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Brownfield Housing: The Post-Industrial Revolution?
I was delighted to have been invited to speak at the North East Shaping the Region event at the end of last year. The event, regularly hosted by Lichfields with other regional partners Turner & Townsend and Muckle LLP, aims to provide insights and stimulate thought across a range of key themes. The most recent event focused on sustainability and regeneration, two topics at the forefront of both regional and national strategy ambitions, reflecting the Net Zero and Levelling Up agendas.
My presentation considered:

  • The regeneration opportunities that can be unlocked through brownfield housing delivery;
  • The role of brownfield housing in supporting housing delivery targets as well as local regeneration and economic ambitions;
  • The challenges facing brownfield development; and
  • The funding opportunities available to accelerate delivery.
The purpose of this blog is to provide insights into the current opportunities that can be unlocked through brownfield housing development and the interventions available for supporting and accelerating brownfield housing delivery.  In the weeks since delivering the presentation, there have been several relevant Government announcements, including:

  • The announcement of the opening of the final application period for the Brownfield Land Release Fund Round 2 (BLRF2)[1];
  • The release of the National Planning Policy Framework (NPPF)[2]; and
  • Homes England research[3] into quantifying the social value associated with brownfield development.

National Housing Context

In the 2019 Conservative Manifesto, the Government pledged to deliver 300,000 homes per year by the mid-2020’s. A review of latest housing supply data[4] shows that housing delivery has consistently fallen short of this target. Emerging Government policy is seeking to focus new housing delivery on urban and brownfield sites.

Figure 1 Trends in net additional dwellings, England, 2001-02 to 2022-23

Source: Net additional housing supply, ONS (2023)

Forecasting, undertaken by the Office for Budget Responsibility (OBR)[5], indicates that this trend is expected to continue, underpinned by delays to Local Plans, rising construction material costs and high interest rates.

Figure 2 OBR housebuilding forecasts March Vs November

Source: ONS, OBR (2023)

In May 2023, a House of Commons Research Briefing[6] was published, exploring how the undersupply of housing could be tackled. The findings suggest that whilst it is not possible to solve the housing undersupply crisis with brownfield housing alone, developing brownfield sites can play a significant role in tackling the issue.
This sentiment is echoed within the revised NPPF (December 2023). Chapter 11 sets out the planning policy position, noting:
‘Strategic policies should set out a clear strategy for accommodating objectively assessed needs, in a way that makes as much use as possible of previously-developed or ‘brownfield’ land.’
The NPPF also suggests that planning policies and decisions should:
‘Give substantial weight to the value of using suitable brownfield land within settlements for homes and other identified needs, and support appropriate opportunities to remediate despoiled, degraded, derelict, contaminated or unstable land.’

 

The National Context

Research undertaken as part of Lichfields' Banking on Brownfield insight[7] (2022), reviewed Local Authority Brownfield Land Registers (BLR). It identified that across the UK there were:
  • 23,500 brownfield sites;
  • Comprising 36,000 hectares of land; and
  • Maximum net capacity of up to 1.4 million homes, equivalent to 31% of housing need over 15-years.
Figure 3 shows the geographical distribution of brownfield capacity by housing market area.

Figure 3 Brownfield land capacity for new homes by Housing Market Area

Source: Lichfields analysis of Brownfield Register, DLUHC (2021)

Figure 3 highlights the spatial distribution and availability of brownfield land as a share of housing need. It can be seen from this that brownfield sites across the North East (and the North generally) have the potential to make a substantial contribution relative to other parts of the Country. This is a function of both the region’s industrial heritage, as well as relatively lower absolute levels of housing need.

Figure 4 Brownfield land as a share of ‘levelled up’ need, summed to Housing Market Areas

Source: Lichfields analysis of DLUHC and Building Back Britain Commission

 

The North East Context

An analysis of updated Brownfield Land Registers across the North East region identifies a total of 875 brownfield sites, totalling 1,690 Ha of land and offering capacity to deliver up to 42,350 net dwellings. Broken down into the individual Combined Authority areas of the North East, this translates to:

Table 1 North East Combined Authority area - Brownfield sites, area and capacity

  Combined Authority
No of
Sites
Total Area
(Ha)
Net Dwelling Capacity
  Tees Valley Combined Authority
174
254.2
10,345
  North East Combined Authority
240
526.3
17,795
  North of Tyne Combined Authority
461
908.2
14,215
  Total
875
1,688.6
42,355


Source: Lichfields analysis of individual Local Authority Brownfield Land Registers (2023)

