Housing white paper
With the whole of the UK’s media poring over the 130 word “bill to confer power on the Prime Minster to trigger article 50” you’d be forgiven for missing the publication of the Government’s 104 page housing white paper.
This twice delayed paper sets out the Government’s proposals to “fix our broken housing market” and ensure that enough homes are built to meet our housing need. While restating a number of existing or already announced Government policies (think Help to Buy, lifetime ISAs and extending the right to buy to Housing Association tenants) the question remains will the new policies encourage developers to build and increase the stock coming to the market?
The paper covers four areas which we will look at in turn:
Planning for the right homes in the right places:
The Government want to make sure that enough land is used for development in the right places with local communities having a say in what development goes on and how it looks.
Local authorities will be required to have up to date local plans to ensure that communities are not blighted by unplanned housing growth. Developers will also be encouraged to increase the massing of their developments (i.e. fit more units on a site). This will be achieved by proposals to amend the National Policy Planning Framework to support higher density developments, reducing minimum space requirements, and taking a pragmatic view in respect of daylight considerations so as not to prevent dense, high quality development.
Up to date local plans may provide greater clarity for developers as to whether an application is likely to be looked on favourably. However, the Government also want to ensure that more land is made available for development, while protecting the green belt.
In order to identify land which may be suitable for housing, the Government wish to make data regarding land ownership, control and interests readily available to all by making its commercial and corporate ownership data set available for free. Whether the Government will push to identify the ultimate beneficial owners of land remains to be seen, however, developers might be wary of increased data sharing and the ability for individuals to identify land in their ownership.
Building homes faster:
In order to enable developers to build out quicker the Government will seek to prohibit planning conditions which do not meet national policy tests and limit the use of pre-commencement conditions. S.106 contributions will also be reviewed to ensure they provide a benefit for communities with a potential to move towards standardised agreements.
These policies will be music to developers’ ears given the resources required to sign off numerous conditions attached to a detailed planning permission, or the time needed to settle a s.106 agreement with the council.
Conversely, planning policy will also be amended to encourage local authorities to consider how realistic it is that a site will be developed when considering planning applications and larger house builders may be required to publish aggregate information on build out rates. While it is unclear whether this information would be used to assess the realistic prospect of a developer starting on site, increased reporting and administration is unlikely to speed up the delivery of new homes.
Councils will also be given more effective tools to withdraw planning permission on a site where development has stalled and encouraged to make use of compulsory purchase orders to promote development on such sites. These policies could impact on a developers’ ability to obtain further funding if a lender is concerned the local authority may withdraw a partially implemented decision.
The time period within which house builders have to implement permissions also looks set to be reduced to two years from the grant of permission as opposed to the current three year period.
The initial capital required to obtain planning is set to increase with local authorities able to increase planning application fees by 20% from July this year with a consultation planned on the introduction of fees for lodging a planning appeal.
Diversifying the market:
As well as encouraging the growth of the private rented sector, marking a shift away from seeing home ownership as the sign of a healthy housing market, the Government is keen to encourage greater use of modern methods of construction.
While the commercial property industry has embraced modular construction (with budget hotel chains craning in fully fitted bathrooms into their new developments) the house building sector has been slower to adapt - despite the suggestion that these homes can be built up to 30% quicker with a potential 25% reduction in costs.
Notwithstanding the potential to increase margins, banks are currently unwilling to lend on existing prefabricated homes, and given the limited take up of the “Buildoffsite Property Assurance Scheme” will developers be wary of history repeating itself?
The Government proposal to “support a joint working group with lenders and valuers” to encourage good decision making appears insufficient and until the model is proven any developer adopting these methods may end up with a development on which buyers are unable to secure mortgages.
Helping people now:
As well as commitments to build affordable starter homes for those with an income of less than £80,000 (£90,000 in London) the paper also points the spotlight firmly on leases with reviewable ground rents and the trading of reversionary interests. The Government intend to consult on a range of measures to combat the issue and we await further details on the outcome of the consultation.
With the residual income from ground rents and the value of the developer’s reversion often being factored in to the financial viability of a development; any legislation aimed at reducing or limiting its availability could lead to an increase in asking prices to enable this to be recovered.
Conclusion:
Those initiatives aimed at cutting red tape will be welcomed by the industry, however, we detect a general consensus that the initiatives in the paper do not go far enough and are unlikely to markedly increase build out rates. Developers will also be keen to see if those policies imposing additional administrative burdens, on an already regulation heavy industry, will come to fruition.
If you are a developer and would like to discuss how the initiatives in the housing white paper may affect your business or how CBG Law can assist with your conveyancing requirements then please do not hesitate to contact Alex Hutchings or Sammi Hsu by email (ah@cbglaw.co.uk and sh@cbglaw.co.uk) or call 0207 436 5151 to book an appointment for an initial conversation.