Planning (Affordable Housing and Land Compensation)

1st reading: House of Commons
Wednesday 27th February 2019 Commons Chamber

Motion for leave to bring in a Bill (Standing Order No. 23)

13:55

[Helen Hayes (Dulwich and West Norwood) (Lab)]

I beg to move,

That leave be given to bring in a Bill to define affordable housing in relation to household incomes; to amend the law relating to land valuation and compensation; and for connected purposes.

Our post-war planning system is a framework for managing change in our towns and cities and ensuring that new development meets the needs of local communities, for brokering and mitigating the gap between individual private interests and collective community needs, and for redistributing the scarce resource of land. Local plans safeguard land for particular purposes, including housing, employment, education, and community uses. Our heritage protection regime and national parks protect the buildings and landscapes that communities value. Planning policies seek to ensure that affordable housing is delivered and that across many dimensions of design, from building height to energy performance standards, new buildings take due account of their surrounding community and wider environment. Despite that, our planning system, deregulated and modified in recent years, too often fails to deliver against either the promises it makes or the real and pressing needs of local communities.

In a wider political environment characterised by a lack of trust in politics, our planning system is part of the problem. Every time a new housing scheme is delivered in which even the “affordable” homes are far out of reach of local people in housing need, every time a new building starts to look shabby after just a short time and every time planning permission is granted but nothing happens on the site for years, trust is eroded a little more. It is time to restore a vision of planning as the key to meeting the needs of local communities while also safeguarding their interests for future generations, and it is time for planning to step up and play its full part in helping to restore trust in democratic processes.

We need an agenda for reform, and I want to set out today two reforms—of the definition of affordable housing and of the rules around land values and viability—that could make an immediate difference. My Bill, which is supported by Shelter and the Town and Country Planning Association, seeks to reform our planning system to deliver the fair outcomes communities desperately need and to accelerate the delivery of genuinely affordable social housing.

The housing crisis is the single biggest practical issue facing communities across the whole country. The critical challenge for our planning system is to deliver the genuinely affordable social homes that are urgently needed in so many places, but there are some major problems that limit the effectiveness of our planning system and work in favour of landowners against the interests of communities.

Too many of the current mechanisms designed to deliver fair outcomes from the planning and development process essentially amount to shutting the door after the horse has bolted. Local planning authorities are required to negotiate affordable housing contributions with a definition of “affordable” that has no relationship to income, and the price of land, which is a key determinant of how many affordable homes are considered “viable”, can be hugely inflated by landowner expectations of a right to “hope value”—future speculative value based on planning permissions which the landowner does not own and has not realised, and which are not confirmed in law.

Our planning system is in need of major reform. The Government’s definition of affordable housing includes homes to buy at up to £450,000 and homes to rent at up to 80% of market rent. I and my party support the delivery of affordable entry-level homes to buy, and although I believe that there are ways to deliver these homes that are more effective and give better value for money than the Help to Buy scheme, my Bill does not cover homes for sale; it addresses the definition of affordable homes to rent.

Market rents vary across the country. Westminster council warned in 2013 that 80% of market rent would require a household income of more than £100,000 to sustain a tenancy on a three-bedroom home, while a two-bedroom home in Southwark in the same year would require £44,000—more than double the average household income in the borough.

The role of affordable housing has always been to meet the needs of those who cannot afford to rent or buy housing in the private market, yet the current definition has completely broken the ability of the planning system to deliver sufficiently for those in the greatest housing need. The figures bear this out. Over the past 10 years, the number of social homes built each year has fallen from around 30,000 to 6,400. At the same time, the number of so-called affordable homes at up to 80% of market rent has increased to 47,000. With 1.25 million families on the waiting list for social housing, there is no justification for a policy that fails to deliver homes that are affordable to households with low incomes. My Bill re-establishes the link between the definition of affordable and income, replacing the current definition of up to 80% of market price with a definition of

“no more than 35% of net household income for lowest quartile income groups in each local authority area”.

Just as important as the definition of affordable homes is the cost of the land on which they are built. Despite reforms introduced last year, which were welcomed, our planning system still affords landowners the right to the future value of development rights or planning permission, which are granted by and in the gift of the planning authority. This so-called hope value dramatically inflates the cost of land, and inflated land prices make it much more difficult for councils to buy land in order to deliver social housing.

In a recent example in south London, a site with an existing use value of £5 million was put on the market at £25 million on the assumption that it could be developed for housing. It was later withdrawn from the market on the expectation that the value would rise even further, setting back the delivery of any housing at all on that site by years and making it almost impossible to deliver affordable housing, even by the current broken definition. This inflation of value either places sites far beyond the reach of councils and housing associations or requires a significant quantum of private homes to be built to cover the costs—homes that either push up density to levels that are unacceptable to the surrounding community or are built at the expense of genuinely affordable homes.

The current viability rules were developed to encourage and stimulate building in a recession, but they have evolved to become something quite different: a quasi-scientific basis for negotiation between developers and councils, with the overt objective on the part of developers of reducing their obligation to build affordable housing. The current system enables this to happen, as viability arguments can justify an appeal against refusal, and cash-strapped councils are reluctant to risk having to pay the applicant’s appeal costs if they lose. These negotiations are often not between equals, as councils struggle to resource the expertise they need to interrogate developers’ figures, and they also slow down planning, often taking years to resolve, creating great uncertainty and frustration.

It is vital that our planning system provides certainty and transparency, and puts an end to speculation on land values that prevents land from being used to deliver new homes. While landowners should receive fair compensation, coded in law, they should not be entitled to speculative value that does not arise from any action or effort on their part. My Bill creates a new requirement in planning law for local planning authorities to have a duty to include a policy in their local plans to capture betterment values where they arise, formally establishing a legal duty in the planning system to capture land value to be used for the benefit of communities and creating a strong justification for councils to argue for the resources they need to engage in viability discussions on equal terms with applicants.

Finally, my Bill seeks to specify in law the key factors used for viability testing in relation to planning decisions, including placing explicit limitations on the expectations of developer profit and land values for compulsory purchase, providing greater certainty and transparency for both landowners and communities. Specifically, my Bill would: amend section 19 of the Planning and Compulsory Purchase Act 2004, as amended, and add to it a statutory definition of an affordable home for the purpose of all planning decisions; make further changes to sections 14 to 16 of the Land Compensation Act 1961, as amended; and introduce a new statutory definition of the key factors used for viability testing in relation to planning decisions.

In the context of a national housing crisis, our planning system must be able to deliver the genuinely affordable homes that communities need. More than this, communities must be able to trust that it will do so, and that the promises made in local plans and in planning applications will not be watered down later on the ground of viability. My Bill will reform our planning system to place community need at its heart and increase the speed and quantum of affordable housing delivery to address the housing crisis. I am grateful to Members from across the House who have indicated their support for the Bill, and I commend it to the House.

Question put and agreed to.

Ordered,

That Helen Hayes, Mr Clive Betts, Rosie Cooper, Emma Dent Coad, Ms Harriet Harman, Mr George Howarth, Norman Lamb, Caroline Lucas, Jess Phillips, Andy Slaughter, Alex Sobel and Sir Gary Streeter present the Bill.

Helen Hayes accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 22 March, and to be printed (Bill 344).