MHCLG should ditch the false promises instead of serially ditched housing policies, says PAC

In a report published today, Wednesday 10 December 2020 the Public Accounts Committee condemns as “deplorable” the “cycle of policy invention, abandonment and reinvention, stringing expectant young people along for years”, “wasting time and resources” on housing policies that “come to nothing as ministers come and go with alarming frequency” .

The Ministry of Housing, Communities & Local Government (MHCLG) has failed to deliver the 200,000 discounted Starter Homes it promised first-time buyers in 2015. Despite setting out the legislative framework for Starter Homes in 2016, the Department has never put in place the necessary laws to make the affordable homes initiative a reality.

The PAC has reported regularly on housing delivery since 2015, and not one of the promised housing programmes has delivered its objectives. By 2017, Starter Homes as a distinct policy had been abandoned, although it was not until 2020 that the Department formally announced the end of the policy. Some 85,000 people had registered their interest in Starter Homes since 2015, only to hear in 2020 that they had been waiting in vain.

MHCLG is now introducing a new policy with similar aims – First Homes – but is unable to say when they will be available for first-time buyers to purchase. Its reliance on developer contributions to fund First Homes is part of an opaque, complex mechanism which risks less money being available to local authorities for housing and infrastructure.

After this string of abandoned policies and wasted resources, MHCLG remains unable or unwilling to clarify how it will achieve its ambition of 300,000 new homes per year by the mid-2020s. There is an alarming “blurring” of the definition of affordable housing: it is essential that the Department is clear what ‘affordable’ means to different sectors of society and in different areas of the country. The long-term success of MHCLG’s housing policies depends on it working effectively with players across the housing sector, without losing sight of the needs of those who are unlikely to be able to buy or rent a home in the UK property market without support.

Meg Hillier MP, Chair of the Public Accounts Committee, said: “The Department for ‘Housing’ is at risk of losing the right to the title. It has serially, constantly failed to deliver affordable new homes or even make a serious attempt to execute its own housing policies or achieve targets before they are ditched, unannounced - costs sunk and outcomes unknown.

“MHCLG needs to ditch instead the false promises and set out clear, staged, funded plans, backed by the necessary laws and with a realistic prospect of delivering.

“It also needs to ditch what is becoming a hallmark lack of transparency, if it is to have any hope of rebuilding confidence among future tenants and owners that the decent, safe, affordable homes they want and need will ever be built.”

PAC report conclusions and recommendations

1. We deplore the time and resources wasted by the Department as it let the Starter Homes policy drift out of existence. The Department deprioritised the Starter Homes policy in 2017 when the Housing White Paper Fixing our broken housing market indicated a shift in housing policy in favour of a wider variety of ways of helping people into home ownership. However, it was not until January 2020 – three years later - before the Department publicly admitted that Starter Homes had been abandoned altogether. It took the Department far too long to inform both Parliament and those who had registered their interest in Starter Homes that the policy had been dropped. It was not until 2020 that the 85,000 people who had registered their interest with the Home Builders Federation were told that Starter Homes were no longer available and advised on alternative housing options. The Department spent approximately £173 million on brownfield land preparing for the building of Starter Homes, net of receipts from onward sale of land to developers. Homes England forecasts that around 6,600 homes will be built on the sites prepared using funding intended for Starter Homes, but only 36% of these homes will meet the current definition of affordable housing.

Recommendation: The Department should be open with Parliament and the public when policies change or are abandoned. Such announcements should be made to Parliament and the public in a timely manner to reduce uncertainty and disappointment for those looking to the government to help them; in this case, to find a home they can afford.

1. The Department’s reliance on developer contributions to fund First Homes is a complex mechanism lacking transparency and risks less money being available to local authorities for housing and infrastructure. First Homes differ from Starter Homes as they will be sold at a higher discount, only to local first-time buyers, and with a discount that will be passed on to future buyers when First Homes are resold. First Homes will also be delivered through the existing planning system so are not dependent on new legislation. The discount will be funded through developer contributions. Local authorities will be expected to ensure 25% of affordable homes built by developers contribute to the First Homes initiative. We have previously criticised the system of developer contributions for its complexity, and lack of transparency over how much developers actually contribute. The Department does not have a timetable or target for delivering First Homes but is planning a pilot to build 1,500 First Homes ‘within the next couple of years’, which it wants to learn from before further planning of the new scheme. However, the Department could not say when First Homes would become more widely available and blamed its lack of clear timetable or targets on the uncertainty of the housing market.