NB: Tees Valley Combined Authority – Darlington, Hartlepool, Middlesbrough, Redcar & Cleveland, and Stockton
North East Combined Authority – County Durham, Gateshead, South Tyneside, and Sunderland
North of Tyne Combined Authority – Newcastle upon Tyne, North Tyneside, and Northumberland

 

Figure 5 Brownfield land capacity – North East region

Source: Lichfields analysis of individual Local Authority Brownfield Land Registers (2023)

As part of this exercise, local housing needs as set out within Local Plan evidence were also assessed to identify the relative capacity of brownfield land across the North East to meet housing need. The assessment identified that across the North East a maximum net capacity within brownfield sites equivalent to c.37% of regional housing need exists. This exceeds the national capacity of 31%, demonstrating the scale of the opportunity that exists regionally.
Across the individual combined authority areas this breaks down to:
  • 27.9% within the Tees Valley;
  • 41.0% within the North East Combined Authority; and
  • 41.0% within the North of Tyne Combined Authority;

Figure 6 Capacity of Brownfield Land to Housing Need

Source: Lichfields analysis of Brownfield Land Registers and Local Housing Need as set out within Local Plan evidence

 

Key Challenges – Viability

One of the key challenges associated with brownfield development is viability risk. This is due to the high abnormal costs often associated with remediation activity (including engineering and decontamination works) to ensure that sites are suitable for development.
Research as part of the Banking on Brownfield insight developed a viability risk index using ONS and BCIS data. This is summarised in the figure below. The North East falls within the highest risk quintile indicating the highest level of viability risk, as a function of:

  • High ‘clean-up’ costs; and
  • Relatively lower house prices in the region.
This results in potentially smaller margins for developer return, particularly for schemes delivering affordable housing. This can present deliverability risks meaning that without intervention some sites are at risk of remaining unattractive, undeveloped, and derelict.

Figure 7 Viability risk of brownfield and development (5 most at risk)

Source: Lichfields analysis of ONS, BCIS data

 

The Funding Need

Considering the viability challenges outlined above, the figure below demonstrates the logic chain which underpins funding support for brownfield housing delivery.

Figure 8 Funding Framework

 

Source: Lichfields (2023)

 

The Funding Solutions – The National Landscape

In recent years the Government has launched a number of funding interventions to support brownfield housing delivery and regeneration. These total almost £2bn nationally.

  • Brownfield Land Release Fund (BLRF) – Originally launched in 2021, £68.6m of Round 1 (BLRF1) funding allocated to deliver over 7,000 homes. In July 2022, BLRF Round 2 was launched, committing a further £180m of funding to deliver a further 17,000 homes;

  • Brownfield Housing Fund (BHF) – £400m issued to individual Combined Authorities to support brownfield housing delivery; and

  • Brownfield, Infrastructure and Land Fund – August 2023, £1bn through Homes England to unlock housing-led development.
On the 12th December 2023, the final application stage for the Brownfield Land Release Fund Round 2 opened to all English councils. The deadline for applications is February 14th 2024.

The Funding Solutions – The North East Case Study

The North East has been successful in accessing £66.1m of funding to deliver brownfield housing. This includes, £5.6m of BRLF funding issued to four schemes and £60.5m of Brownfield Housing Fund, including:

  • £23.9m issued to the North of Tyne Combined Authority;
  • £19.3m issued to the Tees Valley Combined Authority; and
  • £17.4m issued to the North East Combined Authority through the recent devolution deal.

Figure 9 Brownfield housing funding allocations within the North East – Broken into Combined Authority area

 

Source: Lichfields analysis of BLRF and individual Combined Authority BHF allocations monitoring data (2023)

 

The Opportunities – The North East Case Study

Housing Delivery and Economic Contribution
An assessment of allocations data across the funds indicates that the committed funding is expected to support the delivery of 5,600 new homes including 650 affordable homes. This funding will:
  • Positively contribute towards achieving local housing delivery targets;
  • Bring forward schemes that may have otherwise remained undeveloped and derelict;
  • Support policy-compliant affordable housing ambitions, ensuring housing is accessible; and
  • Generate significant economic benefits (See below)

Figure 10 Economic Impacts associated with North East funding commitments and anticipated delivery

 

Source: Lichfields analysis

 

Wider Impacts

Schemes that Lichfields have been involved in developing business cases for have identified significant wider potential impacts:
 
  • Supporting wider regeneration ambition through public realm improvements, estate renewal, and delivering public amenity and community infrastructure;
     
  • Contributing towards the net zero agenda and environmental sustainability ambitions through developing houses which utilise energy reducing technologies such as Air Source Heat Pumps and Solar PV;
     
  • Support reduced instances of crime and anti-social behaviour;
     
  • Support improved public health outcomes through delivery of open space and infrastructure, promoting increased participation in physical activity; and
     
  • Provide wider benefits through positive impacts on the value of surrounding housing stock associated with placemaking and reducing the negative externality disbenefit associated with derelict sites.
 

