mishmash of different figures that are consistent only in their complexity. This piecemeal approach simply does not give an accurate picture of housing need across the country. Nor does it impress local people who see their area taking on a huge number of new homes while a town on the other side of a local authority boundary barely expands at all.
If we are going to get the right number of homes built in the right places, we need an honest, open, consistent approach to assessing local housing need, and that is exactly what we are publishing today. The approach we are putting out for consultation follows three steps. The first uses household growth projections published by the Office for National Statistics to establish how many new homes will be needed to meet rising need. I should add at this point that these projections already take account of a substantial fall in net immigration after March 2019. But this number simply shows the bare minimum that will be required in order to stand still. If we only meet rising demand in future, we will do nothing to fix the broken housing market—a situation caused by the long-term failure to match supply with demand.
So the second step increases the number of homes that are needed in less affordable areas. In any area where average house prices are more than four times average earnings, we increase the number of homes to plan for. The assessment goes up by 0.25% for every 1% that the affordability ratio rises above four. Of course, the state of the housing market means there are some areas where this would deliver large numbers that go well beyond what communities have previously agreed to as part of their local plans.
That is why the third stage of the assessment sets a cap on the level of increase that local authorities should plan for. If they have an adopted local plan that is less than five years old, increases will be capped at no more than 40% above their local plan figure. If the plan is not up to date, the cap will be at 40% above either the level in the plan or the ONS-projected household growth for the area, whichever is the higher.
These three steps will provide a starting point—an honest appraisal of how many homes an area needs. But it should not be mistaken for a hard and fast target. There will be places where constraints such as areas of outstanding natural beauty or green belt mean there is not enough space to meet local need. Other areas may find they have more than enough room and are willing and able to take on unmet need from neighbouring authorities.
That kind of co-operation between authorities is something I want to see a lot more of. To the frustration of town planners, local communities are much more fluid than local authority boundaries. People who live on one side of a line may well work on the other. Communities at the edge of a county may share closer ties and more infrastructure with a community in the neighbouring county than they do with another town served by their own council, and so on.
From talking to the people who live in these kind of communities, it is clear that they get very frustrated by plans being based on lines on a map rather than their day-to-day, real-life experience. Planning authorities are already under a duty to co-operate with their neighbours, but that duty is not being met consistently. So today we are also publishing a statement of common ground—a new framework that will make cross-boundary co-operation more transparent and more straightforward. Under our proposals, planning authorities will have 12 months to set out exactly how they are working with counterparts across their housing market area to meet local need and fill any shortfalls.
The methodology we are publishing today shows that the starting point for local plans across England should be 266,000 homes per year. Nationwide, this represents a 5% increase on the upper end of local authority estimates, showing that the local planning system is broadly on target. For almost half of the authorities we have data for, the new assessment of need is within 20% either way of their original estimate. Nearly half—148—actually see a fall in their assessment. They go down by an average of 28%. In the 156 areas where the assessed need increases, the average rise is 35%, but in most cases the increase will be far more modest: 77 authorities see an increase of more than 20%.
We are not attempting to micromanage local development. This is not a return to Labour’s ineffective and unpopular top-down regional strategies we abolished in 2010. It will be up to local authorities to apply these estimates in their own areas; we are not dictating targets from on high. All we are doing is setting out a clear, consistent process for assessing what may be needed in the years to come: how to meet the need, whether it is possible to meet the need, where to develop, where not to develop, what to develop, how to work with neighbouring authorities and so on remains a decision for local authorities and local communities.
But new homes do not exist in a bubble. New households need new school places, new GP surgeries, greater road capacity, and so on. That is why, earlier this year, we launched our new housing infrastructure fund. Worth a total of £2.3 billion, it ensures that essential infrastructure is built, alongside the new homes we so badly need. We will also be exploring bespoke housing deals with authorities that serve high-demand areas and have a genuine ambition to build. We are also providing further support to local authority planning departments, with a £15 million capacity fund.
