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Planning and the General Election: keys to long term success

With the General Election drawing ever closer, planning forms the battleground for a several controversial issues close to voters’ hearts, such as fracking and safeguarding the greenbelt. In particular, persistent difficulties in delivering new housing and infrastructure unite the parties in a common cause. More homes are needed, quickly, together with greater certainty around delivery of supporting infrastructure.

The extent to which the next Government succeeds in solving these problems will be determined by its appetite to grapple with a host of underlying difficulties. These include devising an effective model for land value capture, making the CPO process fit for purpose and addressing the chronic shortfall in local authority resourcing.

Despite obvious distractions elsewhere during this campaign, housing delivery still sits atop the planning agenda, with the manifestos all setting targets and the broad route needed to reach them. The Conservatives will point to steps already taken along this long and winding road – most recently through the Neighbourhood Planning Act 2017 and its predecessor the Housing and Planning Act 2016. Similarly, the Housing White Paper affords us the rare luxury of a detailed annex to the aspirations commonly found in (deliberately) loosely drafted manifesto commitments. Whilst less “radical” than badged, it establishes a framework of policy changes aimed at speeding up housing delivery, through measures such as diversifying the market, getting local plans in place and holding the public and private sectors to account for delivery.

Housing delivery at scale is recognised as being paramount. This requires a commitment to supporting the growth of new towns and garden communities – where the worlds of housing and infrastructure collide most spectacularly. The Liberal Democrats propose at least 10 new garden communities whilst Labour also underline the need to start on a “new generation” of new towns. The current system already supports that drive with the introduction of a potentially significant power in the Neighbourhood Planning Act 2017 allowing Regulations to facilitate the designation of areas as new towns and for development corporations to be established.

Whichever party emerges victorious on 8th June, there is a sense that the keys to long-term success are not entirely in their hands. We are witnessing a shift in emphasis towards the increased role of the public sector as an enabler of development. The extent to which they are willing and able to embrace that role will go a long way towards determining whether the same issues – and proposed fixes – will remain on the planning agenda in 2022.

The new New Towns Agenda

The third reading of any Bill in the House of Lords is normally fantastically dull. That was not true of what is now the Neighbourhood Planning Act 2017. Lord Mathew Taylor introduced a new and apparently innocuous clause that allows a completely new and parallel way of bringing new towns forward. It authorises the rewriting of the existing new town legislation, by regulation, to allow local authorities, or groups of local authorities, to ask the Secretary of State to designate an area as a new town and for a development corporation to be set up.

If agreed by the Secretary of State, then the local authorities will, effectively, step into the role that the Secretary of State occupied in the old new towns. They will control the way in which their new town development corporation is governed, operates and delivers new communities.  They will be accountable for successes.  They will be responsible for failures. Some powers will, inevitably, be retained by the Secretary of State, at least in the short term – the power to confirm CPOs and to authorise Local Development Orders. In time, with true devolution, even these powers could be left to the parent authority.

What will this mean? Many authorities are already exploring the possibility of new towns and particularly garden communities. One of the real difficulties is educating landowners that the cost of developing the necessary community and social infrastructure up front is significant, and that the legacy costs of stewardship will eat into land values, as much as if not more than the traditional enabling costs. This means that the normal landowner model of a minimum land value + a share of net proceeds or overage does not really work.  There is also a need to ensure that all land is bound into the same broad vision and programme. If that is not the case then the allocation of costs can be unfair.  The first phases will have to bear significant infrastructure costs that then increase the value of the land in later phases. If the later phases choose to develop independently then it may be problematic making sure that they bear their fair share of the initial place-making investment. A development corporation model helps to solve this. It allows early and extensive acquisition. It also ensures that the underlying “scheme”, the new town, is more completely disregarded for valuation purposes.

In practice, development corporations should rarely be necessary. Local authorities already hold most of the appropriate powers. However, the use of, or the threat of the use of, a development corporation may well be a helpful bargaining tool. It should allow local authorities to reach agreements with reluctant landowners. It should ensure that all parties contribute and benefit equally. It should be a weapon of last resort.

Autumn Statement: mood music?

In the absence of the Housing White Paper, the industry is still left needing to mind the gap.  We have simplified budgets – abolishing the Autumn Statement – but no hint of simplified planning for growth.

