LGA submission to the Ministry of Housing, Communities and Local Government: Changes to the current planning system

A local, plan-led system is vital to ensure that councils and the communities they represent have a say over the way places develop.


About the Local Government Association

The Local Government Association (LGA) is the national voice of local government. We are a politically-led, cross party membership organisation, representing councils from England and Wales.

Our role is to support, promote and improve local government, and raise national awareness of the work of councils. Our ultimate ambition is to support councils to deliver local solutions to national problems.

The LGA welcomes the opportunity to respond to this consultation.

Key messages

• A local, plan-led system is vital to ensure that councils and the communities they represent have a say over the way places develop. This also supports the delivery of homes that are built to a high standard, with the necessary infrastructure to create sustainable, resilient places, and ensures that affordable housing is provided.

 

• Councils are working hard to use planning effectively to deliver the right kind of homes for their communities, approving nine in ten applications and granting permission for almost 372,000 homes in the year to December 2019.

 

• Whilst the LGA has previously welcomed the principle of a standardised, simplified methodology for calculating the local housing need for areas, we have stressed that any model should be able to reflect the complexities of different housing markets. The proposed further changes to the methodology in the consultation have reinforced our concerns with the overall approach and illustrate that a nationally set formula does not, and cannot, accurately reflect local needs.

 

• The proposed new method should therefore be optional to use for local planning authorities where it is considered to robustly produce a number that accurately reflect local housing needs.

 

• We support the principle of First Homes as a discounted home-ownership product which could assist first-time buyers to purchase a home. However, we do not support the mandatory requirement meaning that 25 per cent of affordable housing contributions should be First Homes. This will lead to the displacement of other discounted-market products, including those for affordable and social rent.

 

• Councils should be able to determine the mix of affordable homes tenures that best meet local needs.
 

• We also remain seriously concerned about the actual affordability of First Homes for first-time buyers in many areas, even if councils have flexibility to increase the discount to 40 per cent or event 50 per cent.

 

• We do not support the proposals to raise the affordable housing threshold to 40 or even 50 homes. This will have a devastating impact on the delivery of affordable housing and deprive those in need of access to the housing market. It will also further exacerbate the loss of affordable homes through other national exemptions, for example permitted development rights.

 

• It is vital that any thresholds for affordable housing should be determined by local planning authorities based on assessment of local need for affordable housing.

 

• More broadly, we are concerned about changes to the planning system being introduced in the short-term, which could then be changed again should proposals in the government’s Planning for the Future White Paper consultation be brought forward. For example, further proposed changes to the standard method for assessing local housing need and a change in the way contributions for affordable homes, including First Homes, are secured. There is a risk that this will add confusion and uncertainty into the planning system, throw Local Plans off course and potentially result in a hiatus in development proposals being brought forward. This is clearly at odds with the government’s ambitions to simplify and streamline the system.

Response to specific questions in the consultation

The proposed new standard method for assessing local housing need

Q1: Do you agree that planning practice guidance should be amended to specify that the appropriate baseline for the standard method is whichever is the higher of the level of 0.5% of housing stock in each local authority area OR the latest household projections averaged over a 10-year period?

Q2: In the stock element of the baseline, do you agree that 0.5% of existing stock for the standard method is appropriate? If not, please explain why

Q3: Do you agree that using the workplace-based median house price to median earnings ratio from the most recent year for which data is available to adjust the standard method’s baseline is appropriate? If not, please explain why.

Q4: Do you agree that incorporating an adjustment for the change of affordability over 10 years is a positive way to look at whether affordability has improved? If not, please explain why.

Q5: Do you agree that affordability is given an appropriate weighting within the standard method? If not, please explain why.


Answer (to questions 1-5):

The LGA has previously acknowledged that there are merits in introducing an element of standardisation in supporting councils to assess housing need, to reduce uncertainty and increase data transparency.

However, we have continued to have concerns with the government’s standard method for housing need since its introduction in 2017 and the resulting figures it produces for local areas. In particular, that the methodology is not responsive to the complexity in local housing markets, as well as the implications of using the resulting numbers as a target within the Housing Delivery Test and the subsequent sanctions if these are not met. 