So those are our proposals. But past experience tells me that, as soon as I sit down, the right honourable gentleman opposite will leap to his feet, bang his fist on the Dispatch Box, and tell us that today’s announcement is not enough, that it will not get homes built—and he will be absolutely right. These measures alone will not fix our broken housing market. I make no claim that they will. As the White Paper made clear, we need action on many fronts. This new approach is one of them. On its own, it will simply provide us with numbers. But, taken with the other measures outlined in the White Paper, it marks a significant step in helping to meet our commitment to deliver a million new homes by 2020 and a further 500,000 by 2022.
It is so important that we fulfil that commitment, because the young people of 21st-century Britain are reaching out, in increasing desperation, for the bottom rung of the housing ladder. For the comfortably housed children of the 1950s, 1960s and 1970s to pull that ladder up behind them would be nothing less than an act of intergenerational betrayal—one that our children and grandchildren will neither forget nor forgive. If we are going to avoid that, fix the broken market and build the homes the people of this country need and deserve, we must start with an honest, open, objective assessment of what is needed where. Today’s publication provides the means for making that assessment, and I commend it to the House”.
Lord Shipley (LD)
My Lords, I remind the House that I am a vice-president of the Local Government Association.
It is good that councils will be undertaking a more accurate assessment of housing needs in their area and working across boundaries with neighbouring authorities—perhaps better than occurs in some places. The further support through the capacity fund is welcome, although I suspect that it may prove not to be enough, but no doubt the Government will keep that under review.
The Statement goes so far but when it says that,
“we need a proper understanding of exactly how many homes are needed and where”,
there is something missing. We need to know also what tenure they ought to be. Are they for sale, and at what kind of price range? Are they for rent? Are they to be affordable or are they to be homes for social rent? A major failing in the Statement is that it does not address the issue of finance. I will come back to that in a moment.
I am interested, if the Minister happens to know, in how much the expensive consultants using their own methodologies have actually wasted. Presumably there is a figure in the department which would indicate to us how much money has been spent by consultants who are not using common methodologies. It should be a matter of concern if public money is being spent for purposes that may not be giving us a clear result. But the Statement ends by saying:
“The result is an opaque mishmash of different figures that are consistent only in their complexity”.
We need to know more about that, because the figures that are being used for planning purposes need to be reliable.
Perhaps the Minister will explain why the four times average earning planning figure is being used rather than some other number. Presumably it has been carefully worked out but another number could be more appropriate. The Government may find that they need to keep under constant review whether the three stages of assessment are actually working. They may do, but the consultation will reveal whether or not they actually do.
Is it necessary for planning authorities to have 12 months,
“to set out exactly how they are working with counterparts across their housing market area”?
In some cases they already are; in other cases where they are not, they should be doing it a great deal more quickly than in 12 months. If there was to be a faster figure, I would want to support that.
The Government have come out with the figure of 266,000 homes per year as the starting point for local plans across England. I just draw the Minister’s attention to the report by the Economic Affairs Committee of your Lordships’ House, which said that it should be 300,000 a year—after a great deal of work. Perhaps the Minister could explain whether 300,000 is the Government’s target. Presumably, to hit 1.5 million over five years, as the Statement also indicates will occur by 2022, it is closer to 300,000 a year. Unless the financial arrangements are sorted out to enable local authorities and others to build, particularly for social rent, a problem is going to arise because I do not think you can build 1.5 million houses to sell. Whether it is for a form of shared ownership or whatever, in the end we simply need more social homes for rent.
The Statement makes it clear that:
“These measures alone will not fix our broken housing market”.
That is absolutely true. But the Statement does not go on to tell us why that is. But the reason is because the financial arrangements are not in place to do it. Earlier today in Questions, I cited the National Audit Office report on homelessness, which cost local authorities £1.1 billion in 2015-16. That would have provided 30,000 new affordable homes—not necessarily homes for social rent. It is clear to me that the broken housing market will not be fixed only through changes to the planning system. The root of the problem is that the cost of renting is too high and not enough social housing is being built. The Government are at serious risk of not delivering the 1 million new homes by 2020 and the further 500,000 by 2022.
