Public Accounts Committee report - Planning and the broken housing market

- Ministry lack a clear plan explaining how they will meet their highly ambitious 300,000 new homes a year target

-  Poor performance in the planning system is delaying progress

- Ministry and local authorities not doing enough to prevent poor build quality of new homes

REPORT SUMMARY

The government has an ambitious target of delivering 300,000 new homes per year by the mid-2020s, but inherent problems at the heart of the housing planning system are likely to jeopardise this target. If the Government delivers 300,000 new homes per year, this would be a significant increase in the rate of house building, with the number built a year averaging only 177,000 in the period 2005-06 to 2017-18.

While the Ministry of Housing, Communities and Local Government (the Department) has made some recent reforms to the planning system, much more needs to be done and it still does not have a detailed implementation plan for how it will scale-up house building.

The Department stresses that it wants a ‘plan-led system’, with local authorities determining the shape of development in their areas through their own local plans. We welcome this outlook, which has the potential to engender a housing system which is both efficient and able to be tailored to local communities. But local authorities are struggling to produce local plans showing how many, where and what types of new homes are needed in their areas, and fewer than half of authorities have an up-to-date local plan, and the Department is reluctant to take decisive action.

New housing developments also need supporting infrastructure in place and the Department estimates that £12 billion a year towards the cost of this infrastructure should come from public sources. The rest must come from developers, but local authorities find it difficult to navigate complex negotiations with developers who are too often able to negotiate lower contributions to infrastructure.

COMMENT FROM PAC CHAIR MEG HILLIER MP

“Progress against the government’s annual new house building target is way off track and currently shows scant chance of being achieved.

“The Government has set itself the highly ambitious target of building 300,000 homes a year by the mid 2020s – levels not seen since World War two - even though there is no clear rationale for this figure and the Ministry themselves say only 265,000 new homes a year are needed.  

“Government needs to get a grip and set out a clear plan if it is not to jeopardise these ambitions.

“Poor performance by the Planning Inspectorate in reviewing appeals has also added to delays. There is also a collective failure to ensure developers contribute fairly for infrastructure."

CONCLUSIONS AND RECOMMENDATIONS

The Department has a highly ambitious target to deliver 300,000 new homes per year by the mid-2020s but does not have detailed projections or plans on how it will achieve this.  Meeting the target of 300,000 new homes a year will need a significant step-up in the level of house building.  Current levels are not promising: the number of new homes has increased every year since 2012-13, with 222,000 new homes in 2017-18, but the average number in the period 2005-06 to 2017-18 was still only 177,000 a year. Although the Department accepts that it will need to transform the housing market to get more new homes built and says that achieving the target would be “very challenging”. Despite having introduced some projects to help, including encouraging small builders through the small builders guarantee scheme and reforming the planning system, the Department simply does not have the mechanisms in place to achieve the 300,000 target. This is compounded by lack of detailed rationale as to why this target was chosen in the first place. It also lacks year-on-year projections on how it will ramp up house building, only illustrative projections which are not in the public domain. To make this even more concerning, the target does not align with the Department’s new method for calculating the need for new homes which shows that just 265,000 new homes a year are needed.

Recommendation: By October 2019, the Department should set out, in a single publicly-available document, the full set of actions it is taking to achieve the target of 300,000 new homes and include year-on-year projections for the number of new homes it expects to be built.

Fewer than half of local authorities have an up-to-date local plan in place, despite the Department stressing the importance of a ‘plan-led system’ for development. Local plans are required by planning legislation and should be the key way that local authorities demonstrate how they will help meet the need for new homes in their areas. However, local authorities are often under-resourced and under-staffed and struggling to produce plans as they can be technically complex, time consuming and resource intensive. As of December 2018, only 149 (44%) of local authorities had an up to date local plan, 143 (42%) had a plan that was more than five years old, and 46 (14%) had no plan at all. Despite these significant gaps, the Department has made limited use of its powers to intervene in local authorities who have not produced a local plan. In November 2017, the Secretary of State wrote to 15 of the local authorities who did not have a local plan and in January 2019, made more direct interventions in two local authorities. But these figures barely scratch the surface of the significant number of local authorities which either have no plan at all or a very old one. The Department is avoiding decisive action: while it has powers to remove local planning away from a local authority, it told us that is reluctant to take what it considers to be a ‘significant step’.

