Third time lucky?Posted: September 6, 2012
So here it is: what by my reckoning the coalition government’s third housing strategy in two and a half years.
Mark one was the assumption that implementing the coalition’s programme for government would do the trick. The ‘powerful new incentive’ of the new homes bonus would persuade local authorities to approve more homes and get housebuilding moving. The Localism Act would turn help turn NIMBYs into YIMBYs. And FirstBuy would give a time-limited kick-start to the housing market with equity loans for first-time buyers.
When that didn’t work, Mark two came last November. The big idea was NewBuy, a government-backed mortgage indemnity scheme to give 95 per cent mortgages on new homes to up to 100,000 buyers. That was backed up by funds for custom homes and empty homes, a consultation on right to buy 2 and another review of investment in the private rented sector.
When that didn’t work, Mark three was announced this morning in what David Cameron said was evidence that ‘this government is serious about rolling its sleeves up and doing all it can to kick-start the economy’.
Details so far are pretty thin on the ground to put it mildly but here are some initial comments from the No 10 statement [see below for the parliamentary statement by Eric Pickles]:
• Removing restrictions on stalled sites by removing ‘costly affordable housing requirements’ where developers can prove they make the project unviable. This has been coming for a while as part of a consultation on renegotiating section 106 deals prior to 6 April 2010 that runs until October 8. It sounds like the outcome has already been decided. The No 10 press release says this will help unlock 75,000 homes but it’s not clear how this figure is calculated. It’s also not clear how the system will work since it is already quite possible to renegotiate section 106 agreements and only three weeks ago Eric Pickles was sending in ‘expert brokers’ to sort it out.
• Confirmation of government guarantees of up to £10 billion for new homes. This was the announcement that was expected earlier in the summer and delayed. This will be part of the Infrastructure (Financial Assistance) Bill and include guaranteeing the debt of housing associations and private developers. The thinking seems to be that this will bring lending rates down close to those enjoyed by the government while remaining off the public balance sheet. It’s not clear though what the balance will be between associations and developers or how much of the lending will be new and how much will replace existing bank loans.
• An extra £300 million in ‘new capital funding’ for up to 15,000 affordable homes and 5,000 empty homes brought back into use. This is good news and seems to be the Lib Dem price for agreeing to the section 106 changes. However, note the ‘up to’ and the clear implication that this will be more affordable rent when many of the scrapped agreements will have specified social rent. It’s also not at all clear what will happen to section 106 in the longer term.
• An additional 5,000 homes for market rent in line with the proposals in the Montague report. Again, no more detail yet but the speculation is that the government will agree to Montague’s proposals including removing affordable housing requirements on schemes that are for market rent.
• Including big residential schemes in the planning fast-track for major infrastructure schemes so that ‘where councils are poor’ developers can go straight to the Planning Inspectorate. Again there are no more details so we do not know what counts as big but perhaps this could clear the way for future new garden cities and urban extensions?
• Putting the worst-performing planning departments into special measures and setting up a fast-track appeal process. This assumes that planning is the problem but, as the LGA points out in research out today, housebuilders already have planning permission on 400,000 homes and are taking up to nine years to build homes in some cases.
• A £280 million extension of the FirstBuy scheme to help 16,500 first-time buyers. Again there are no more details but this marks a change from the statement in last year’s housing strategy was a ‘fixed term measure’. FirstBuy mark two is also much less generous: FirstBuy mark one provided £400 million for 10,500 first-time buyers to give them a 20 per cent equity loan of almost £40,000 each; FirstBuy mark two works out at at an average of around £17,000 each
• Freeing up the planning rules on extensions and improvements for a time-limited period. As reported, this will allow single-storey extensions of up to 8 metres without permission. This appears to represent not one by two u-turns: one of the government’s first acts was to ban garden grabbing for new homes but now it seems they can be grabbed for extensions; and only last week ministers were launching a clampdown on beds in sheds but now it seems they will be allowed if they are attached to the main house. The consequences of this remain to be seen. Ironically, it could turn us from NIMBYs quite literally into YIMBYs. However, it could also reduce housing market transactions still further as people decide not to move and spark off a wave of cowboy conversion work in city suburbs with big gardens.
That’s all the detail so far. Overall, this strategy seems rather less full of hype than the last two, as does the promise of ‘up to 70,000 homes’. But maybe that’s no bad thing. I’ll add more when there is more detail.
A parliamentary statement by Eric Pickles has more detail on the package. Here are some highlights:
• Montague and the private rented sector: the government is ‘investing £200 million in housing sites to ensure that the high-quality rented homes that are needed are available to institutional investors quickly’. A taskforce of developers, management bodies and institutional investors will broker deals. Providers who commit to invest in additional new-build rented homes will be be eligible to raise debt with government guarantee from the £10 billion fund. Expressions of interest will be invited from tomorrow and ‘it is expected that housing associations, property management companies and developers will be amongst those to benefit’.
• Affordable housing, the government will be inviting bids for up to 15,000 extra affordable homes ‘through the use of loan guarantees, asset management flexibilites and capital funding’. The £300 million extra government funding will also cover brining an extra 5,000 empty homes back into use.
• FirstBuy: the extra £280 million will enable the scheme to be extended to March 2014.
• Large housing schemes: the government will look to work in partnership with developers and local authorities to do more deals like Ebbsfleet.
• Off-site construction: Pickles revives memories of John Prescott’s campaign for off-site construction, with the creation of an industry-led group convened by DCLG and BIS to look at barriers to the growth of the sector and how increase incentives to use off-site techniques. This will make proposals by Budget 2013.
• Public land: the role of the HCA outside London will be strengthened with a ‘targeted programme of transfers from other government departments and agencies’. Pickles adds: ‘We will also work to accelerate disposals by preparing the land for market and providing a single ‘shop window’ for all surplus public sector land.’
• Planning:Pickles confirms the plan to allow applications to be decided by the Planning Inspectorate ‘if the local authority has a poor track record of consistently poor performance in the speed or quality of its decisions’. However, unlike the statement by No 10, Pickles does not mention housing in the definition of major infrastructure projects that will be able to use fast-track planning procedures.
• Section 106: the government will introduce legislation effective from early 2013 that ‘will allow any developer of sites which are unviable because of the number of affordable homes to appeal with immediate effect’. Pickles goes on: ‘The Planning Inspectorate will be instructed to assess how many affordable homes would need to be removed from the Section 106 agreement for the site to be viable in current economic conditions. The Planning Inspectorate would then, as necessary, set aside the existing Section 106 agreement for a three year period, in favour of a new agreement with fewer affordable homes. We would encourage councils to take the opportunity before legislation comes into effect to seek negotiated solutions where possible.’ This is in addition to the consultation on non-viable section 106 agreements made before April 2010. This appears to signal that all section 106 agreements are potentially up for grabs and it poses all sorts of questions, not least about the ability and expertise of planning inspectors to rule on viability. Sounds like good news for lawyers.
• Green Belt: Pickles says the coalition agreement ‘safeguarding the Green Belt and other environmental designations’ but says the government will ‘encourage councils to use the flexibilities set out in the National Planning Policy Framework to tailor the extent of Green Belt land in their areas to reflect local circumstances’ and to make better use of previously developed land.
• Empty offices: ‘We will introduce permitted development rights to enable change of use from commercial to residential purposes, while providing the opportunity for authorities to seek a local exemption where they believe there will be an adverse economic impact. This common sense measure will help the regeneration of our towns and cities. Our high streets will benefit from a greater resident population, increasing footfall and supporting local shops.’
Originally posted on my blog for Inside Housing.