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Two Sides to an Interesting Political Experiment
Housebuilder – October 2012

The government has introduced new initiatives to try to boost housebuilding, focusing on easing the planning delays and affordable housing demands. Housebuilders hope this will work, but, as Mark Smulian reports, local authorities are by no means convinced.

Back in the heady days of 2007 councils were demanding plenty of affordable homes as a condition of granting housebuilders' planning permission. But the good times were rolling and it was usually worth accepting these because homes could be sold for a handsome profit.

Things now look rather different. With the housing market having suffered a long spell in the doldrums, profits from sales are no longer high enough to pay for as many affordable homes as they once did. Yet obsolete planning conditions are still in place, and some local authorities may refuse to change them.

The result has been deadlock - builders doubt they can develop viably if they have to provide affordable homes at pre-recession levels, and unless they can renegotiate, sites are stalled with no homes of any kind being built.

According to the government, 75,000 homes are stalled in this way. In the summer it came up with the idea of mediators, working through the Homes and Communities Agency, to broker renegotiations of planning gain for affordable homes agreed originally under the section 106 system.

pilots

Ten pilots were launched, and only weeks later - mediators having presumably been beavering away quietly for some time - communities secretary Eric Pickles hailed the example of Eastern Quarry.

This was a development of multiple villages planned for the former quarry adjacent to the Bluewater shopping centre near Dartford, Kent.

Developer Lend Lease planned to build 22,600 homes over 20 years, but had stopped work after the recession struck because of concerns about the cost of planning conditions, in this case for roads rather than affordable homes.

Mediation was used to cut the cost of the transport infrastructure required and housebuilding can now start in December 2013.

More help for builders followed fast. A few weeks after Eastern Quarry was resolved. Pickles unleashed a torrent of measures designed to "unstall" housebuilding to coincide with the ministerial reshuffle.

In addition to the voluntary mediation there will now be promised legislation to allow housebuilders to ask the Planning Inspectorate to rule on reductions in the affordable homes requirement needed to make a development viable, and a consultation on whether developers should be allowed to demand renegotiation of any "non-viable" s106 agreements entered into before April 2010, instead of waiting the normal five years before doing so.

Other measures less directly concerned with planning gain, but also intended to benefit housebuilders, included the Planning Inspectorate being handed powers to decide applications where a council has a "consistently poor performance in the speed or quality of its decisions," and wider powers to award appeal costs against a local authority where applications have not been handled correctly.

Politically, though, ministers could hardly be seen to be stoking the private housing market while also reducing requirements for affordable homes.

They have therefore come up with 10 billion in debt guarantees and will invite bids to use this to provide up to 15,000 additional affordable homes, though the guarantee fund will also cover institutional investors, including housing associations, entering the private build-for-rent sector.

This in effect uses the government's ability to borrow cheaply to stand behind those investing in affordable homes or private rent.

The borrowing guarantees will help those housebuilders that work for housing associations, and the actions against the worst cases of sloth in the planning system will be a bonus too, so indeed might be the mediators if they can bring builders and councils to agree how to reduce s106 affordable homes demands to viable levels.

But behind all the recent government measures to encourage housebuilding has been an assumption that the planning system is to blame for slow progress.

Here, as one might expect, housebuilders and the councils with whom they must work are not going to agree.

Stephen Teagle, managing director of affordable housing and regeneration at Galliford Try, says: "I think there is a problem with sites with s106 agreements that predate 2010, where the percentage of affordable housing asked for now makes them unviable.

"It can also be that other factors like educational and community planning requirements collectively make them unviable."

He says many councils recognise the problem and will renegotiate but "there are some where they will not take that into account and sites are stuck. "I'm not going to single anyone out, it isn't even a particular type of council, it is varied."

Teagle says he believes that "every housebuilder has sites in their landbank that are affected by this lack of ability to progress because of s106 conditions". Bob Weston, chairman and chief executive of Weston Homes, takes a more pugnacious view, having come off worst in some recent scraps with planners.

"Despite hand-wringing from the liberal left, the government is right to look at reducing the burden of affordable housing provision to help kickstart stalled projects," he says. "But even if the financial barriers to development are lifted, we still have far too many barriers to building new homes."

Weston says that his 25-year old company has never taken so many applications to appeal as it does now, and is particularly aggrieved at the rejection of a 136 homes scheme in Cambridge, even though he offered 40% affordable housing.

"Far too many local authorities block development for short-term political reasons," he says."I am confident we will win the appeal, but it's a time consuming and expensive exercise. No wonder there is a chronic shortage of homes in this country.

"The government needs to stop tinkering around the edges of planning policy and take bold and decisive action. Without a complete overhaul of our dysfunctional planning system, these latest initiatives will fail to make a jot of difference."

What sort of reception might these sentiments find among planners and councillors?

Local Government Association chair Sir Merrick Cockell, a Conservative from Kensington & Chelsea, said in response to Pickles' announcements that, far from 75,000 homes being stalled, "there are enough approvals in the system for 400,000 new homes and more than three years of building".

Planning approval rates were at a ten year high, and had accelerated since the National Planning Policy Framework was introduced last spring, he added.

affordable housing

"Removing affordable housing requirements will not make it easier for developers to sell houses more cheaply, and so will not address the underlying wider economic issues that are stalling development," Cockell said. "The perception that councils are asking for unaffordable 'nice to have' add-ons through these requirements is wrong."

He said local renegotiations were "the best way of sorting out problems" as it would "undermine local people's confidence in the planning system if developers can go running to Whitehall at the first hint of trouble."

Not much sympathy for housebuilders there perhaps.

Mike Holmes, immediate past president of the Planning Officers Society, sat on the Local Housing Delivery Steering Group, which reported in the early summer on viability problems in local plans.

"Planning seems to be blamed for an awful lot," he says. "Most building is held up because builders cannot get the finance, and even if they can, people cannot get mortgages. That is the message I get back.

"I'm worried because we need affordable housing and mitigation of sites - development does increase traffic and demand for infrastructure - and where are we to get that from except from developers? If the government now says we can't, we will be chasing our tails a bit."

Holmes says he does not expect the mediators or the Planning Inspectorate to be able to unblock any large number of stalled sites, "because they are not being blocked by intransigent councils, the problem is finance".

This will become an interesting political experiment.

The government is desperate to get the economy moving before the next election and housebuilders have convinced it that relaxing planning requirements is one way to do this.

However, there is not much more that ministers could do on this short of dismantling s106 altogether, which is unlikely as the cost of affordable homes and their infrastructure would then fall wholly on the public purse.

If these measures work, builders might then be able to make a case for long-term relaxation of planning demands.

But if these measures do not work, it will suggest that planning and its requirements were not the main cause of the slowdown in building, and the industry and ministers will have to look elsewhere for solutions.