Housebuilding is complex and risky and involves a wide range of partners. Councils are committed to getting homes built where they are needed but do not have all the planning powers to actually ensure it happens once planning permission has been granted. This could be achieved by councils having more powers to direct the diversification of products within sites, and a streamlined compulsory purchase process to acquire stalled sites or sites where developers do not build out agreed with a local planning authority. Consideration should also be given to the introduction of financial penalties, for example council tax charges on developers who are not building out to agreed timescales. If the government is to meet is aspirations on build out of new homes it needs to provide councils with the tools to encourage/oblige developers to build out sites with permission in a swift and timely manner.

Our analysis of the new methodology reveals that in terms of housing numbers there are some stark impacts in different parts of the country, and across different rural/urban areas (as outlined in Tables 1-4). This demonstrates that a nationally set formula will always struggle to reflect local need. Raising the number required without incentivising or compelling developers to build will not lead to more homes. The methodology also does not appear to support the government’s ambitions to level up and build more on brownfield land in urban areas.

In addition, the model targets areas of high affordability ratios without taking into account the housing mix in an area. That means that, for example, in an area with a bias towards predominantly larger homes (typically more rural areas) e.g. three or four bed detached homes, this would generally result in an a higher unit price than an area that is predominantly smaller homes e.g.one or two bed apartments (typically more urban areas). This would result in a higher affordability ratio and in turn a higher required housing number. The unintended consequence of this is that the national methodology appears to implicitly incentivise the building of smaller homes. There will of course be exceptions to this rule i.e. in some city centres, one and two bed apartments will be more expensive than the average four bed house elsewhere in the country, even those in city suburbs.

The need for this consultation, which is the third consultation in as many years on the standard method for assessing local need, reinforces our concerns with the overall approach. We are also concerned that there is potential for further changes to the formula as outlined in the Planning for the Future White Paper – which as we understand it could go beyond adjusting for land constraints, and potentially change other elements of the revised method outlined in this consultation and then become binding targets on councils. This further highlights the overall fragility of a national approach to determining local housing need and risks delaying and frustrating the local planning process in many areas, rather than streamlining and speeding it up as was the original intention. This uncertainty, coupled with future proposals to abolish the Duty to Cooperate, could further impact on the ability of councils to deliver national housing targets, particular where there are significant land constraints. Not only do the proposals risk throwing Local Plans off course, they could also undermine neighbourhood plans.

In addition, it is important to note that simply building more homes does not and will not resolve affordability issues – having the right tenure mix to meet the needs of local communities is vitally important. It is our view that assessment of local housing need, including overall numbers and tenure mix, should be determined locally based on the relevant up to date evidence, because what might be the optimum tenure mix in one place, will not be in another. The proposed new method should be optional to use for local planning authorities where it is considered to be appropriate for the housing market area that they operate within. Notwithstanding our views on a nationally-determined standard method, if the government is minded to continue with one, rather than further tinkering with the method in the interim, it should wait until any proposals emerging from the White Paper are taken forward.

There should also be national guidance that makes clear that local planning authorities can use their own clear and justified methodology, regardless of whether that results in a local housing need figure which is higher or lower than that given by the proposed revised standard method. This could include for example using residence-based earnings rather than workplace-based earnings. The house price to workplace earnings ratio is assessing whether people can afford to live where they work. In a relatively low wage area with high house prices, because people can commute to a higher wage area, the workplace based ratio will be higher than the residence based ratio. As an example, the ONS state that “there are relatively higher affordability ratios in the surrounding areas of London when the workplace-based earnings are used”. In this example, for those residents reliant on local jobs, that might be less well paid on average, it isn’t just about building more homes, it is about providing a mix of homes including affordable homes for purchase and homes for affordable and social rent. Using the proposed methodology on workplace-based earning would in this case distort the actual need.

The impact of the housing need numbers resulting from the proposed changes to the standard method is very real. In some areas it risks capping ambition to drive forward economic growth, as well as providing leverage for those local interests who are less favourable to new development. In other areas, it sets an ambition that will be all but impossible in the current environment. This is exacerbated due to councils holding limited tools to incentivise developers to build the homes that local communities need at the scale and speed necessary; this is a situation that is not improved by the measures included in this or the Planning for the Future consultations. To illustrate, LGA analysis has shown that more than a million homes granted planning permission in the past decade have not yet been built. In addition, there are hundreds of thousands of homes already allocated in Local Plans which developers have not yet brought forward to planning application stage. Our response to the White Paper consultation will expand on this point further.

Table 1 illustrates that the highest percentage increase in new homes growth will be expected in the East and West Midlands and the South, with lower growth rates in northern regions, which does not appear to align with the levelling-up agenda.

