Government can empower councils to proactively disrupt local housing markets to deliver the homes communities need.
Introduction
Government can empower councils to proactively disrupt local housing markets to deliver the homes communities need. It can do this by:
- providing certainty to the local plan-led system by committing to a period of stability on national planning policy
- This will provide certainty to councils, developers and communities and support the delivery of high-quality homes with the necessary infrastructure to create sustainable resilient places
- giving councils additional tools to incentivise the build out of housing sites
- This should include a ‘stalled sites’ council tax premium (akin to the existing empty homes premium), as well as a streamlined compulsory purchase process to acquire (at pre-uplift value) stalled sites or sites where developers do not build out to agreed rates.
- delivering five-year local housing deals to all areas of the country by 2025
- This would combine funding from multiple national housing programmes into a single pot that can be used flexibly by local areas. This would provide the funding, flexibility, certainty and confidence to create the conditions to secure additional institutional investment to stimulate housing supply.
- giving councils the powers and funding to scale up and deliver an ambitious build programme of 100,000 council homes a year – including Right to Buy reform
- This would provide a counter-cyclical boost to housing supply, help families struggling to meet housing costs, and tackle housing waiting lists.
Public priority
Councils share the collective national ambition to tackle local housing challenges and create great places for current and future generations. Our local areas should be somewhere we are all proud to live, work and enjoy our time in, and give everyone the opportunity to reach their full potential. This will only be achieved through strong national and local leadership working together.
Housing consistently appears in the top ten priorities for British residents. It is mentioned as a key issue twice as frequently by 18-34 years old than older age groups and overall satisfaction with how the government is handling the issue of housing is also on a downward trajectory.
In the UK we continue to face significant challenges in ensuring that everyone can live in a home that meets their current and future needs – challenges that encompass availability, affordability, security and quality.
These challenges have been exacerbated by both the economic impacts of Covid-19 and more recently the cost-of-living crisis which is piling increasing pressure on every type of household, irrespective of income levels or dependents.
We need action that is more than just a numbers game – but action that delivers homes of the highest quality, of the right type, in the right places and, crucially, affordable for those that need them. That means homes that are accessible, spacious, eco-friendly, affordable to heat and easily adaptable when household needs change. Homes that are well-served by transport links and with access to community spaces in well-designed neighbourhoods.
Local action for local homes
Health Equity in England: The Marmot Review 10 years on (2020)
National government plays a vital role in putting in place the overarching policy framework for the development of land, including for housing, in England. But the complexity and interconnection of the housing system within the economy and society, means that local authorities need to be empowered to make decisions best suited to maximising added value in local housing markets. Alongside this, they have a range of duties and wider interests in ensuring the most effective functioning of their local housing markets.
There is no single housing market. Instead there are multiple markets defined by location, property type, tenure and price. The housing need and demand within these markets is even more varied – driven by demographics, income, wealth, health, employment, migration, education, consumer confidence, and an array of preferences.
In London, the South East and some of our major cities, the acute housing shortage and affordability is the main concern, while in large parts of the North a key challenge lies in existing homes which are in poor condition and do not meet modern needs. A key issue for coastal communities is the supply of private rented sector housing and other accommodation including Houses of Multiple Occupation (HMOs) and static caravan parks. Poor quality, but cheap HMOs incentivise the migration of vulnerable people, often with multiple and complex health needs, into coastal towns – bringing implications for both service provision and support.
Councils play a fundamental role in identifying and understanding the housing related symptoms in their locality – this diagnosis will then support the development of solutions that address those local circumstances and deliver the homes that people want and need.
Mission to Reality: what councils need?
Councils need the stability and certainty of a local plan-led system
Constant national changes and updates to the planning system, particularly since the National Planning Policy Framework was introduced in 2012, have resulted in councils needing to regularly change their approach to development in their Local Plans after initiating consultation on proposals with local communities.
This results in delays to plan-making as account is taken of national policy changes - in turn encouraging speculative development which disenfranchises local communities and leaders, and often delivers the wrong types of homes in the wrong locations.
Councils now need a period of stability in national planning policy to provide certainty to developers and communities, as well as sufficient investment in the planning system so that objectives on housing, beauty, climate, the economy and health can all be met.
Councils also need to be empowered to maximise the opportunities to secure a locally responsive mix of housing tenure through the planning system. This 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. Additional planning powers would also enable councils to address the impact of unregulated growth in the short-term letting industry and second homes in recent years. In many parts of the country this has exacerbated housing supply shortages and in turn increased housing unaffordability.
The government should also remove permitted development rights to ensure all developments contribute to the delivery of affordable homes and remove the national requirement that mean a minimum of 25 percent of all affordable housing units secured through developer contributions have to be First Homes. Further, the removal of viability as a material planning consideration would negate the need for lengthy negotiations with developers that still happen too often, about the level of affordable housing contributions that they will provide.
