Housing Delivery and the Budget

Against a long-standing background of a failure in England to deliver sufficient new homes, Philip Hammond sought in his budget to pave the way for a brighter future with a wide-ranging series of measures.

Financial Measures

While the headline announcement was the abolition of stamp duty for first time buyers purchasing homes worth under £300,000, the Chancellor is hoping that the specific and targeted measures in the budget will allow for the delivery of 300,000 homes annually by 2022.

The Homes and Communities Agency (expanded and rebranded as Homes England) will have a clear remit to facilitate delivery of new homes through lending and “planning powers to intervene more actively in the land market” including working alongside private developers. Homes England will be given the tools to provide loans and financial guarantees to small and medium sized (SME) developers.

The Treasury will also explore options to create £8 billion worth of financial guarantees coupled with significant funding allocation of:

• £2.7 billion for its Housing Infrastructure Fund;
• £1.1 billion for the Land Assembly Fund;
• £630 million for a small sites infrastructure and remediation fund; and
• £400 million of loan funding for estate regeneration.

Tackling Perceived Landbanking

The Government is carrying out an urgent review into why a large number of residential planning permissions have been granted, but without the development being carried out. In his speech, Hammond stressed that “In London alone, there are 270,000 residential planning permissions unbuilt.” The Government is considering direct intervention including the use of CPO powers. More detailed policies may be proposed following the review, which will be chaired by Oliver Letwin, expected to report in time for the Spring Statement with a full report at Budget 2018.

SMEs

The budget also provides for a further £1.5 billion for a “Home Building Fund”, providing loans specifically targeted at supporting SMEs to access finance to build. The £8 billion worth of new guarantees being explored to support housebuilding may also include further assistance for SMEs. This acknowledges the genuine role that SMEs have to play and the need for support. Whilst access to more funding is a helpful start, the issues affecting SMEs continue, such as the lack of smaller sites, onerous pre-commencement conditions, and access to specialist technical planning advice.

Growth Areas and the Green Belt

The Chancellor stressed the importance of the provision of high density housing in towns and cities, together with up to 1 million homes by 2050 in the built up Cambridge-Milton Keynes-Oxford corridor and improvements in road and rail infrastructure. This includes improved infrastructure and for the delivery of 100,000 new homes around Oxfordshire by 2031.

The government is also proposing the use of public and private capital to build new garden towns, potentially through the use of development corporations. Restrictions on green belt development were not, however, proposed to be changed.

Local Authorities’ Responsibilities

The Chancellor emphasised that the Treasury would also be relying on local authorities to contribute to the housing provision target. To facilitate the building of affordable council housing, the government is lifting Housing Revenue Accounts caps on public borrowing in areas of high demand, which could allow local authorities to meet housing needs in areas where the market is not providing sufficient homes. The government will also consult on a new policy for first-time buyer led developments, outside development plan allocations on the condition that a high proportion of the homes are discounted for first time buyers or for affordable rent.

The Housing White Paper released in February 2017 proposed a “Housing Delivery Test” intended to measure housing delivery against LPA’s housing requirement. This Test has not yet been introduced, but the government has indicated it intends to “strengthen” the Test with tougher consequences where planned homes are not built.

Notwithstanding the proposed £1 billion towards Local Authority house building in the budget to provide borrowing for Councils to build new council homes, there is a disconnect between the expectation that the private sector will play a major role in meeting housing targets, and the requirement that LPAs will be responsible for the building out of the consents it grants. In this respect, the budget raises more questions than it answers.

Clean Air and Infrastructure

Away from housing, the budget also provides for a new £220 million clean air fund, “to allow local authorities in England with the most challenging pollution problems to help individuals and businesses adapt as measures to improve air quality are implemented”. A £1.7 billion “Transforming Cities Fund” is also being established to improve local transport connections.

Conclusions

The budget, in planning terms, feels in some respects like buying time while more substantive policy is formulated. The Chancellor’s reference to planning measures “in due course” may result in more beneficial measures in the future. In the meantime, a very bold target has been established and substantial funds set aside as a means of incentivising both the public and private sectors. The challenge has been set and the objective is clear.