Table 1 Regional analysis - difference between current and new proposed methodology

Region Existing Proposed Difference as %
E. England 33,370 38,050 4,681 14%
E. Midlands 19,294 27,949 8,655 45%
London 70,160 93,431 23,270 33%
NE England 6,190 7,288 1,098 18%
NW England 20,322 24,633 4,311 21%
SE England 51,268 61,278 10,011 20%
SW England 22,170 31,696 9,526 43%
W. Midlands 19,518 27,509 7,990 41%
York & Hum 16,377 17,871 1,494 9%
Grand total 258,669 329,706 71,037 27%

 

Table 2 illustrates that the highest percentage increase in new homes growth will be expected in some of the most rural areas (see Box 1 below). If the new method is used, some of the most rural areas in England will see a requirement for a 59 per cent increase in homes compared with those required under the current method, compared
to a 20 per cent increase in major urban areas.

Table 2 Urban vs rural classifications - difference between current and new proposed methodology

Type Existing Proposed Difference As %
LU 27,461 32,804 5,343 19%
MU 107,186 128,152 20,966 20%
OU 35,281 38,760 3,479 10%
R50 32,411 48,181 15,770 49%
R80 24,576 39,146 14,570 59%
SR 31,753 42,662 10,909 34%
Grand total 258,669 329,706 71,037 27%

 

Table 3 illustrates that the proposed policy shift underplays the capacity of some Northern regions to grow and does not appear to align with the levelling up agenda.

For example, North East England’s proposed new numbers are 28% below actual delivery.

Table 3 Regional analysis – difference between actual delivery and new proposed methodology.

 

Region Delivery Proposed Difference As %
E. England 25,217 38,050 12,833 51%
E. Midlands 21,070 27,949 6,880 33%
London 35,748 93,431 57,683 161%
NE England 10,095 7,288 - 2807 - 28%
NW England 26,786 24,633 - 2,153 - 8%
SE England 39,120 61,278 22,159 57%
SW England 22,785 31,696 8,911 39%
W. Midlands 22,003 27,509 5,506 25%
York & Hum 19,084 17,871 - 1,213 - 6%
Grand Total 221,907 329,706 107,799 49%

 

Table 4 illustrates that compared to actual delivery the highest increase will be required in major urban areas. However, this is skewed significantly by London’s current level of delivery which is 38 per cent of the new proposed target.

Table 4 Urban vs rural classifications - difference between actual delivery and new proposed methodology

Region Existing Proposed Difference As %
LU 24,096 32,804 8,708 36%
MU 70,349 128,152 57,804 82%
OU 30,290 38,760 8,470 28%
R50 35,662 48,181 12,519 35%
R80 27,798 39,146 11,348 41%
SR 33,712 42,662 8,950 27%
Grand total 221,907 329,706 107,799 49%

 

BOX 1 Urban Rural Classification

MU - Major Urban: districts with either 100,000 people or 50 per cent of their
population in urban areas with a population of more than 750,000

LU - Large Urban: districts with either 100,000 people or 50 per cent of their
population in urban areas with a population of more than 750,000

OU - Other Urban: districts with fewer than 37,000 people or less than 26 per cent
of their population in rural settlements and larger market towns

SR - Significant Rural: districts with more than 37,500 people or more than 26 per
cent of their population in rural settlements and larger market towns

R-50 - Rural-50: districts with at least 50 per cent but less than 80 per cent of their
population in rural settlements and larger market towns

R-80 - Rural-80: districts with at least 80 per cent of their population in rural
settlements and larger market towns

Transition

Do you agree that authorities should be planning having regard to their revised standard method need figure, from the publication date of the revised guidance, with the exception of:

Q6: Authorities which are already at the second stage of the strategic plan consultation process (Regulation 19), which should be given 6 months to submit their plan to the Planning Inspectorate for examination?

Q7: Authorities close to publishing their second stage consultation (Regulation 19), which should be given 3 months from the publication date of the revised guidance to publish their Regulation 19 plan, and a further 6 months to submit their plan to the Planning Inspectorate?

If not, please explain why. Are there particular circumstances which need to be catered for?

Notwithstanding our views on the use of a standard method for calculating local housing need, the LGA welcomes the government’s recognition that transitional arrangements will be essential if the revised method of calculation is introduced.

However, there needs to be appropriate arrangements in place that will take into account every local authorities’ individual circumstances, given that all councils are at different stages of plan preparation or plan review.