Finally, the Minister said a great deal about the regional spatial strategy. There were problems with the regional spatial strategy, but it was not quite as bad as the Statement made out. This new approach may be better, but it is still slightly top-down. I draw the Minister’s attention to a report published recently by Homes for the North, which looks at a regional approach to the provision of housing and identifying housing need. What is particularly interesting in its statement that 500,000 homes are needed over a 10-year period across the north of England is that the work is being done in conjunction with Transport for the North; in other words, there is an integrated planning system, not officially in place but unofficially in place, which I think is going to help identify need. If the Minister has not read the report, Future Housing Requirements for the North, I hope he will endeavour to do so.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lords, Lord Kennedy and Lord Shipley, for their contributions. The noble Lord, Lord Kennedy, was keen to tell us that he was not going to bang on the Dispatch Box but then went for a metaphorical bang on the Dispatch Box before he got out of his first sentence, I think, on the Housing and Planning Act 2016, which is a routine approach of his, I know. I take issue with him on the housing White Paper. This was widely welcomed, including by many people in the Labour Party, certainly in the other place, as being radical and forward-looking. I am not sure I would go along with his uncharacteristically churlish approach. I also remind him that 333,000 new homes have been built since 2010. On the local authority housing situation, as a Government or as part of a Government in the past five years, we have built more than double the amount of local authority housing that Labour did in 13 years. We all have challenges to face but these are irrefutable facts.
I remind noble Lords that this is a consultation. This is not the definitive word. We are opening this for consultation and the consultation is open until 9 November. I do not want to say, “This is definitely what we are going to do”. We are consulting on many of the issues that noble Lords have understandably raised. The noble Lord, Lord Kennedy, asked when this would take effect. I appreciate that there is a lot to take in in the documents but we have indicated that 1 April 2018 is the date we are looking at, or later if the National Planning Policy Framework is altered. It is whichever of those two dates is the later but of course we will want to take account of the consultation, which is not ending until nearly halfway through November. I am sure noble Lords would expect us to do just that.
The noble Lord, Lord Kennedy, also asked about what happens if local authorities do not agree with that approach. Let us presume that it goes forward after consultation in a very similar form—though, as I say, the consultation is open. If the local authority does not like a particular figure, or wants to revise it because of green belt or an area of outstanding natural beauty in its area, the policy will then go, in the normal way, as in every case, to examination by the planning inspector, who could disagree with it. That decision will be the definitive decision unless there is judicial review, if the planning inspector misdirects himself in law. There is a process there for independently ensuring that the agreed figure is carried forward.
I thank the noble Lord, Lord Shipley, for his comments on common ground and working across boundaries in the housing market areas. He questioned why the period is 12 months. I anticipate that some local authorities will say that the objective is challenging. Although we are always tempted to go more quickly, some local authorities may have not one, but various, boundaries to cross, perhaps working with other authorities to the east, west, south, and so on. It may be a taller order than is immediately apparent.
The noble Lord, Lord Shipley, also raised the issue of consultancy costs. Our workings on that show that, on average, each local authority is spending around £50,000 on consultancies. We are not suggesting that that is wrong—certainly it is intra vires within the present system—but we think that the system we are recommending will be simpler and not need those consultancies, because it will essentially be a mathematical formula. I am not suggesting that that money has been illegally spent, but it could be saved. We are proposing a uniform approach. I do not think it is top down in the way that was suggested, in the sense that we will still be giving local areas key decisions on whether to disagree with the approach, and so on. Nevertheless, it will provide a uniformity of approach. Four times average earnings is a formula we have adopted, but the consultants at the consultation may throw up other suggestions.