The overall commitment to housing is welcome mood music, but the lack of detail on powers and fiscal incentives to support locally-led Garden Towns to deliver at the scale needed leaves a hole.  Expanding grant funding for affordable tenures is great news but at £25,000 per unit is not going to be life changing.

hamThe £2.3bn Housing Infrastructure Fund could be a game changer if it is used to reward areas for proactively planning for growth. Making an up to date housing land supply a condition for at least some of the funding would dangle the right carrot for authorities that currently only have the stick. The lack of fiscal measures for new settlements – incentivising forward funding of major infrastructure that can unlock delivery at real scale – is disappointing though.

Affordable Housing is heading towards life support – delivery in 2015-16 was 52% lower than last year.  The announcement in the Autumn Statement of a funding injection to deliver 40,000 affordable homes is welcome. It is a clear recognition that addressing the housing shortage is not simply about building more homes.  Yes, we need more but they must meet a variety of needs. There are further signals of a softening of the Government’s stance on Starter Homes – tenure flexibility replacing David Cameron’s commitment to a single tenure.

Without the Housing White Paper, there is also still a wait to see how the NPPF is going to be reshaped and in particular how housing land supply and Local Plan duties will be re-set following expert advice on accelerating delivery. If the Community Infrastructure Levy is to be replaced by a simplified flat national charge, the effect on infrastructure funding and the transitional arrangements need to be understood now, so that schemes in the pipeline do not get put into suspended animation.

The statement gives some clues about the Government’s direction of travel but, funding commitments aside, offers little substance.  We still await the detail in the Housing White Paper which we are told will be published “soon”.  Reasons for the delay are unclear. Have responses to leaks on more radical measures, such as penalising developers for slow delivery, prompted a re-think?

MIPIM 2014: London Calling for more homes

IMG-20140312-00029This year’s MIPIM is upbeat and dominated by an industry intent on making the most of intense demand for homes and increasing demand for commercial space in London.

Sir Edward Lister, the Mayor’s Chief of Staff and Deputy Mayor (Policy and Planning), emphasised that the Mayor will leave no sites out in order to deliver the 49,000 new homes confirmed as needed in the recent London Plan Further Alterations.

Speaking at the annual Dentons – London First Lunch, Sir Lister called for the development sector to ‘double up’ its current housing production. He also stressed that the Mayor is willing to explore all options to bring forward stagnant sites and new communities, including through the use of compulsory purchase powers.

Sir Lister highlighted the role of transport investment, infrastructure tariffs and TIF-style forward funding to bring forward new opportunity areas such as Old Oak Common.

The Nine Elms Battersea Vauxhall Opportunity Area would be the model, he said. He agreed with our suggestion that flexible plan policies and a board of owners and key investors would be key to making other areas as successful as the VNEB. Dentons has been recognised as a “stand out winner” among the law firms advising in the VNEB Opportunity Area. We have helped secure consents for the 4 of the largest 25 VNEB schemes approved since 2007 – Vauxhall Sky Gardens (Frasers), Vauxhall Square (CLS/ Vauxhall Square Limited), Sainsbury’s Wandsworth Road (Northern Line Extension Works Act Order) and Hampton House.  We are also working on the £2bn New Covent Garden Market regeneration scheme.  Together, these account for around 30% of the 16,000 homes envisaged within the VNEB area.

With institutional investors now seriously interested in residential and infrastructure there is a real prospect of achieving these goals.

A long hard look will be needed to ensure that the CIL regime is up to the job, since it will largely replace the S106 tariffs that have worked well at Nine Elms.  Even after recent reforms, it is a dysfunctional system not fit for purpose in relation to large scale and complex development.

Stephen Ashworth also stressed the need to look wider than London at new settlement opportunities that can both provide for London’s needs and begin to balance growth. Realism is needed on the green belt, he said.

We continue to be involved in the most complex new settlements – at Harlow North, Alconbury Weald and New Covent Garden Market – and are working with the TCPA on their New Towns Act proposals.

New Towns Act 2015?

Dentons sponsored the TCPA to produce a new version of the New Towns Act, updated to make it fit to deliver the cities that we need today.  Why is it relevant?  Because we have all talked about increasing the delivery of housing and found it difficult to achieve in the present planning system.  And because the legislation is already available to deliver several new towns like Milton Keynes if there is the courage to do so.  This could be done quickly, and we would all benefit.

