Alex Morton is Director of Policy at the Centre for Policy Studies, and was a member of David Cameron’s Downing Street Policy Unit.
The Government’s new National Planning Policy Framework (NPPF), the document that effectively governs the current system of housing delivery, was slipped out on Tuesday with little fanfare and fairly limited changes – which appears to indicate that given the focus on Brexit, even May’s number one domestic priority of housing is slipping. Yet the last election saw a massive five per cent swing from Con-Lab among renters.
Housing needs fixing by 2022 – or at least to be moving in the right direction to stop Corbyn. I personally strongly support the net tens of thousands figure for migration and agree monetary policy is encouraging higher prices, but even if we accept this, there is still an underlying need to build more than we’ve achieved in recent years. We need both other policies – and more homes.
A welcome focus on delivery – but with the wrong penalties
The main change in this new NPPF was the ‘delivery test’ – where councils that consistently fail to oversee sufficient housing will face, in theory, a penalty whereby developers can push through housing on appeal. But there are two problems. Firstly, the threshold, even at its maximum, will only be 75 per cent – meaning that across the country you could see fairly substantial under-delivery of homes and this penalty not be applied.
But more importantly, if a council does not have a sufficient five-year land supply available for developers, councils are already more likely to lose on appeal if they reject housing. Almost every council failing to meet the delivery test will be one of the third or so of councils that already fail to provide a sufficient five-year land supply, so this penalty will already hit them. Thus it is a Potemkin policy.
The delivery test was created in 2015 under Cameron, and the penalty was always meant to be that central government would find a way to increase delivery directly through intervention, recognising that without this, the delivery test would largely be meaningless – as it now risks becoming.
The issues of developers building out permissions, design and infrastructure remain unsolved
The NPPF does not really tackle the three major issues (although it makes some positive tweaks) of building out permissions, design, and infrastructure.
On build out, the Letwin Review’s excellent interim analysis set out the large developers’ model of ‘build to sell’ – not pure land banking, but drip-feeding sales to maintain high profits. The Government will have to act on this once the final review comes in for the November Budget – as pressure builds to release greenfield sites, the need to speed up large brownfield sites will only increase. The proposed 2020 abandonment of Help to Buy will, all being equal, slow build out further by reducing sales rates, which means that developers will reduce build out still further.
Infrastructure support remains insufficient and patchy alongside new homes, despite polling showing lack of such infrastructure is the number one issue driving NIMBYism, and this document does not change that. On the design aspect, the changes to support neighbourhood plans and warm words on design are welcome, but it is hard to see what it means. ‘Poor’ design under this NPPF is theoretical justification to refuse housing, but there is no clear guidance on how ‘poor’ design should be judged.
There is an issue around brownfield office to home conversions being stopped
In addition, Government is ignoring a major issue around reduced supply of homes from office to residential conversions. These rose from 12,590 to 37,190 from 2011/12 to 2016/17 as Government liberalised policy. Now the London Plan is encouraging councils to use something termed ‘Article 4 Directions’ to stop this and if this goes unchallenged, which it seemingly is – despite the fact the Secretary of State can revoke these directions and not sign off the London Plan – it could see the homes from this brownfield route drop substantially.
Why action is needed now – and what form might it take?
You could argue that we should only focus on Brexit. But given housing’s large lead times, reforms need to be undertaken in the next 12 months, even with a weak Government heavily focused on Brexit. Given that, the following areas are likely to be key to moving forward:
Intervention. Government needs to ensure that where the delivery test is failed, they intervene to make up the shortfall in a politically sensitive way. How to do this is an article in itself, but if Government does not even think about this, the delivery test may as well be scrapped and Government admit the delivery test policy is largely a sham.
Infrastructure. Kit Malthouse, the new Housing Minister, should start planning for a process where each new home comes with a guaranteed and ring-fenced capital spend, taken out of overall capital budgets at the 2019 Spending Review. This means policy groundwork needs to be laid now. If we build 250,000 homes each year, then what does each home require in terms of average capital spend for roads, schools, local primary care and so on? Is the average cost £10,000 or £20,000 (over four years and 250,000 homes a year, the difference between a £10 billion and a £20 billion carve out)? Does it differ across the country, between housing sizes and tenures? We need to begin planning now.
Design. There is a need to clarify that ‘poor’ design is unpopular design. In a conservation area near me a plastic cube was allowed on ‘quality’ design grounds as it was sustainable and ‘innovative’. There needs to be an acceptance that the views of local people near new homes matter and this is what the new NPPF means – they decide what quality is – not one size fits all, but power over design being given to local people.
Change of use. The Government must clarify that the Secretary of State will use his powers to stop councils using Article 4 Directions to block buildings moving to residential use, and the Secretary of State should not sign off the London Plan until it reverses such a strong attack on this policy.
Accelerating build out. Government needs to increase sales rates and so homes built – without inflating prices. This means using shared ownership or other low-grant models as well as better design to increase the size of market – and sell into different markets. Given financial constraints, this means pushing for a mix of tenures to increase speed of build out, focused heavily on low or zero grant models (e.g. shared ownership, custom and self-build, institutional rented properties, more varied and better design). This should take place on a voluntary basis but be monitored on a developer by developer basis and with penalties, including perhaps creating more contractual obligations between councils and specific developers if particular developers consistently fail to deliver.
Trying to take this forward should begin now, since if we do not at least start to fix this – within the constraints that exist – we will stand no chance at the next election. Since the start of 2015 – or three and a half years ago – there have been four Secretary of States, and five Housing and Planning Ministers. Hopefully whatever change happens more broadly, Kit Malthouse and James Brokenshire will be proving themselves successful enough to remain in post for some time.