Summary and implications
Tuesday delivered not one but two key development industry documents: the long and eagerly anticipated Housing white paper and also proposals to reform CIL. The Housing white paper is all about driving delivery of new homes but it is hard to make out anything really radical in it that might solve chronic housing under supply. Instead there is a smorgasbord of key ideas which taken together could begin to make a difference. Overall it marks a philosophical departure by the Government from an unswerving commitment to home ownership to recognition that, for many, renting will now be a lifetime commitment.
Developers will welcome the proposed CIL reforms. Since their introduction in 2010 both developers and authorities have struggled with many features of CIL charges, mainly their fairness and increasing complexity. Ultimately it is apparent that CIL has not delivered the infrastructure in the manner it envisaged. The proposals go a long way towards a simpler development tax that can operate alongside section 106.
We comment on the key features of both documents below:
The White Paper re-affirms the Government’s commitment to ensure that local authorities have in place up-to-date and sufficiently ambitious local plans. This will be achieved by making it easier for local authorities to produce plans and by providing further support, though the nature of that support is unclear. The Government has continued its pledge to intervene to ensure that plans are in place, with new powers proposed to strengthen their ability to do so.
Local authorities will need to demonstrate that there is a clear strategy to maximise the use of suitable land for housing. This does not necessarily include the green belt, with authorities being directed that they should only amend green belt boundaries where they there has been an examination of all other reasonable options for meeting identified development requirements. Where land is removed from the green belt, local policies should require that the impact is offset. This is in line with the Conservative manifesto “to leave the natural environment better than we found it” but will be disappointing for developers.
Plans will also need to be updated if the existing housing target can no longer be justified against objectively assessed housing requirements. The Government will consult on the options for introducing a standardised approach to assessing housing requirements and the outcome will be reflected in the National Planning Policy Framework. This should assist where there are disputes over a local authorities five year housing land supply.
The Government will also be bolstering the ability of local authorities to secure completion of developments by preparing new guidance encouraging the use of local authorities’ compulsory purchase powers to support the build out of stalled sites.
This is designed to prevent "landbanking" but has frustrated developers who have pointed to onerous pre-commencement planning conditions as being one of the main causes for developments being delayed. This could be the start of a "use it or lose it" attitude towards house building.
Funding development – CIL and section 106
Alongside the White Paper, the community infrastructure levy review team published its long awaited report on CIL. A radical overhaul of the CIL regime had been mooted in the run-up to the White Paper, with some even suggesting it may be scrapped.
The review team's report recommends major reforms to CIL and developer funding, arguing the current CIL regime is too complicated and fails to secure the sums it set out to.
Principally, the review suggested a Local Infrastructure Tariff (LIT) be applied to all development with almost no exemptions. This would be calculated via a national formula based on local market value and set at a low rate to make it simple to impose and easy to collect for local authorities. For larger developments, direct mitigation would be secured by a renewed focus on section 106 contributions.
Recognising that the most effective aspect of the current regime is the Mayoral "Crossrail" CIL, a Strategic Infrastructure Tariff (SIT) was also recommended as a tool for Combined Authorities to deliver specific pieces of infrastructure.
We will find out the extent to which the government implements the proposals in the Autumn Statement.
Private Rental Sector
There will be changes to the NPPF so authorities are left in no doubt that they should plan proactively for build to rent properties where there is a need, and to make it easier for build to rent developers to offer affordable private rental homes (instead of other types of affordable housing). This is to address the need for rental properties at a time when buying is far too expensive for many households.
The rental property market suffered a blow under the previous Prime Minister who made buy-to-let investments less lucrative by implementing tax policies targeting landlords. The industry has flagged that the impact of this on rental supply will need to be addressed to prevent a crisis in the near future.
Starter Homes were the flagship housing policy of the previous Government. With the focus now appearing to shift to the rental sector, there was speculation before the White Paper as to what would happen to Starter Homes.
The headline is that while the White Paper keeps Starter Homes as part of the affordable ownership offering, their importance has been greatly reduced.
The proposed requirement for a 20% Starter Homes quota for new developments has been shelved. There will now be a revision to the NPPF introducing a policy expectation for developers to provide 10% affordable homeownership units on new housing sites (of which Starter Homes will be just one component).
Where Starter Homes are pursued, the NPPF will also be amended to clarify that they should be made available only to those eligible first time buyer households with an annual income of less than £80,000 (£90,000 in London) and – to prevent cash buyers – a mortgage. A 15 year repayment period for a Starter Home is also designed to discourage speculation.