The noble Lord referred to our existing targets and suggested they are challenging. I accept that they are: 1 million new homes by 2020 and 1.5 million, so another half a million, between 2020 and 2022. Those will not all be homes to purchase—I correct the noble Lord on that point—some of them certainly will be for rent. The White Paper refers to the need to get the social housing sector moving as well. We are of the view that this needs a mixed approach. The figure of 266,000 may well be exceeded. We may find—we hope—that some local authorities will want to go further. They will have to justify that again when the plan goes for examination, but they could well go further, so this figure would therefore be a baseline.
The noble Lord, Lord Shipley, also referred to other issues that should be integrated. I fully accept that, and we expect to work alongside the national infrastructure framework and the £2.3 billion that we have allotted to help achieve that. I think I have covered the points that the noble Lords raised but, as always, I will write to them after the Statement concludes to pick up any points I have missed and perhaps to answer any detailed questions.
Lord Bourne of Aberystwyth
I thank the noble Lord, Lord Best, very much for his contribution and I welcome the work that he does in this area. He set out two anxieties, the first of which was affordability. The fact that in the formula we are looking at the areas where prices are highest and affordability is a real issue—and putting an additional obligation on those areas to deliver more housing—should have a beneficial effect on prices in those areas. I agree that that could be exaggerated but, nevertheless, it will put some downward pressure on prices.
The second issue that the noble Lord raised was quality. I very much agree with what he said, and perhaps it is a point that I should have addressed earlier. This House has taken a particular interest in quality and design—and I think of the response that I gave in a debate on a Select Committee report on this very issue led by the noble Baroness, Lady Andrews. We are seeing what we can do within the department to mainstream design much more as an important part of the process. It is important.
The other thing that I should have picked up in response to the noble Lords, Lord Kennedy and Lord Shipley, is planning committee fees. In addition to the money that we talked about in the Statement itself we will soon bring forward an SI on the 20% increase in planning fees. In the consultation there will also be, as noble Lords will see when they read it, an additional 20% on those authorities that deliver the housing set out in their housing need targets. That incentivises it, and of course that money must be ploughed back into the planning department; that is one of the attached conditions. I am sure that that will be beneficial too.
Baroness Donaghy (Lab)
My Lords, I welcome the Government’s intention for there to be an open and honest approach. As part of that, it is important that we all accept that successive Governments have not succeeded on the issue of housing for our country.
I was disappointed that so much was made in the statement about the record number of planning permissions. We all know how meaningless that is. There is already a mountain of planning permissions that have not been acted on. However, I am interested in the steps in the consultation. If the first two on the household growth projections and increasing homes in less affordable areas are carried out—one on accuracy and one on building homes in areas of real need—they will be very good steps indeed. I will ask a little more about the third step, which is setting a cap on the level of increase that local authorities should plan for. I was not quite clear what that meant for existing local authority planning.
I will ask a bit more about what plans the Government have to enable more local authority housebuilding. It may have more than doubled, as the Minister said, but it has probably more than doubled from a pretty pathetic figure. Enabling local authorities to expand any housebuilding projects would help enormously.
My final point is about the construction industry, which has not been mentioned. It is going through some relatively bad experiences, certainly outside London. Balfour Beatty has been making hundreds of very experienced construction workers redundant. I know the housebuilding sector is rather different from some of the very big construction companies, but I wonder whether the Government are in consultation with those construction firms to ensure that they are around and able to build these houses, and that their workers are in the right place to help build them.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness, Lady Donaghy, for her characteristically honest and candid contribution on the shared blame we all have relating to the problems we face and why we must all move forward together. As she rightly said, this is about seeking to build more in less-affordable areas. As I said, that should have a beneficial effect in those areas, particularly for people struggling to buy. As I said, the cut-off date for existing local plans is that if they have gone in before 1 April 2018 they will not be subject to the new, consulted-on regulations. That is the cut-off deal.
The noble Baroness referenced the need for more local authority building. I agree. She will know, and I think I mentioned this previously, that we are seeking to do bespoke deals with authorities up and down the country. We are in discussion with many authorities. We are certainly at a fairly advanced stage with Leeds and the West Midlands, but there are others.
