Local authorities need powers to set their own fees, and levy council tax on unexecuted planning permissions. That’s the view of the Economic Affairs Committee of the House of Lords, which in a critical new report sets out eleven action points to get housing going once more.
The Building More Homes report analyses a system that it perceives as fundamentally broken, and persistently failing to deliver the recognised requirement of new housing across the UK. It also notes that the Brexit vote appears to have shifted UK government policy in ways that could help loosen restrictive rules that have been throttling back local authority home building.
However, the report says that fundamentally, the government has been wrong on policy: “The Government’s ambition is welcome but this must be matched by appropriate action on a much larger scale than currently envisaged and across all tenures. The Government is primarily focused on building for home ownership, neglecting housing for affordable and social rent.”
For a start, the Lords report says the government’s existing housing target of one million new homes by 2020 is not enough, and is a figure based on flawed analysis. At least 300,000 new homes are needed a year, for the forseeable future, says the report. And the current actors in the market are not set up to help: “In a functioning market, the private sector, housing associations and local authorities would be building enough to meet anticipated demand. But they are not. The business model of the large developers looks to profit margins rather than volume, housing associations are facing loss of revenue due to Government policy on social rents and local authorities, despite some having the appetite, are not in a position to finance large housebuilding programmes.”
The report proposes allowing local authorities to levy council tax on sites where housing permissions have been granted, but work has not commenced within a set time period. This “use it or lose it” idea would address the apparently growing gap between consented homes, and the numbers actually built. And it says local authorities should be free to set their own fees, to help ensure they can fund a decent planning system. With the Community Infrastructure Levy already under review, it calls for simplification and clarification of the fundraising tool.
One solution will be to incentivise local authorities and housing associations to build. Part of the problem for local authorities, is that the government sets “arbitrary limits” on what they can borrow for housing – while in contrast other projects such as swimming pool building are not subject to limits. And land release has, to date, been “ineffective”, say the Lords. As new chancellor Philip Hammond is looking to moderate his predecessor’s target of achieving budget surplus, he could therefore allow local authorities more leeway to borrow for building.
Despite much talk of releasing public land for housebuilding, too little has happened, says the report. A senior cabinet minister needs to be given responsibility for the issue, to get things moving, while the National Infrastructure Commission also needs to take an active role. Finally, says the report, the mantra of achieving best market value needs to be relaxed to help, among other things, encourage smaller building companies back into the market.
LPA Perspective: While the Brexit vote may have created plenty of uncertainty, there is one thing we can be sure of: it has also created a golden opportunity for Theresa May and her lieutenants to reset key elements of flawed government policy.
This Lords report effectively delivers her a blueprint for making major improvements for housing delivery. It does so without demanding new government funds – though a review of the funds flow between social security, housing benefit and social rent homes is clearly needed. More clarity on this would help housing associations, some of which seem to be running scared, to clarify their mission.
For those on the ground, none of this is rocket science. Many will be dearly hoping the new government listens to the sensible recommendations made by the Lords committee.