Councils need greater powers to incentivise the timely build out of homes that have been granted planning permission, as well as those that have been allocated in Local Plans. While measures being introduced through the Levelling Up and Regeneration Bill have been welcomed, they do not go far enough. The government should urgently introduce a ‘stalled sites’ council tax premium (akin to the existing empty homes premium), as well as a streamlined compulsory purchase process to acquire (at pre-uplift value) stalled sites or sites where developers do not build out to agreed rates. Councils should also be given powers to direct diversification of housing products on sites, to speed up overall build out.
Communities are also increasingly being adversely affected by the conversion of family housing into exempt accommodation. A lack of planning powers has created the conditions for a minority of unscrupulous non-commissioned providers to take advantage of the higher rents that can be charged for exempt accommodation to maximise financial gain for private investors. Councils should be able to require planning permission for exempt supported accommodation which would help to strengthen local oversight of new accommodation in an area and ensure the right balance of housing in communities to meet local need. This needs to sit alongside a locally-led fully funded oversight and enforcement regime for exempt accommodation within a strengthened national regulatory framework.
Councils need place-based funding allocations
The recent announcements of local leadership of the Affordable Homes Programme for the first time outside of London - in Greater Manchester and the West Midlands Combined Authority – alongside devolution of brownfield land funding, demonstrate strong national recognition of the benefits that can be realised through greater local control and place-led strategic delivery.
This place-led approach should be expanded to all areas of the country by 2025, offering devolved funding for a minimum 5-year programme up to 2030 and combining funding from multiple national housing programmes into a single pot – and removing national restrictions which stymie innovation and delivery.
This would provide the funding, flexibility, certainty and confidence to create the conditions necessary to secure additional institutional investment to stimulate housing supply. Flexible funds have already been demonstrated to be a valuable element of devolution deals, providing access to finance that is not available from traditional sources, as well as enabling alignment of investment decisions.
Such an approach would benefit from continued expertise and support to councils from Homes England and One Public Estate as needed, in order to build local capability and capacity.
Councils need a long-term national commitment to support a council house building renaissance and improvements in existing stock
The government has itself recognised that there is a significant unmet need for social homes. Councils now need to be given the freedom and support needed to once again take a leading role in building new homes – at scale, and fast, where these are locally needed.
A generational step-change in council housebuilding would provide a counter-cyclical boost to housing supply, help families struggling to meet housing costs, and tackle housing waiting lists. There are currently not enough social homes to meet current demand, with more than 1.2 million households on waiting lists and almost 100,000 households in temporary accommodation.
Long-term certainty on powers and funding could help councils scale up to deliver an ambitious build programme of 100,000 high-quality, climate-friendly social homes a year. It would also improve the public finances by £24.5 billion over 30 years, including a reduction in the housing benefit bill and temporary accommodation costs. Councils spent £1.6 billion on temporary accommodation in 2021-22 alone.
Expansion of the development programmes of councils would also: offer a pathway out of expensive and insecure private renting, and on towards home ownership; help address pressure on public services, notably health and social care, driven by poor housing conditions; support an accelerated switch to sources of renewable energy and support mainstream use of Modern Methods of Construction (MMC) and support the development of green skills and net zero supply chains.
Councils will need access to varying policy and fiscal interventions to reflect local housing markets but could include:
- Continued access to preferential rates through the Public Works Loan Board (PWLB).
- Further reform to Right to Buy - allowing councils to retain 100 per cent of receipts on a permanent basis; flexibility to combine Right to Buy receipts with other government grants; the ability to set the size of discounts locally, as well as the ability to recycle a greater proportion of receipts into building replacement homes.
- A long-term rent deal for council landlords to allow a longer period of annual rent increases for a minimum period of at least 10 years. This should include some flexibility for councils to address the historic anomalies in their rents as a result of the ending of the rent convergence policy in 2015.
The current self-financing council housing regime which has been in place since 2012 also needs to urgently be reviewed. This will ensure a greater understanding of the current and future capacity of Housing Revenue Accounts (HRAs) to deliver on agendas that impact on council housing, for example building safety, fire safety, decarbonisation, housing quality, new supply and regeneration.
The self-financing settlement in 2012 distributed debt to stock-holding local authorities on the assumption that anticipated rent income would be sufficient to fund works to raise all homes to the Decent Homes Standard (DHS) and maintain them there, and to pay off debt over a 30-year period. The settlement is now ten years old, and its underlying income and expenditure assumptions have both been superseded.
Income within the HRA is not only now lower than that provided for in the self-financing settlement, but this income is now expected to cover both higher costs and higher standards of stock and service delivery.
Whilst councils have strong ambitions to increase the numbers of council homes available to those most in need, they also need to deliver vital investment to improve and regenerate their existing stock. The current financial climate means that trade-offs inevitably need to be made between a wide set of competing priorities. A long-term sustainable funding framework for social housing is therefore vital to ensure that councils have the ability to invest in and regenerate their housing stock, and to fulfil local and national ambitions of ensuring that everyone has access to a safe, secure and high-quality home.