There is a risk that putting in place transitional cut off points which do not take into account these individual circumstances, will mean that some councils may have to put on hold, or abort, work currently underway, which could waste considerable time and money.

Local planning authorities also need to be given sufficient notice and lead-in time for any new transitional arrangements that are going to be introduced. This should be at least 12 months.

First Homes (Q8-16)

The LGA supports the ambition to increase housing supply that is sustainable, meets demand and is matched by the required services and infrastructure. Local government has an important role to play in achieving this ambition, both as leaders of place through the planning system and as builders of homes in their own right.

In our response to the First Homes consultation in February, we broadly supported the principle of First Homes as a discounted home-ownership product which could assist first-time buyers to purchase a home they can afford in their own communities. We also welcomed the proposal to place an in-perpetuity discount on First Homes through restrictive covenants, and are pleased that this will be taken forward.

Everyone has the right to live in a safe and secure home they can afford. However, not everyone will be able to, or aspires to own their own home. Councils want to play a lead role in developing a locally responsive mix of tenures, which includes homes for sale, as well as social homes and other affordable homes for those who are not ready or do not want to buy.

We do not support the proposal for a mandatory requirement for First Homes as a percentage of section 106 affordable housing contributions despite the Government reducing the mandatory requirement from the proposals consulted on earlier in the year.

Even with a mandatory requirement set at 25%, there will be a displacement of other discounted-market products, particularly affordable and social homes for rent, of which there is already an under supply in many local authority areas. Affordability is more than just the price of a house and includes other housing‐related costs including deposit, rent or mortgage payments, heating and transport.

We therefore maintain our view that local planning authorities must maintain the levers to deliver First Homes alongside other housing products in a way that addresses need identified locally as part of the planning process. Ensuring the right mix of tenures across the country create balanced and mixed communities, as well as supporting first time buyers and those who prefer or need to rent, and the needs of different groups.

Nothwithstanding our views on a mandatory requirement for First Homes, if the Government takes the First Homes requirement forward we would want to see an increase in affordable housing through the Affordable Homes Programme to compensate for the loss of other types of affordable homes, particularly those for social rent, resulting from implementation of the First Homes policy.

Councils should also have full flexibility to negotiate down any nationally set requirement for First Homes or to include other home ownership products where it can demonstrate that the First Homes requirement might reduce overall supply in an area. For example, where it might have an adverse impact on viability of schemes in a particular housing market or on a particular site.

Percentage of affordable housing secured through developer contributions

Q8: The Government is proposing policy compliant planning applications will deliver a minimum of 25% of onsite affordable housing as First Homes, and a minimum of 25% of offsite contributions towards First Homes where appropriate. Which do you think is the most appropriate option for the remaining 75% of affordable housing secured through developer contributions? Please provide reasons and / or evidence for your views (if possible): i) Prioritising the replacement of affordable home ownership tenures, and delivering rental tenures in the ratio set out in the local plan policy. ii) Negotiation between a local authority and developer. iii) Other (please specify)

Notwithstanding our views on a mandatory requirement for First Homes, if the proposals are taken forward we consider that a local planning authority should have flexibility to determine the mix of tenures for the remaining 75% of affordable housing secured through developer contributions. Councils should have sufficient lead-in time before implementation of First Homes to enable them to review the tenure mix for the remainder of the affordable housing that they are seeking to secure, through a streamlined local plan review process.

With regards to current exemptions from delivery of affordable home ownership products:

Q9: Should the existing exemptions from the requirement for affordable home ownership products (e.g. for build to rent) also apply to this First Homes requirement?

Q10: Are any existing exemptions not required? If not, please set out which exemptions and why.

Q11: Are any other exemptions needed? If so, please provide reasons and /or evidence for your views.


Answer (to questions 9-11):

Exemptions from delivery of affordable home ownership products (as well as affordable homes for rent) should be determined by local planning authorities. For example, it may not be appropriate to deliver First Homes in specialist developments such as ExtraCare or other developments including supported housing projects, or rural exception sites, unless there is a specific identified need for First Homes, or where they could viably be delivered through an off-site contribution.

Local plans and transitional arrangements

Q12: Do you agree with the proposed approach to transitional arrangements set out above?