Summary

There are clear benefits of brownfield housing development, both in terms of contributing towards achieving housing delivery targets but also economic and regeneration outcomes. A key barrier for delivery is presented by the viability risk associated with site remediation meaning that some schemes can stall and remain undeveloped. In response to this, the Government has committed significant funding to support with overcoming viability issues to prioritise the delivery of housing on brownfield land.
Lichfields has an excellent track record of developing business case and funding application submissions, helping clients to access gap funding to deliver much needed housing on brownfield sites. If you require any support in identifying and applying for potential funding opportunities, please get in touch with James on james.robertson@lichfields.uk

 

About the author

James Robertson – James joined Lichfields in 2022 and has over six years’ experience as an economist. James offers applied experience in quantitative and qualitative research methods across a range of economic and social research services on behalf of private and public sector clients.
James’s experience covers business case development, economic impact assessment, evaluation of social policy interventions, delivering ex-ante appraisals and cost-benefit analysis, in line with HM Treasury Green Book Guidance.
James has led on the preparation of several full business cases for Brownfield Housing Fund applications, helping to unlock over £6.0 million of funding. James is currently advising a number of public and private clients in support of grant funding applications to Government grant funding opportunities to bring forward brownfield housing development.
 

[1]One Public Estate: Brownfield Land Release Fund (BLRF2) Round 3 – December 2023, Local Government Association (2023)

[2]National Planning Policy Framework (publishing.service.gov.uk), DLUHC (2023)

[3]Brownfield Development Values - GOV.UK (www.gov.uk), Homes England (2023)

[4]Housing supply: net additional dwellings, England: 2022 to 2023, DLUHC (2023)

[5]Economic and fiscal outlook – November 2023, OBR (2023)

[6]Tackling the under-supply of housing in England, House of Commons Library (2023)

[7]Banking on Brownfield, Lichfields (2022)

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Autumn Statement 2023: will tax cuts prove good for growth as well as for party politics?
This year’s Autumn Statement was promoted by the Chancellor as one of optimism. Less than two months ago, the Chancellor warned that tax cuts would be virtually impossible. However, in the lead up to next year’s election, the Chancellor delivered a highly politically targeted Autumn Statement with the Conservative’s record in power defended and debated from either side of the house, with dividing lines being drawn. The Chancellor claimed that: enabled by the priorities and stability set out a year before, the economy is “back on track” and able to sustain personal and business “tax cuts” before the next election.
The good news - that emerged over the last month - and was celebrated by the Government is that inflation is lower and public sector finances are healthier than expected, providing the Chancellor with £27bn fiscal head room. The Autumn Statement provides a platform for the Government to set out how they plan to spend it.
  

Progress against the economic priorities

Economic Growth
The top priority - agreed by both political parties - for the country’s economy is growth. Although real GDP is set to marginally outperform March’s OBR forecast in the short term (figure 1 ), growth in 2024 is expected to be just 0.7%, compared to 1.8% forecast in March, and in 2025, growth is forecast to be 1.4%, rather than 2.5%. All this means that “Real GDP per person remains 0.6 per cent below its pre-pandemic peak and in the central forecast only recovers that peak at the start of 2025”. This will remain the key long term challenge for the rest of this and the next Parliament.
Figure 1: Real GDP forecast
Borrowing less
The key fiscal target the Government set itself, is that public sector net debt (excluding the Bank of England i.e. associated quantitative easing measures) will fall in the final year of the forecast (2028-29 in this forecast, figure 2). Using the OBR’s central forecast, this target is met, albeit this is due to underlying forecast changes that reflect lower borrowing in cash terms in 2027-28 rather than policy decisions set out in the Autumn Statement, which instead will offset some of the improvements in headroom. The OBR reports that almost all of the headroom will be spent on National Insurance Contributions, business investment tax reliefs and welfare reforms, “leaving debt falling by a narrow margin in five years” in keeping with the Government’s pledge.
Figure 2: Public sector net barrowing
 
Inflation down
The Government also set itself the target of halving inflation. This is also on course to be met, with the October rate at 4.8%, down from 11.0% a year ago, and with ‘core inflation’ falling. Although others will debate whether Government measures have a significant impact on this, as opposed to the economy more generally and interest rates set by the Bank of England, the OBR do say that measures will reduce inflation further.
However, this good news had sceptics reaching for the OBR’s independent analysis on inflation “We…expect inflation to remain higher for longer, taking until the second quarter of 2025 to return to the 2 per cent target, more than a year later than forecast in March.” Indeed, as figure 3 shows, the OBR forecast inflation to hit the long term Bank of England 2 per cent target in the second quarter of 2025, about a year later than forecast in the latest Budget (March 2023).
Figure 3: CPI inflation
 

The Headline Measures

The messaging for the Autumn Statement was clear: “backing business and rewarding workers for growth”. The headline measures therefore were:
  1. Cuts to National Insurance contributions - the main rate for employees will be cut from 12% to 10% from 6 January 2024.

