Building More Homes (Economic Affairs Committee Report)

Baroness Young of Old Scone Excerpts

Thursday 2nd March 2017 Lords Chamber

[Baroness Young of Old Scone (Lab)]

My Lords, I declare an interest as chairman of the Woodland Trust and president or vice-president of a range of wildlife and conservation organisations. I very much welcome this report from the Economic Affairs Committee—particularly the focus on enabling local authorities to retake their place as providers of social housing for a range of tenures, including rent. Then there is the proposal that local authorities are given the power to levy council tax on developments that are not completed in a set time period. The report is very much complementary to the report of a year ago by one of the ad hoc Select Committees—the Select Committee on National Policy for the Built Environment, on which I had the privilege to sit. I do not know whether we had slightly longer than the Economic Affairs Committee to wait for a response from government, but it was 10 months during which I reminded the Government pretty well monthly that time was ticking away—but it came.

I want to raise two economic points germane to both these reports. First, I echo the contribution of the right reverend Prelate on the need for houses but not at the expense of quality. The report on the built environment stressed that the quality of our housing and other development is vital in creating places that foster health and well-being that are environmentally sustainable. If we do not achieve that, we could fail to get value for money and we could build ourselves economic and other problems for later years.

There is a lot of evidence to be worried about on quality. First, new homes in the UK are now smaller than anywhere in western Europe. I used to visit friends in the Netherlands and think secretly, when they were showing me great hospitality, “I could not live in these little boxes”. In many cases, those are now our little boxes. I suspect when I look around that noble Lords are old enough to remember the Pete Seeger song in the 1960s about,

“Little boxes made of ticky tacky”.

According to the RIBA, half of homes built in the UK fall below the Government’s space guidelines. That is particularly so the further north you go in England. I welcome the commitment in the housing White Paper to review space standards, but we cannot continue in a situation where they are to all intents and purposes voluntary. Can the Minister comment on the prospect of statutory space standards?

Another example of worries about quality is with design and the process of design review, which is faltering and patchy as local authority resources diminish. Inadequate care has been taken to ensure access to green open space, which the evidence increasingly shows is good for physical and mental health and cheaper than the NHS. The Government’s Natural Capital Committee estimates savings of £2.1 billion in reduced health treatment costs if adequate green open space access is provided. That committee has also calculated that if 250,000 additional hectares of woodland were planted in and around towns and cities, it could generate net societal benefits of £500 million per annum. So the evidence is there that the quality of settlement and design is fundamental to value for money. We have heard in the news recently about the quality of build of some developers, which really does reinforce the worry that they are all “made of ticky tacky”. I am sure that many of them are not, but we need to make sure that we maintain the quality of build. It was distressing to hear about poor experiences of the NHBC in helping house purchasers who had bought substandard houses.

A common theme in the evidence that we received during the built environment inquiry—I am sure that it was the same with the Economic Affairs Committee—was how under the cosh local authorities feel, faced with the need to deliver plans for ever rising housing allocation targets. This can result in poor location decisions, as local authorities grasp thankfully at large greenfield sites which offer big numbers of houses but raise major questions about transport infrastructure, access to jobs and sustainability, and eat away at formal or informal green belt. I very much welcome the Government’s commitment to the green belt in the housing White Paper but open countryside is also at risk. My overall point on quality is that we must not, in the dash for much-needed houses, make the mistake of building small, mean houses of patchy quality which are poorly located and create places which have no quality of place, do not promote well-being, are not sustainable and rapidly become the slums of the future. Will the Minister indicate how the Government can avoid the “stack ‘em high and sell ‘em cheap” philosophy?

That takes me to my second, linked point, which, again, chimes with the Economic Affairs Committee’s conclusions on planning reform. Time and again during the built environment inquiry we heard from planners, local authorities, developers and practically everybody about local authority cuts resulting in the loss of planning resources and expertise. We heard of planning departments struggling with few or no specialist resources such as heritage experts or ecologists. Two-thirds of local authorities now have no ecologist in their planning department. I very much commend the committee’s proposal that local authorities should be allowed to set and vary their own planning fees. I welcome the housing White Paper’s announcement of a 20% increase in July and the consultation on a further 20% incentivisation to local authorities which are actually delivering homes. However, we need something beyond this one-off hike and I would be grateful if the Minister would indicate whether there are long-term plans to give further flexibility to local authorities. The strength and expertise of planning departments is vital if we are to see well-thought-through local plans, good support to neighbourhood planning and swift, effective development decisions.

If there was one overriding message throughout the evidence we heard from all sides during the built environment inquiry it was this: although many development proposals start off excellently, proposing quality places with good contributions to mixed housing, infrastructure and open space, there would then be a falling back. Developers would subsequently use the viability test to row back considerably from delivering these collateral benefits to simple housing numbers. Developers would come back wringing their hands and saying that they simply could not make the value proposition stack up to deliver all the promised goodies that secured the planning permission in the first place. Struggling planning departments, we were told time and again, would simply cave in, unable to challenge the viability test arguments of the better resourced developers with sharp suits and shiny consultants. The result was that the initially proposed quality of development simply disappeared. So we need strong, expert planning departments. Encouraging housing development must not be at the expense of quality of place or we will achieve poor value for money and many people in this country will live to regret it.