There needs to be greater clarity about how First Homes will be delivered in the future, and in particular how decisions resulting from the government’s Planning White Paper will impact on delivery of First Homes. We support the proposal giving local authorities the ability to review the tenure mix for the remainder of the affordable housing that they are seeking to secure, through a local plan review. Councils also need to retain the flexibility to plan for all tenures of homes needed by local communities, in the locations they are needed.

We consider that local plans and neighbourhood plans that are submitted for examination within 12 months of any new First Homes policy being enacted should not need to reflect the First Homes policy requirements, rather than the 6 months proposed in the consultation.

Going forward it will be important to consider the impact that the Covid-19 pandemic may have on delivering housing, the risk to sales, as well as people’s ability to borrow and afford to pay for housing.

Level of discount and Community Infrastructure Levy

The consultation does not specifically ask a question about proposed exemptions of First Homes from the Community Infrastructure Levy (CIL). However, we do not support the proposals to introduce a CIL exemption for First Homes. As stated in our February submission to the First Homes consultation, our longstanding view is that mandatory national exemptions to CIL reduce flexibility for charging authorities to cater for local needs and priorities. The cumulative impact of national exemptions ultimately lead to a reduction in the amount of funding to invest in critical infrastructure to facilitate development.

Instead, any exemptions should be decided by councils at a local level. Councils can already apply discretionary CIL relief to homes sold under the ‘Discounted Market Sale’ principle, as the consultation rightly points out, so this flexibility should remain.

The local plan process already requires policy requirements that set out contributions to be expected from development e.g. affordable housing provision and other infrastructure, to be informed by evidence of infrastructure and affordable housing need. It also needs to be informed by a proportionate assessment of viability that takes into account all relevant policies, as well as local and national standards, including the cost implications of CIL and section 106. Making policy requirements clear means that they can then be accurately accounted for in the price paid for land.

Q13: Do you agree with the proposed approach to different levels of discount?
We support giving local authorities the discretion to increase the discount to 40% or 50%. Our analysis found that there are just four local authorities where the median income household could afford to buy the average new build home at a 30% discount with a 5% deposit. In addition however, in more than half of local authorities, or approximately 171 in total, the discount would need to be greater than 50% to be affordable to the median income household.

When comparing incomes by tenure, our analysis also suggests that a 30% First Homes discount will only make the median new build home affordable to a small proportion of households. In a third of local authorities, or approximately 115 in total, a 30% First Homes discount will make home ownership accessible for less than 10% of non-owner households who could not afford to buy already.

That is why it is important that councils have the flexibility to determine the mix of affordable housing tenures available as well as the levels of discount. This will enable them to maximise delivery of the types of affordable homes that are most needed by local communities.

Exception sites and rural exception sites

Q14: Do you agree with the approach of allowing a small proportion of market housing on First Homes exception sites, in order to ensure site viability?

We are concerned that introducing a First Homes exception sites policy will undermine the effectiveness of a long-established rural exceptions policy through raising the expectations of landowners and land prices through offering increased receipts from development of exception sites for First Homes. This could risk undermining the delivery of truly affordable homes for those in genuine affordable housing need.

Local authorities should have the flexibility to pursue other forms of affordable housing on entry-level exception sites, in cases where they would otherwise be unviable. This should be considered on a site by site basis. Any amendment to the entry-level exception site policy should not apply to designated rural areas (see Q16).

If the government takes forward its proposal to amend the entry-level exception site policy to First Homes exception sites, then as a principle, First Homes need to be affordable in their wider sense and should be located on sites with access to the community and social infrastructure needed to support resilient communities.

Q15: Do you agree with the removal of the site size threshold set out in the National Planning Policy Framework?

We do not support removal of the site size threshold as set out in the National Planning Policy Framework, which currently states that ‘entry-level exception sites should not be larger than one hectare in size or exceed 5% of the size of the existing settlement.’ (footnote 33).

Q16: Do you agree that the First Homes exception sites policy should not apply in designated rural areas?

Notwithstanding our view on the First Homes exception sites policy, if this is taken forward, we agree that it should not apply in designated rural areas.

We recommend that the Government could encourage further use of the existing rural exception site policy by promoting local authority best practice and providing additional capacity support. Consideration should also be given to the additional support that could be provided to organisations and individuals that work to secure affordable housing for local people in rural areas e.g. Rural Housing Enablers and Community Land Trusts.