One benefit of a new Act would be to force the present cross-party rhetorical commitment to new homes into legislative form.  It would allow the law to be modernised.  It can bring in duties in relation to good design, sustainable development and dealing with climate change.  Importantly, it could also start to bring back to life the real vision that lay behind the original 1946 Act – of creating better places for people to live and work.  We should seize the opportunity to do so.

Muscular Action

The Bank of England is concerned that Britain is building half as many homes a year as Canada, despite having twice the population.  Planners are concerned about unplanned growth.  David Cameron’s support in early 2012 for a new Abercrombie Plan to protect the green belt and meet housing needs led to an RTPI/ Land Securities report.  But a Garden Cities Prospectus promised for high growth areas has not materialised.  Nick Boles’ confirmation in June this year that no resources would be allocated seemed to seal its fate.  But new towns are back on the agenda.  The Labour Party proposes to use five of them to double annual housing delivery until 2022 and the man they have appointed to come up with a blue print for 220,000 homes a year is calling for ‘muscular action’, including the compulsory acquisition of land subject to unimplemented consents.  The Policy Exchange, courtesy of Lord Wolfson, are also keeping the original commitment alive  – offering a £250,000 prize for a workable Garden City model. Now David Cameron’s key planning advisor has jumped ship to oversee it. Here is a short entry for the Prize.

Geographies

Where should new settlements go? In the absence of the RSS ‘Areas of Search’, LEPs should be empowered and incentivised to identify their own Garden Cities and Suburbs, where needs indicate they are required.  Business Rates, CIL and other fiscal tools can be used to make it worthwhile. An assumption that they will be built within range of London or on the line of HS2 needs care – the original Garden Cities were as much about where employment, not just houses, should go. ‘Muscular action’ is certainly needed, if only to make clear choices about the location and scale of major new settlements and their accompanying infrastructure.

Land powers and costs

‘Housing estate’ is a sullied phrase.  If there is going to be social licence to build, genuine placemaking is required.  Excellent masterplanning and design require land budgets and values that allow space for schools, parks and the like as a starting point, not an extra, ‘subject to viability’.  Compulsory purchase will be needed to achieve this, as the draft London Housing Strategy recognises.  The real question is how is it valued and who holds the land once assembled – LEPs, community trusts, Community Interest Companies or an arm of the Treasury?

Prime the pump

CPO valuation will reflect the public cost (or balance sheet risk) of forward funding significant new infrastructure. The TIF approach that has catalysed the Vauxhall Nine Elms Battersea Opportunity Area is a good starting point.  It needs a strategic body – such as the Mayor – to invest in infrastructure before planning payments, CIL and land receipts can catch up.  Labour envisage market borrowing backed by a UK plc guarantee.

City governance

garden city

Letchworth and Welwyn are characterised by communal ownerships and structures, which has allowed investment to be repaid and reused.   Milton Keynes had a different but effective model.  The lessons from these experiences – good and bad – need to be reflected in models of community ownership and reinvestment that provide an asset lock for crucial facilities and a base for social enterprises, releasing local authorities from management and revenue burdens associated with new infrastructure.  The Neighbourhood Share of CIL is a good model for endowing these vehicles.

The Prize winner should address these issues and more, not just design.

Turn up the volume, three suggestions …

The first two parts of this post identified the clear need for new housing and the important role that the private rented sector needs to make going forward.  This part makes three broad suggestions:

Firstly, recognise the limits of Localism.  Once the right locations for growth are identified, the debate should not be around whether but how to deliver. Recent changes to the Nationally Significant Infrastructure Projects regime allow a wider range of projects to be dealt with under Development Consent Orders.  Homes were excluded.  Why? Proposals that would make a significant contribution (say 3,000 homes or more) could and should benefit from the DCO regime,  the use of CPO and other powers to bring them forward.

Secondly, planning should plan positively for new settlements at a sensible scale relative to needs.  If there is significant unmet need in an area then the LEP should be charged with reviewing the best locations for major new development.

Thirdly, we should think about what a new Towns Act would need to look like and how the layering of European law would affect the process for adopting it.  Whilst the compensation regime will look different in some ways to the 1950s and 1960s approach, it will have to perform the same role – assembling land at scales and values that allow masterplanning and design excellence, using longer term land values to pay for the infrastructure, and a fund of part private/part public monies to meet the upfront costs of getting it done in return.  The process itself should learn the lessons of the doomed rush to Eco Towns and reflect the role that Community Interest Companies and other structures can play in providing a long term stake in making new places.