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[Lord Layard (Lab)]

My Lords, as a member of the committee, I too thank our great leader, sitting in front of me. As has been said, the starting point for our inquiry was a very remarkable estimate that is widely accepted—that, simply to stop real house prices and rents from rising further, we need not 200,000 homes a year but 300,000, just to stop things getting worse. However, surely we want things to get better, so we need more than 300,000 homes a year to make the target of an affordable housing sector a reality. That means a massive housing boom over 15 years, as the noble Lord, Lord Kerslake, has said—that is what we have to generate. We have to ask ourselves what conditions could generate a continuing housing boom—not little tinkerings but the fundamentals for generating such a boom. However, I do not think that we will get the answer to that unless we understand the fundamentals of our present situation, which is really quite remarkable.

Real house prices and rents have trebled over the last 30 years—it has been said that that is completely out of line with the experience in the rest of the world—yet the number of houses built by the private sector is the same as it was 30 years ago, so there is no response. You would have expected those extraordinary prices to generate an extraordinary supply response but that has not happened. If you look for explanations, you can find little ones that might apply in one year or another, but surely the fundamental explanation must be the planning system. The planning system determines the supply of land on which the houses are built and, if the supply is restricted, the real price of land goes up. So what has happened to the price of land? It has more than quadrupled. In fact, in terms of the constituents of the price of housing, the whole increase is due to the increase in the price of land. Therefore, I would like to talk about land and planning.

There is only one way that we can describe the present situation, which is that it involves a major disregard of human need. For example, if a hectare of land is worth £2 million when it is used to provide homes for people and with its existing use it is worth only £20,000, that simply disregards the simple evidence of human need. What is the value of the land to society with one use as compared with another? The only exception to that being an outrage would be if one could show that the amenity value of the land with its existing use was as high as the price of the land if it provided homes. That might be the position sometimes but certainly not in an awful lot of cases at present.

How can we improve the situation and unleash the energy of the housebuilding industry? The key is to make it easier to get planning permission. It is that simple and, unless we face up to that, we will not start from the central analysis of how we have reached where we are. In particular, we have to make things easier for small and medium-sized builders, who have been pushed out of the market mainly by the complexity of the planning system. We have to get them back in to create this boom. Therefore, I want to make two suggestions for liberalising the planning system and generating the boom.

First, there has to be in the system more presumption in favour of development. I think that the Government have used that phrase sometimes but it has to be made real. One possibility is to focus on areas where the price of land is very high and therefore the evidence of human need for houses is very strong. You could say that in areas where the value of land was above £2 million, there would be a presumption in favour of development, and the local authority could refuse it only if it could persuade the inspector that the amenity value of the existing use exceeded the value of the land if it were used to provide houses. I would not suggest that as a universal arrangement, and certainly not in areas of the green belt that were open to public access, for example, but I shall make a few suggestions as to where you could start.

One obvious starting point that has been suggested in some reports is on land near railway stations. I think it has been suggested that if we could build up the areas within two miles of railways stations in commuter reach of big cities, we could have an awful lot more homes. Another suggestion would be parts of the green belt lying inside the M25 but without public access. There is an awful lot of land without public access inside the M25. I do not know whether your Lordships know this extraordinary fact but if only 10% of the green belt inside the M25 were developed, this would provide 1 million homes. It is important to get these things in perspective.

[Baroness Young of Old Scone]

I have recently chaired a conference on the green belt for Greater London. It was startling to see just how the proposition that my noble friend is putting forward works in practice. The reality is that, if we are to make London liveable in the face of climate change, we need to maximise the benefits of the existing green belt to deliver heat reduction, water protection, flood risk management and access to open spaces, otherwise we will see the heat impacts on London of increasing temperatures from climate change. As far as I am concerned, the secret is not to build lots of houses on the green belt but to get the green belt to work for its living in all these aspects. Two-thirds of the green belt being inaccessible to the public is something to change, but it does not need to be built over.

[Lord Layard]

I am grateful for that. I am a bit more hopeful about dealing with climate change by electrifying the economy with clean electricity rather than by failing to give people homes. I think that we can make progress without expecting people to go into ever more expensive properties. I was very encouraged by what the noble Lord, Lord Kerslake, said about the green belt. It is true that attitudes are changing, and that is very helpful.

Of course, we understand that local authorities have political reasons for not wanting to give planning permission. We always remember how Aneurin Bevan got the National Health Service set up by stuffing doctors’ mouths with gold. It still seems to me that we ought to allow local authorities to have a higher fraction of the financial uplift that occurs when they give planning permission, and we should then insist that they use that for housing purposes. My colleague Professor Cheshire at the London School of Economics has suggested a levy on the final value of a completed development, combining that with the change in presumption that I referred to earlier. There are many areas in which these ideas can be explored. The committee took no view on these issues but it made a clear recommendation that the Government should examine these proposals. I hope that the Minister can confirm that his admirable colleague Mr Barwell will be doing that.

We should recognise that we are suffering from a self-inflicted wound. We have inflicted it on ourselves mainly through the way in which we have operated the planning laws. Other countries have much less of a problem because they have not done what we have done. It is a case of the triumph of the few over the many. The distributional impact of the planning system is one of the most powerful sources of inequality in our society, and I think that we will satisfy the needs of the many only if we are honest about the origins of our present situation.