Small sites planning policy

Extending the small sites planning policy

For each of these questions, please provide reasons and / or evidence for your views (if possible):

Q17: Do you agree with the proposed approach to raise the small sites threshold for a time-limited period? (see question 18 for comments on level of threshold)

No. Councils are keen to support the delivery of small housing sites to both meet local housing needs and support local economic growth. This includes working with developers to negotiate section 106 contributions on a case-by-case basis, so that wherever possible development can be brought forward.

Councils also need to support delivery of affordable housing – to rent and to buy – to meet the needs of local residents who cannot afford to rent or buy on the open market. With an excess of one million households on council waiting lists and almost 93,000 households in temporary accommodation, there is a need to significantly scale-up, not scale-down, affordable housing delivery.

The proposed approach will remove the ability of councils to make judgments about balancing these aims at a local level. Thresholds for affordable housing should be determined based on assessment of local need for affordable housing. A nationally applied arbitrary number does not and cannot take into account local housing market intelligence or recognise that there are housing markets with properties for sale in excess of £50 million and others elsewhere in the country for less than £20,000.

The proposals to raise the threshold for affordable housing, which will reduce affordable housing delivery, is also inconsistent with the government’s ambitions in the White Paper consultation to make changes to the planning system to ‘deliver at least as much – if not more – on-site affordable housing as at present.’

The cumulative impact of introducing mandatory exemptions to section 106 affordable housing contributions will significantly undermine the ability of councils to plan for local affordable housing needs, as required by the National Planning Policy Framework (para 61). It will also prevent councils from delivering a well-integrated variety of homes of different types and tenures to support mixed and balanced communities. As an example, the continued expansion of permitted development rights is making it substantially more difficult to secure affordable housing through the planning system. Our research earlier this year showed that potentially 13,500 affordable homes have been lost in the last 4 years through permitted development rights allowing offices to be converted to houses without the need for a full planning application.

To illustrate the potential impact on affordable housing delivery of the proposed approach in the consultation, in between 2015/16 and 2019/20 there were 119,505 homes completed on sites between 10-49 units (based on research undertaken for the LGA by Glenigans). Based on a conservative average of 25% section 106 affordable housing contribution (this will of course vary across the country), this could have resulted in the loss of almost 30,000[affordable homes over five years had the proposed policy been in place during that period.

Illustrative example:
Lewes District Council has delivered 217 affordable homes over the last five years (2015/16 – 2019/20). If the affordable housing threshold had been 40 units, there would have been a 32% reduction in affordable homes delivered (148). A higher threshold of 50 units would have resulted in a 37% reduction in affordable homes delivered (136).

In the last 5 years (2015-2020) and as at 31 March 2020, Elmbridge Borough Council has secured under existing Local Plan policy, the provision of:

• 216 affordable homes completed across 13 sites;
• 90 affordable homes under construction across 7 sites; and
• 180 affordable homes with planning permission across 16 sites

Applying the proposed site size threshold of 40 and 50 units respectively, would have the affect of reducing the delivery of affordable housing, as set out above, to:

  • 132 affordable homes completed across 2 sites (on sites of 40+ units) or 128 affordable homes completed on 1 site (on sites of 50+ units);
  • 40 affordable homes under construction on 1 site (on sites of 40+ and 50+); and
  • 99 affordable homes with planning permission on 1 site (at both 40 and 50 units).

Based on past delivery and the type of sites that come forward in Elmbridge, the introduction of a 40 or 50-unit threshold could cut the provision of affordable housing by nearly 50%. This is significantly higher than the decrease estimated by the Government of between 7 – 14% (on a threshold of 40 units) and between 10 – 20% (on a threshold of 50 units).

A Unitary council in the South West has delivered 2505 affordable homes between April 2014 and March 2020, of which 520 were on sites of up to 50. If the affordable housing threshold had been 50 during that time, this would have resulted in a 20.7 % reduction in affordable homes delivered (1985).

Cornwall Council has estimated that if the proposal to increase the affordable housing threshold is taken forward, the impact on the delivery of affordable homes could potentially be up to 300 fewer affordable homes per year.

In West Suffolk, the impact of raising the affordable housing threshold to 40 per cent would equate to a 35.4% loss of the total affordable homes in rural areas with populations of less than 3,000. This is based on schemes identified in the current five year land supply.

Introducing a 40 or 50 unit threshold will also create an incentive for developers to game the system by putting forward proposals of 39 or 49 or less units respectively, on sites that are capable of accommodating more to circumvent any affordable housing requirement. This will not only reduce the amount of affordable housing coming forward but also risks reducing the total number of homes delivered overall, frustrating the government’s ambitions to deliver 300,000 homes per year.

