What the Budget 2018 means for planning reform

The October Budget included a number of announcements taking forward the government’s plans to boost housing delivery, support the high street and promote planning reform.

The Letwin Review of Build Out: the Final Report

Letwin’s interim findings previously concluded that housebuilders do not ‘landbank’, but do build out sites at a speed that ensures that new homes can be absorbed by the market without affecting the value of new or second hand housing stock. Further, their limited product range restricts choice and therefore potential buyers on any particular site.

The Final Report recommends legislative and policy change to increase the variety and differentiation of large sites in areas of high housing demand to speed build out.

• Letwin seeks diversity in housing type, size and style, design (through local design codes), tenure mix, target groups (eg older people’s or student housing) and delivery (custom or self-build). Letwin suggests that applicants should consider whether they would take on the risk of differing housing types or explain how they would sell parts of the site to others to do so. A “high” proportion of affordable housing is expected. Yet not all types of housing will be appropriate on large new build sites. In addition to affecting viability, such diversity will significantly complicate the process of obtain allocation and consent for, and bringing large sites to market.
• New primary legislation could define large sites by size (potentially at least 1,500 units) and boundaries (eg by reference to an allocation in a plan, although an allocation might have a number of actual permissions and be in different ownerships).
• Ahead of primary legislation, a Written Ministerial Statement, new secondary legislation and new planning policy could set ‘diversification principles’ and seek a ‘diversification strategy’ for large sites. Housing diversification could be a reserved matter – Letwin suggests specfically type, size and tenure mix, although size of dwellings is already a reserved matter and it is commonplace for type and tenure of anything other than open market housing to be secured through condition and/or section 106 agreement already.  To avoid uncertainty, if the procedures are adopted by the end of 2018 (very unlikely), the new rules could apply to permissions granted from 2021.
• A new National Expert Committee is recommended to provide advice on diversity requirements to developers and authorities on applications and the Planning Inspectorate at appeals
• To promote change ahead of 2021, Letwin proposes short term incentives to encourage developers with existing permissions to adopt new diversity provisions through a new section 106 agreement. This could be a condition of future government funding for developers or potential purchasers. A large sites viability fund could assist where sites would otherwise become unviable. However, it seems unlikely that developers locked into existing land deals and planning permissions would voluntarily make such changes without full compensation.
• Letwin sees scope in the longer term for authorities to designate unallocated, single large sites within local plans, backed by master plans and design codes, to which the new rules will automatically apply.  New development vehicles could facilitate delivery including local development companies which would secure a masterplan / design code, invest in land and infrastructure and sell off serviced parcels, or infrastructure development companies which would get involved after the authority had developed the masterplan / design code. Authorities would be given clearer compulsory purchase powers.

It is intended by Letwin that diversity requirements should affect land value, including as a result of the required high level of affordable housing. Indeed, controversially, Letwin recommends that guidance should encourage levels of diversity that will result in residual land values at around 10 times existing use value.  It is doubtful whether long term landowners would be incentivised to release valuable agricultural land at that level. This could also result in a two tier land market in areas where authorities are prepared to use compulsory purchase powers in relation to large sites.

The government has committed to responding to the review by February 2019. It will be a difficult task to promote diversification without complicating the system so much that interest in bringing forward large sites is diminished. Whether what is proposed will actually speed up build rates remains to be seen.

Other measures

The government has announced other measures in the Budget affecting the planning system and house building.

• Provisions to boost house building include a new Help to Buy equity loan scheme which will run for 2 years after the current scheme ends in 2021, but apply to first time buyers only and be subject to price caps. From 29 October in England, the Housing Revenue Account cap will be abolished enabling Councils to increase borrowing for house building. Further detail is awaited.
• Support for neighbourhood planning continues. Funding will be made available for neighbourhood bodies to allocate or grant permission for discounted homes to be sold to local people. Despite the recently adopted NPPF, further guidance will ensure that neighbourhood plans and orders approved by local referendums cannot be “unfairly overruled by local planning authorities” - it is unclear at this stage how this is intended to work.
• There is a new consultation on further permitted development rights to allow upward extension above commercial and residential properties and allow commercial buildings to be demolished and replaced with new homes.  Office to residential permitted development rights have proved unpopular with many authorities concerned about the poor quality housing that can result and the difficulties caused in pursuing masterplanned regeneration around buildings with the benefit of such rights. A package of support for the high street also includes a review of the use classes order and role of compulsory purchase powers.
• The government has also considered further the role of the community infrastructure levy and section 106 agreements. Changes will be made to the levy regulations and new guidance introduced in due course. In particular, and helpfully, pooling restrictions will be lifted so that multiple section 106 obligations can be collected towards a single piece of infrastructure. However, the requirement to produce regulation 123 lists will also be removed – it is difficult to see how reporting standards can adequately replace the current express restriction on ‘double dipping’ (securing payments through both section 106 and the levy). Payment of section 106 monitoring fees, held unlawful by the courts in certain circumstances, is to be supported. 

In short, planning reform through changes to primary and secondary legislation and to guidance is set to continue.

This article was written by Claire Fallows. For more information please contact Claire on +44 (0)20 7427 1046 or claire.fallows@crsblaw.com