Recommendation: As part of the First Homes pilot, the Department should model the effect of funding First Homes from developer contributions on local authorities’ ability to fund local infrastructure and other housing needs, such as social housing, and what the opportunity cost is of using developer contributions in this way. It should also set out clearly how the secondary resale market will work.

1. We are disappointed that the Department remains unable or unwilling to clarify how it will achieve its ambition of 300,000 new homes per year by the mid-2020s. We are wearily familiar with the Department’s lack of clarity over how it intends to meet its ambition – not target – of 300,000 new homes per year by the mid-2020s. The Department asserts that the ambition is ‘incredibly challenging’, made more so by the current uncertain housing market conditions. It claims that this makes it impossible to be transparent over the path to meet this ambition as it is in part dependent on how developers respond to market conditions. The Department has plans to increase the range and variety of new homes that are built, speed up building, and encourage more small and medium-sized developers to build homes and encourage developers to build out sites and not land bank. However, if the Department does not set targets and map the path to meeting its ambition for 300,000 new homes a year, it cannot measure progress or assess value for money across its array of housing policies.

Recommendation: We are frustrated that once again we must repeat our recommendation that the Department should clarify how its range of housing schemes, including First Homes, will each contribute to its ambition of building 300,000 new homes per year by the mid-2020s.

It should write to us within three months, including an assessment of how many homes of each tenure it expects will be delivered and what types of homes count towards its 300,000 ambition.

1. We welcome Homes England’s commitment to provide us with regular updates on its progress delivering affordable housing, but we are concerned that it and the Department has yet to clarify what ‘affordable’ actually means, and how much it costs to deliver affordable housing. The Department claims that ‘affordable’ means different things in different settings: different regions have differing requirements for housing that is affordable, and it varies in meaning across different housing programmes. Homes England uses the formal definition as set out in the 2018 version of the National Planning Policy Framework: broadly, ‘affordable’ means homes for rent, sale or shared ownership at less than market rates. The number and proportion of affordable homes planned for the sites intended for Starter Homes has increased from 1,700 (29%) to 2,370 (36%), reflecting an increased focus on affordable housing. However, we are concerned that the cost per affordable home of those funded by money intended for Starter Homes appears much greater than the cost per affordable home delivered by local authorities. The assessment of value derived from the funding intended for Starter Homes should encompass those homes delivered for market, and it should recognise that homes are being built on land that would otherwise be underused and not viable without government help, therefore will be more expensive than other types of affordable home.

Recommendation: The Department should write to us within one month setting out a clear definition of ‘affordable housing’, whether this definition means they are for sale, shared ownership or rent, and whether, and how, the definition may vary for different circumstances and geographies.

As agreed, Homes England should write to us every 6 months to update us on the numbers of affordable homes created, and of what type and tenure.

1. The long-term success of the Department’s housing policies depends on it being able to engage effectively with organisations across the housing sector and provide clarity on funding, without losing sight of the needs of those who are unlikely to be able to buy or rent their own home without support. Success in delivering housing relies on close working with local authorities, good relationships with developers, and maximising value for money from the public subsidy of housing. Starter Homes and First Homes are, however, aimed at people who want to buy and have incomes that allow them to do so - they do not help people move out of temporary accommodation, which requires more social housing. The Department’s view is that diversity of housing supply is key to building out sites and increasing rates of take up of new housing. The £12.2 billion Affordable Homes Programme contains other types of new housing supply to meet a variety of needs. The Department counts student accommodation and converted offices as new housing, as they relieve pressure on housing more widely. To address the housing needs of the homeless and those in temporary accommodation, Homes England is trying to encourage the building of smaller, cheaper homes through investing in modular homes, encouraging sites with high levels of modular construction, and encouraging demand for this type of home given the doubts of some local planning authorities.

Recommendation: The Department should write to us within three months to explain how it is addressing the problems of homelessness, rough sleeping, and families in temporary accommodation.

It should increase its efforts to work more closely with local authorities and developers, make greater use of innovative methods such as modular forms of housing, and embed space and light standards in legislation to ensure housing is of decent quality.