There is also a risk that the proposal will result in a hiatus in delivery if developers delay submitting applications for schemes below the proposed thresholds, until an announcement is made as to whether the proposal is going ahead.

In addition, whilst there may be some locations where a 40 or 50 unit threshold may be appropriate, a lower threshold (or no threshold at all) will be appropriate in other places, where justified by affordable housing need and land values/viability.

The removal of the requirement for affordable housing contributions will also likely result in the provision of a smaller range of housing tenures, leading to slower build out owing to market absorption rates. This was an issue raised in the independent review of build out. Moving to a position where the majority of sites of up to 40 or 50 units are housing for market sale (or rent), could slow down development and have a negative impact on housing supply targets.

There is also likely to be a higher sales risk to an SME developer delivering homes only for market sale (or rent) compared to agreements with housing associations or local authorities to deliver other affordable housing tenures. Obviously an SME developer could still decide to deliver a proportion of affordable housing on a site but this would put them at a competitive disadvantage when looking to purchase a site as they would need to factor this into the price they pay for the land. This needs to be given careful consideration, particularly given the intention of the policy to stimulate economic recovery. In the short-term cash flow will be critical to SME developers and the introduction of a threshold could actually have an adverse effect in this respect.

Finally, notwithstanding our view that we do not support the raising of the threshold, it is not clear from the proposals how they would be specifically targeted at genuine small and medium-sized builders (SMEs). There is a risk that the removal of the threshold could lead to some of these smaller sites becoming more attractive to volume housebuilders, who may seek to set up or use existing subsidiary SMEs to obtain them, potentially outbidding those for whom the policy is intended to support. There could also be adverse threshold effects whereby local authorities with significant affordable housing challenges may plan for an increased number of larger sites to deliver the need, rather than smaller sites where no affordable homes will be delivered.

Q18: What is the appropriate level of small sites threshold? i) Up to 40 homes ii) Up to 50 homes iii) Other (please specify)

Thresholds for affordable housing contributions should be determined locally based on viability and assessment of local need for affordable housing.

Q19: Do you agree with the proposed approach to the site size threshold?

No. Thresholds for affordable housing contributions, relating to site size and numbers of homes, should be determined locally based on viability and assessment of local need for affordable housing.

Q20: Do you agree with linking the time-limited period to economic recovery and raising the threshold for an initial period of 18 months?

Notwithstanding our view that we do not support the raising of the threshold, if the policy is brought forward, we agree that this should be time limited, but this should be for no longer than 12 months. We agree that the impact of the threshold should be monitored – this shouldn’t just monitor the impact on the SME sector, but also on the delivery of affordable housing. This evaluation should be published. The government should also urgently review and publish the results of the impact on affordable housing of the introduction of the 10 unit threshold (and the lower threshold in designated rural areas) introduced in November 2014.

Q21: Do you agree with the proposed approach to minimising threshold effects?

Notwithstanding our view that we do not support the raising of the threshold, if the policy is brought forward, we agree with the proposed approach to minimising threshold effects. It would also be helpful to set out in planning guidance how local planning authorities can secure contributions for affordable housing where it is apparent that development is being brought forward on sites below the threshold, by a subsidiary SME of a volume or large housebuilder.
Supporting SMEs

Q23: Are there any other ways in which the Government can support SME builders to deliver new homes during the economic recovery period?

The government should continue to work with the SME sector to understand the financial barriers that restrict their ability to boost output of new homes and identify new measures or changes to existing measures that would help to resolve these.

Many SME builders are unable to compete with the larger developers and land promoters in the acquisition of sites, particularly those who are willing to pay higher prices on the expectation that they can challenge the existing planning system and negotiate down their planning obligations and/or deliver cheaper housing. Ensuring that are clear, robust obligations on all sites which cannot be appealed/gamed would even the playing field.

Extension of the Permission in Principle consent regime

Q24: Do you agree that the new Permission in Principle should remove the restriction on major development?

No. We consider that the government should undertake a review of the impact of the existing Permission in Principle process for minor development before extending it to major development. Major development is, by its very nature and scale, more complex and inevitably has a greater impact on local communities, requiring more in-depth analysis by councils to determine its appropriateness in a particular setting. If the proposals are brought forward, the scope of permission in principle should be expanded to include information on proposed tenure of development.