The noble Baroness then mentioned the construction industry. Obviously we consult it, particularly on employment issues and the impact of Brexit on the workforce, where we have concerns, as set out in the Farmer review, which was an independent review but commissioned by the Government on the industry. It is something we look at very closely and we are in discussion on a regular basis with developers about the industry’s needs.
Lord Filkin (Non-Afl)
My Lords, I warmly welcome the Government’s commitment to radically increase the supply of housing. I declare two interests as chair of the Centre for Ageing Better and as a member of the Intergenerational Commission. The problems of insufficient housing are borne by both ends of the spectrum. Younger people face significantly higher housing cost and significantly lower quality of housing because we have failed to build enough housing in the last 20 years. The greatest growth in the number of households and the percentage of households is in people aged 65 plus. Clearly, the housing White Paper makes some reference to this, which is welcome, but there is an urgent need to recognise the importance of the million new homes, many houses being provided that are suitable for older people or people as they get older, and ensuring a supply of suitable accommodation for people to move into in urban and rural areas as they wish to adopt more suitable housing for their later years. What will be done about this?
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord very much indeed for that contribution. I reiterate the point he quite rightly made that this is about cost, but we must also have regard to quality. He refers quite rightly to the great growth in the housing needs of people aged 65 and over, not least because people, thankfully, are living longer. Their needs will be very different as they age. He will recall that on the then Neighbourhood Planning Bill there was discussion on this, prompted initially by the noble Baroness, Lady Greengross, I think. As a result of discussions on that, the Government were keen to ensure that we placed an obligation in the National Planning Policy Framework relating to elderly housing, which has been taken forward. It is very much at the forefront of our thinking and therefore places an obligation on local authorities to make provision for that age group when they present their plan.
Lord Greaves (LD)
My Lords, the Government’s mantra is that the housing market is bust—they say broken, I say bust. The truth is that the local planning system is bust, very largely due to the cost and complexity the Minister referred to of producing local plans. He is really blaming local authorities for this—I declare my interest as a member of a district council in Lancashire—but all the councils are doing in producing these local plans, using expensive consultants and producing incredibly complex documents, is following instructions from above and doing what they are told to do, and how they are told to do it, by the Government.
The Statement says:
“We are not attempting to micromanage local development … It will be up to local authorities to apply these estimates in their own areas—we are not dictating targets from on high”,
unlike the old regional spatial strategies, but this is exactly what the coalition Government said when they introduced the present system six or seven years ago. It has not worked out like that. The truth is that the numbers that come out are effectively dictated from on high by the rules and regulations laid down. It seems this will be just the same.
Will the Minister give a bit more detail about the relationship between this new system when it comes in, which presumably will be next spring some time, and the existing local plans that have been adopted and the local plans and core strategies going through the system in different local authorities? The Minister said that if a local plan is in existence before 1 April 2018 it will not be subject to these new numbers, but will the new numbers still apply when people apply for planning permission for new developments over and above the numbers in the adopted core strategy or the adopted local plan? What about areas where numbers would go down when local people and perhaps the local authority quite reasonably expect to be able to resist applications for planning permission on the basis of new numbers, even if numbers have been set out or land allocated in their local plan?
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord, Lord Greaves, very much for that and give him this assurance: I certainly was not blaming local authorities. I went very much out of my way to say that action was being taken on the system as it was and that it was intra vires their powers. As I have been at pains to say, successive Governments have brought us to the position that the market is broken—bust, as they apparently say in Pendle. It is right to say we are going for a uniform approach, as he indicated, but issues about where the housing goes and the type of housing is a matter for the local authority. We seek to set out a framework here and we are of course consulting on it.
Regarding the dates for when this comes in, if there is an existing plan as of now or an existing plan goes in before 1 April 2018, or later if the national planning policy changes later than that date, that plan is the valid one until it runs its life. New ones will come in and take over from the old plans.
