The 300,000-home questionPosted: February 11, 2019 Filed under: Housebuilding, Planning | Tags: Alok Sharma, NAO Leave a comment
Originally published on February 11 as a blog for Inside Housing.
Can the government meet its target of 300,000 new homes a year by the mid-2020s?
The target was announced to some scepticism in the 2017 Budget and a report just out from the National Audit Office (NAO) says with some under-statement that it will be ‘challenging to meet’.
In detail, the Ministry for Housing Communities and Local Government (MHCLG) commitment is to ‘support the delivery of a million homes by the end of 2020 and half a million more by the end of 2022 and put us on track to deliver 300,000 net additional homes a year on average’.
That means net additional homes so it includes conversions and change of use (less demolitions) as well as new building.
Statistics showing a 78% increase in homes on this measure since the low point of 2012/13 (from 125,000 to 222,000) certainly suggest that it is possible.
However, recovery from the credit crunch is one thing, an increase from more normal times quite another, and the annual increase slowed to just 2% in 2017/18.
As the NAO points out, the average achieved between 2005/06 and 2017/18 was 177,000 a year and the most was 224,000 at the peak of the last boom in 2007/08.
On a similar note, the latest results from major housebuilders like Barratt,Taylor Wimpey and Persimmon show that their completions continue to rise but the annual rate of increase was 3-4%.
This graph revels the extent of the increase required after 2020 to meet the new target:
If the target sounds like a big ask, at least it is a genuine one, unlike the previous unambitious ‘ambition’ of a million new homes between April 2015 and December 2020 that a previous NAO report revealed actually meant an output of fewer than were being built at the time.
But this new report reveals worrying evidence that the planning system in particular is not equipped to deliver the increase in output.
Less than half of local authorities have up-to-date local plans yet the government has only challenged 15 of them to do more about it and only intervened in three.
While that gives developers greater freedom to build where they want under the ‘presumption of sustainable development’ the report warns that ‘risks ill-suited development’.
Austerity has local authority spending on planning fall by almost 15% in real terms since 2010/11, even after allowing for increased income generation.
Staffing in planning departments also fell by 15% but the government does not collect information on the potential shortage of skilled planners.
Staff numbers at the Planning Inspectorate have fallen by 13% and the time it takes inspectors to determine planning appeals has risen significantly. .
The NAO concludes that ‘It is clear that the system is not working well. Given these problems, we cannot conclude that the planning system currently provides value for money in terms of delivering new homes effectively.’
Meanwhile there is evidence the systems that are meant to get contributions from developers towards infrastructure and affordable housing are not working effectively.
MHCLG estimates suggest councils and developers agreed contributions worth £6 bn in 2016/17 but the NAO says the real figure will be lower as developers fail to build everything approved or renegotiate the agreed payments.
Less than half of local authorities have implemented the Community Infrastructure Levy against government explanations that 90% would.
The government has introduced reforms in the wake of developers using financial viability considerations to reduce their contributions but some of them will not take effect for several years.
Section 106 payments towards infrastructure and affordable housing remained the same in cash terms at around £19,000 per new home between 2011/12 and 2016/17.
This was despite a 31% increase in house prices and an increase in average developer profit margins from 12% to 21% over the same period.
The target been criticised as on the low side (because it does not take account of the backlog of housing need) and on the high side (because household projections have been revised downwards since it was set).
And the NAO warns of ‘weaknesses’ in the standard method local authorities are meant to use to determine the number of new homes needed in their area.
The MHCLG is revising the method to make it consistent with 300,000 new homes a year by the mid-2020s but the impact is already clear in dramatic changes to the numbers required in different regions.
Councils in the East of England, South West and the South will require big increases on previous assessments – in London the mayor assess need at 66,000 a year compared with a previous assessment by the boroughs of 46,000 and actual output of 32,000 in 2017/18.
But councils in the North and Midlands will need fewer new homes, with the North West and Yorkshire and the Humber seeing decreases of almost a quarter on the previous assessment.
The dual impact will therefore be to threaten the economic development ambitions of councils in the North at the same time as ramping up the pressure on those in the South.
That will mean big political problems for the government in Conservative-held seats in the South where councils have avoided their responsibilities so far and where even the man who was housing minister at the time the 300,000 target was set is saying ‘not in my back yard’.
The disjunction between what Alok Sharma said then in office and what he says now in his constituency reveals the hole at the heart of the 300,000 target.
The promise of housing ‘jam tomorrow’ is of course a way to avoid hard decisions on the changes needed to the housing system, and in particular social housing, that go well beyond just the need for new homes.
It may sound great in theory to have a government finally doing something serious to expand the number of new homes but the really significant increases in annual output are not required until after the next election.
Extrapolating from the increase in output to get to 300,000 by 2025 relies on the assumption that there will be no market downturn in the meantime despite several different warnings signs that are already flashing.
It is also contrary to the history of housebullding over the last 40 years even allowing for the sunlit uplands of post-Brexit Britain.