Q25: Should the new Permission in Principle for major development set any limit on the amount of commercial development (providing housing still occupies the majority of the floorspace of the overall scheme)?

Please provide any comments in support of your views.
Please see answer to question 24.

Information requirements

Q26: Do you agree with our proposal that information requirements for Permission in Principle by application for major development should broadly remain unchanged? If you disagree, what changes would you suggest and why?

Please see answer to question 24. Our suggested review of the existing permission in principle process should also look at whether the current information requirements are sufficient and whether additional ones are needed. There is a risk that applications may be refused if information requirements are not sufficient, particularly for major development, which will be more complex in nature. Alternatively, local planning authorities should have flexibility to require the submission of additional information, including those specified on its local list.

Q27: Should there be an additional height parameter for Permission in Principle? Please provide comments in support of your views.

There should be flexibility for local planning authorities to include an additional height parameter for Permission in Principle, should these proposals be brought forward. Although not directly related to this consultation, we also have significant concerns about the new permitted development rights allowing developers to build up on existing properties, without the need for a full planning application process. These permitted development rights, alongside existing rights allowing conversion of buildings into new homes, undermine the ability of councils and local communities to shape the area they live in and ensure homes are built to a high quality with the necessary infrastructure in place.

Publicity arrangements

Q28: Do you agree that publicity arrangements for Permission in Principle by application should be extended for large developments? If so, should local planning authorities be: i) required to publish a notice in a local newspaper? ii) subject to a general requirement to publicise the application or iii) both? iv) disagree If you disagree, please state your reasons.

Councils should have the flexibility to determine the most appropriate publicity arrangements that provide easier and more cost-effective ways for local communities to find out about planning applications. This could include the use of social media and other electronic communications.

Revised fee structure to incentive Permission in Principle by application

Q29: Do you agree with our proposal for a banded fee structure based on a flat fee per hectarage, with a maximum fee cap?

Q30: What level of flat fee do you consider appropriate, and why?

As a principle, councils should be able to charge a fee which enables them to recover the costs of processing all types of planning applications. That is why councils should be able to set appropriate fees at a local level. We do not have access to sufficient data to determine whether the proposed fee structure would enable councils to fully cover the costs incurred in processing Permission in Principle applications for large developments.

Brownfield Land Registers and Permission in Principle

Q31: Do you agree that any brownfield site that is granted Permission in Principle through the application process should be included in Part 2 of the Brownfield Land Register? If you disagree, please state why.
This would be a sensible approach should the proposals be taken forward.

Additional guidance to support implementation

Q32: What guidance would help support applicants and local planning authorities to make decisions about Permission in Principle? Where possible, please set out any areas of guidance you consider are currently lacking and would assist stakeholders.

No comment.
Regulatory Impact Assessment

Q33: What costs and benefits do you envisage the proposed scheme would cause? Where you have identified drawbacks, how might these be overcome?

No comment.

Q34: To what extent do you consider landowners and developers are likely to use the proposed measure? Please provide evidence where possible.

No comment.

Public Sector Equality Duty

Q35: In light of the proposals set out in this consultation, are there any direct or indirect impacts in terms of eliminating unlawful discrimination, advancing equality of opportunity and fostering good relations on people who share characteristics protected under the Public Sector Equality Duty? If so, please specify the proposal and explain the impact. If there is an impact – are there any actions which the department could take to mitigate that impact?

First Homes have the potential to reduce the delivery of shared ownership and other affordable home ownership products delivered through section 106 and also reduce the delivery of homes at social and affordable rent levels. The proposals to raise the affordable housing threshold will also reduce the overall number of affordable housing. Overall, this means that the proposals risk discriminating against and disadvantaging those who are socially and economically marginalised.

Councils want and need local discretion to ensure that homes are delivered that meet the needs of all different groups in the community. It is key that we build homes of all tenures to provide everyone with the opportunity to live in a safe and secure home.
Local government has an important role to play in achieving this ambition, both as leaders of place through the planning system and as builders of homes in their own right. The LGA believes that social housing should be treated as a vital national investment and seen as a desirable long-term option for a home. The building of homes at social rent is at an historic low, leading to more and more families being pushed into the insecure private rented sector. Social housing therefore should be recognised as an important national investment.
Contact:

Jo Allchurch
Senior Adviser – Housing, Planning and Homelessness
Email: jo.allchurch@local.gov.uk