In relation to the issue of some authorities wanting to be or being in a position where, on the formula, they will require less housing, if they want to go further than that then of course the Government will be delighted, but they will need to justify that to the Planning Inspectorate on examination. Once again, that will be an independent process. That is the essence of what we are consulting upon but, as I say, we are very much open to this discussion, which will end on 9 November.
Lord Kerr of Kinlochard (CB)
I thank the noble Lord for the Statement. I admire his expertise on the subject—I admit that I have none. I welcome the Statement to the extent that I understand it and as far as it goes. I am a member of the Economic Affairs Select Committee under the noble Lord, Lord Hollick, which produced the report referred to by the noble Lord, Lord Shipley. The two things that struck me most in that exercise were that, first, if one approaches the problem from the basis of the crying need for more social housing, it really is necessary to allow local authorities to borrow to build and that, secondly, if one approaches it looking at the development by the private sector, one really has to think of a way to tackle the problem of three-quarters of a million permitted houses not being built. The big developers were very clear that their business model does not depend on land banking. Yet their results are very good at the moment and the markets might well think that they are doing pretty well on large land banking and not building the houses for which they have obtained permission. As we approach the budget season, can the Minister talk to his colleagues in the Treasury about the possibility of incentivising, taxing or penalising builders to build the houses for which permission has been obtained?
Lord Bourne of Aberystwyth
I thank the noble Lord for the reference to the excellent report from the committee chaired by the noble Lord, Lord Hollick. The Government are of the view that there is sufficient headroom on the borrowing at the moment which is not utilised, so there is no need to look at the cap. There are considerable reserves held by local authorities as well. Obviously this is something that we review but, just at the moment, there does not seem to be any need to move on that.
The noble Lord, Lord Kerr, also referred to the issue of land banking, which I think also came up in an Oral Question today. Obviously it is something that was tackled and mentioned in the White Paper; we are analysing the responses and will come forward following the consultation on that. I am very grateful to him for exaggerating my powers with the Treasury, but I think that that will be a matter for my right honourable friend the Secretary of State. It is obviously an option that is canvassed and talked about, as we certainly want to encourage builders to ensure that we do not need to take that action by not sitting on great reserves of land.
Lord Young of Norwood Green (Lab)
My Lords, I was not intending to enter this debate but I want to make a couple of comments. On the point that was just made about local authorities apparently having enough reserves to build more social housing, even if they do, all those properties—given the Government’s formula—eventually become subject to the right to buy. They come back on to the private market and their prices rise to meet whatever the local circumstances are. If we look at the situations in some local authorities, the right to buy has become the right to buy to let for about 50% of those properties, with very large rents and a huge amount of housing benefit going to these private landlords.
What is the Minister’s view about the developments going on in a number of places? I read recently that, in Hackney, they are using what they call a community land trust, whereby the house may pass on but the land remains in the control of either the community or the local authority. Is this a way forward? It may not solve all the problems but it seems to me that it has a real contribution to make. Are the Government considering ways of encouraging this approach?
Lord Bourne of Aberystwyth
I thank the noble Lord, who I know has considerable expertise in this area. I am glad that he decided to contribute. He will know that we are looking at bespoke deals on social housing and a diverse range of ways to deliver housing—I have mentioned Leeds and the West Midlands, for example. I am aware of the community land trust option; I think it is an interesting one and, given that we are going for a diversity of approach, I am sure that in some situations it is entirely appropriate. It will be interesting to see where else that is being followed.
We are in close discussions with the London mayor. My right honourable friend the Secretary of State met him last week—there is a good relationship there. They discussed London’s needs on housing and, of course, we delivered a record-breaking settlement with the mayor of £3.15 billion, so much is being done in London. We accept that there is a great challenge on affordability—as well as design, which has been referred to—and we are grappling with this. I hope that noble Lords will agree that this Statement offers a way forward. It does not solve the crisis, as we are very keen to say, but it is an important contribution to it.