Turn up the volume, part 2

Meeting housing needs is now recognised as a national challenge (see Turn Up the Volume, Part 1).  Love or hate it, the Regional Strategy system was intended to force reluctant authorities’ hand on planning for large scale delivery.  The requirement to objectively assess needs is intended to have the same effect.  But it is only part of the solution, because delivering new places requires a multi agency approach and, fundamentally, a commitment to infrastructure delivery.  Assembling land at sensible values to prevent circular viability debates is also critical.

The NPPF has proved a sensible tool for delivering growth by appeal, which sometimes provides a convenient excuse for authorities for not making decisions.  The Duty to Co-operate is a good approach but is currently delivering punishment not success in the absence of a duty to agree.  If we are genuinely going to deliver the necessary number of new homes of over the next two decades, what reforms will be needed?

Reform on the cards

Labour has committed to a target of 200,000 new homes per year by 2020 if elected. There is loose talk of supplementing the duty to co-operate with a ‘right to grow’, intended to avoid delivery being mired in the same way as schemes like West Stevenage. The RICS wants the Bank of England to get involved. It may be that the political scales are nearing the point where the wrath for failing to meet needs will outweigh the ire for doing so.  Hence the fact that whilst Ministerial brief has shrunk, it is the Treasury and the Prime Minister making announcements on housing.

cartoon

Source: Inside Housing

The first structural change is a recognition in planning that private renting – and the potential for institutional investment in it – is a significant part of the solution.  Planning can be used to help create the commercial certainty to attract institutional investment, but PRS developers will need to provide a more persuasive model than cheap public land and affordable housing waivers.  How can development structuring using public land and long-term equity get the initial land values right for PRS models? How can affordable tenures – both their type and duration – be innovated to work within them?  What is the role for Registered Providers as part of consortia or place-makers in their own right? As CIL rates begin to hit student housing schemes, genuine PRS portfolios will have to prove themselves.  So the first change is that “objectively assessed needs” has to ensure that PRS requirements are identified and met.  The draft NPPG failed to address that issue which was a missed opportunity.

Three further suggestions for reform will follow in Part 3.

Turn up the volume

Despite political demotion, housing delivery is a key issue for planners, politicians and investors.  Residential yields are driving interest in mixed use schemes that have been dormant for years and in new products such as PRS (http://www.dentons.com/en/insights/articles/2012/november/12/if-you-build-it-will-they-come).

Going for gold

Three years ago (13 September 2010) the House of Commons Communities and Local Government Committee heard from Eric Pickles, Grant Shapps and Greg Clark on the abolition of the “crazy” Regional Strategies an action described by Shapps as “the greatest favour of getting homes built of any government since the last war“.  Building more homes each year than during the previous Government’s tenure would be the “gold standard upon which we shall be judged” he said.  There is a forecast 20% increase in new households to 2031 and planning will fail to meet identified needs if it delivers less than 240,000 per year, every year, for the next 20 years. This remains the Government’s current target, by 2016. So where are we now?

Mind the gap

A long way from the Gold Standard – 106,000 completions last year (9% down on the previous year).  The 2007 Calcutt Review concluded that the housebuilding industry would have to grow by nearly 5%, compounded, over the next decade to achieve the Government target. The pictures tell the story (see below).

shelter

(Prepared by Shelter)

England has a track record of housing reform to head off the social unrest that shadows overcrowding and dissatisfaction with place.  Since the announcement of the Government’s Gold Standard for delivering at least 240,000 new homes per year, housing has begun to assume even greater political significance.  Scarcity values, the diversion of national wealth to servicing mortgage debt and the restraint on home formation are ultimately a brake on the economy.

We have to double up delivery from today (and achieve an increase of 50% above recent peak delivery). That is a new Southwark delivered (not just consented) every year, or a new Birmingham (numbers-wise) every three. Assuming the private sector can deliver 130,000 homes every year, that still leaves an Exeter, 7 Hampstead Garden Suburbs or 2 Welwyn Garden Cities every year for two decades. Will Nick Boles’ vision of self builders delivering the gap be realised? You can, apparently, shoot him if he is still responsible in 2015.

The next blog on this topic will look at what reforms are needed to genuinely deliver against this volume of unmet need.