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Budget offers Hammond opportunity to demonstrate commitment on housing

Dave Trimingham and Richard Laming outline the opportunities Philip Hammond should grasp in his Autumn Budget.

Budget statements may not be the natural place for a Government to unveil a new national target for housebuilding. However, that is exactly what Chancellor Philip Hammond did in Autumn 2017 when he committed the country to the delivery of 300,000 new homes per annum by the “mid 2020s”.

Since that announcement, progress has been made and housebuilding across the country has increased. From a low point in 2012/13 where 124,770 were delivered, the latest building figures show 217,345 were delivered in 2016/17 – close to the pre-recession peak of 223,534.

However, with that figure still falling 30 per cent short of the Government’s target, the budget offers an opportunity for Philip Hammond to take significant action to demonstrate the Government’s continued commitment to tackling the housing crisis. Here are where we believe the big opportunities lie:

1. Refine the standard method for calculating housing need

This must form an urgent priority for the government and should be addressed in the budget. 

In a plan led system, it is essential that local plans get the level of housing needed right as a foundation principle. Planning for the right level of homes can act as an enabler of development, provide a clear sense of direction and create the long-term certainty which gives investors confidence. Getting the number wrong, or suppressing it, can stifle development, create uncertainty and lead to developers looking elsewhere to deliver homes. In such circumstances, housing need will not be met and the housing crisis will be further entrenched.

Perhaps most startlingly, application of the Government’s standard method at a national level suggests we need far fewer homes than the 300,000 per year promised and widely accepted as being required to address decades of under-provision. The standard methodology applied using the latest 2016 based household projections suggests a minimum figure of only 210,000 homes are needed. The Office for National Statistics (custodians of the household projections) have recently clarified that projections are not to be misinterpreted as targets. 

The shock waves the standard method has sent out are such that the Government has rolled back from implementing it in its current form, in favour of reviewing the methodology. The importance of getting this right cannot be overstated – and a clear outline of the Government’s plan to address these problems at the budget would serve to settle a few nerves in the sector.

We suggest that calculation of a minimum measure of need as a proportion of the current housing stock of an area would resolve some of the anomalous results produced by the standard method and would ensure that all areas play their part in addressing a national crisis.

2. Recognise City Regions, Combined Authorities and growth corridors as key drivers of national growth and prosperity. Provide incentives for planning positively above a minimum level

Our largest City Regions, growth corridors and Combined Authorities are the locus of much of the economic growth that is expected to occur and will in turn drive housing need. As it stands, there is nothing in the NPPF or planning guidance to ensure that these areas plan positively for housing growth. Government is holding local authorities that are recipients of housing deals to account, but there is no wider or proactive mechanism for ensuring that some of the economically most dynamic areas of the country play their full role in meeting housing need. 

The Chancellor (working with MHCLG) could set expectations for ambitious plans and delivery for such areas. This would go beyond a mere “minimum” position as suggested by the standard method for calculating housing need. Under such arrangements, growth areas would be required to demonstrate how, through their local plans and joint spatial plans, they are going beyond planning for the minimum level of need.

Recent revisions to the National Planning Policy Framework have also diluted the requirement for local planning authorities to take into account the relationship between the economy of their area and the homes that are required. Reintroducing an explicit requirement to plan for the economic needs of a local area, including the housing that is needed as a result, would help to ensure that local plans are positively prepared. This could easily be achieved through a simple revision of the NPPF.

Providing a financial payment or “premium” for local authorities that plan significantly above minimum levels of housing need might incentivise a more positive approach to planning and provide funding support for infrastructure, place making and sustainability investments. 

This could be structured as a one off premium associated with planning for set thresholds above a minimum figure. This could be introduced at local plan formal adoption stage to provide an early incentive. 

Alternatively, the Chancellor might look at introducing a “specific grant” in relation to boosting housing delivery to supplement the local government financial settlement annually. This could be linked to the number of homes completed or alternatively granted planning permission over the preceding year. Such a grant might be used to address issues of marginal viability or to contribute to the funding of infrastructure. This would not be a substitute for developer contributions and would instead work alongside and augment these.

3. Introduce stamp duty tax reforms to widen choice of family homes

The population of England is ageing and there is a well-documented issue with the under occupation of larger homes. This can in turn create access issues for growing households requiring larger properties, and pressures at points on the housing ladder.
 
The Chancellor could consider the introduction of incentives for “downsizing” households moving to housing products for older people. Introducing a stamp duty exemption on such products might incentivise moves and enhance availability of larger homes for families and larger households. The availability of such incentives and an increase in household demand would also stimulate further development activity in this sector of the housing market, thereby contributing to boosting supply.

 

25 October 2018
 

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