Recommendation: By the end of 2019, the Department should write to us detailing what additional interventions it will make when local authorities fail to produce local plans. These interventions should include a range of ‘carrot and stick’ measures of support and penalties.

The Planning Inspectorate’s performance is poor and detracts from efforts to deliver 300,000 new homes a year. The time taken by the Planning Inspectorate to determine housing appeals, which increased from increased from 30 to 38 weeks in the five years from 2013 to 2018, is delaying the building of new homes, hampering progress on targets and creating uncertainty for local authorities and communities. The Department knows the Inspectorate needs to significantly improve its performance. In June 2018, the Secretary of State commissioned a review of how the Inspectorate deals with appeal inquiries. The Department expects the Inspectorate will develop an action plan promptly in response to the review’s findings and has also agreed a performance recovery business plan of £13 million to help the Inspectorate improve. The Department says that reforms need to focus on improving business processes with some investment in new technology. The Inspectorate is also recruiting more inspectors to help it deal with the backlog of appeals. The Department has an admirable ambition that the Planning Inspectorate will improve its performance by the end of 2019 and be able to decide appeals within 18 weeks on average but it did not stipulate targets for other areas of the Inspectorate’s performance.

Recommendation:  By the end of 2019, the Department should set out for us detailed actions and milestones for the Planning Inspectorate’s performance improvements across the full range of all its services.

The system to get contributions from developers to the cost of infrastructure is not working effectively, and too often favours developers at the expense of local communities. To pay for infrastructure, the Department estimates that around £12 billion a year should come from the public purse and the rest from developers. Local authorities lack certainty on how infrastructure will be funded from public sources as government departments are not required to align their investment strategies with local plans. Local authorities may lack the skills to negotiate contributions from developers through section 106 agreements and there is little transparency of these negotiations. In two tier authorities there is the added risk of insufficient co-ordination between them to achieve the maximum contribution. Local authorities can also use the Community Infrastructure Levy to get contributions from developers, but as of January 2019 only 47% of local authorities had implemented the Community Infrastructure Levy. Implementing the Community Infrastructure Levy is complex, time consuming and yields small returns in areas of low land value. The Department is aware of these shortfalls and introducing and consulting on several reforms to section 106 and the Community Infrastructure Levy which aim to simplify the process, bring more transparency and help prevent developers reducing contributions using viability arguments. Some of these reforms will need legislative changes and could take several years to be put in place.

Recommendation: The Department should continuously monitor whether its reforms to the Community Infrastructure Levy and section 106 are having the impact that is necessary and adjust or adapt accordingly.

It should update us by the end of 2019 on the impact of those reforms already in place, and on the progress of implementing those that were in development at the time of our evidence session.

The Department acknowledges that it will need to sustain and increase the numbers of affordable housing built to help it achieve the target of 300,000 new homes but cannot say how many and what types of affordable homes are needed. The Department has not detailed its expectations for numbers of these types of homes to be built as part of its 300,000 target for new homes. It is encouraging greater numbers of affordable homes to be built though the Affordable Homes Programme; and its reforms to the planning system aim to deliver more homes in areas of high unaffordability, such as London and the South East. At local level, local authorities detail the numbers of types of affordable housing needed in their local plans including social housing, affordable rent, built to rent, and that provided by Housing Associations. However, these planned numbers can be undermined as developers renegotiate section 106 agreements to provide less affordable housing than originally agreed with local authorities. The Department believes that its reforms to section 106 agreements would help the provision of affordable homes.

Recommendation: By October 2019, the Department should set out its expectations for the types, tenures, and amounts of affordable and social housing to be delivered and how this will contribute to the 300,000 new homes a year.

We are concerned that the Department and local authorities are not doing enough to prevent poor build quality of new homes. There are concerns about poor quality of the build of new homes and that of office accommodation converted into residential accommodation through permitted development rights. The Department is focusing on the quality and safety of high-rise residential buildings after the Grenfell fire. It does not have a specific programme to address concerns about the quality of new builds. It has some initiatives which aim to improve the quality of design of new homes, including revising the Department’s design guide, although these do not address the quality of the final build.

Recommendation:

a) By October 2019, the Department should set out how it will work with local authorities, developers, and other agencies on how they will prevent, penalise and compensate for poor residential build quality.

b) When it releases the design guide, the Department should define what a sufficient quality of final build should look like.