  2. Invest for less – businesses will benefit from full expensing (invest for less) becoming permanent.

  3. Maintaining the triple lock for pensions – meaning the state pension will increase by 8.5% in April 2024.

  4. Welfare reform launched - benefits to rise but alongside stricter return to work expectations, especially for the hugely increased numbers of people unable to work due to ill health.

  5. Increase in the minimum wage - the national living wage will rise to £11.44 an hour, up from £10.42.
The counter narrative, as the Opposition set out, is that the higher fiscal headroom, that enables tax cuts and the Government to keep to its deficit promises, is predicated on real term cuts of between 2.3% - 4.1% a year after 2025 amongst ‘unprotected departments ’ following the last spending review period (and most probably following a general election).
It is also noted that the drop in National Insurance contribution rates is somewhat tempered by the ‘fiscal drag’ of frozen income tax? brackets that, by 2029, are expected to create 4 million new income tax payers and £45bn in tax receipts.
 

The outlook for the development industry

Supply Side Reforms
While the headline tax cuts will be welcomed ammunition for Conservative MPs in the run up to the election, the Chancellor will have also been concerned about the risk of re-stoking the temperamental inflation rate by putting more money in peoples’ pockets. To that end, he has looked to target his cuts and spending to promote growth: encouraging investment and expanding the nation’s productive capacity.
Often critiqued as being a break on investment and development, the planning sector was once again the target for a number of these supply side measures, with a particular emphasis on encouraging investment on energy infrastructure, commercial projects and new housing.
New funding was announced for the areas already earmarked for significant housing delivery in DLUHC’s Long-Term Plan for Housing published in July. As part of the proposals, housing delivery in Leeds and East London’s Docklands will be accelerated, while a new ‘urban quarter’ will be delivered in Cambridge.
Additionally, a new £110 million Local Nutrient Mitigation Fund to help unlock development sites currently constrained by nutrient neutrality rules by offsetting nutrient pollution from housing development. DLUHC estimate that the funding will help to unlock 40,000 homes over the next five years and will be welcomed in areas that have seen stasis since the nutrient neutrality decisions.
A third round of the Local Authority Housing Fund will also begin in 2024, providing £450 million to assist local authorities in obtaining affordable housing for those on resettlement schemes. It is estimated that the fund will help to provide a further 2,400 affordable homes across the UK.
Aside from the promises of new funding were proposals to reform the planning system for commercial and infrastructure projects. At the centre of these plans was the proposal for an Action Plan to halve the time to build new grid infrastructure to seven years and accelerate the UK’s movement towards net zero.
Proposals incentivising households living close to new energy infrastructure to accept developments, by providing money off their energy bills, and reforms to the grid connection process to remove wait times for significant energy infrastructure projects were also introduced.
A new premium planning service for businesses in England will be set up, allowing businesses to pay extra to guarantee accelerated decision dates for major applications and fee refunds wherever these are not met.
The Government are also consulting on introducing a new Permitted Development Right that would allow for the subdivision of houses into two flats without requiring prior approval, to be introduced in 2024.
  
Levelling up and economic development
The Government announced further support for UK high streets by maintaining a freeze on business rates for small retail, hospitality, and leisure businesses which was introduced in the wake of the pandemic. However, the standard business rate multiplier will be uprated in line with inflation which will hike up rates for almost two-thirds of businesses on the high street.
Earlier this week, the Government announced the award of around £1bn in the third round of its flagship Levelling-Up Fund (LUF). The package was the first of the three rounds to be uncompetitive, with funding distributed to 55 high scoring but unsuccessful bids from Round 2 which concluded in August 2022. The focus of Round 3 has been on regeneration and transport orientated projects, with a further £100m of funding to be subsequently allocated to cultural regeneration projects. However, given the shifts in the macro-economic landscape and the high inflation since the searing heat summer of 2022, there are concerns over the financial viability of projects first put forward in Round 2. The allocation of LUF funding will only be confirmed after consultation with Councils and a re-scoping exercise to ensure the projects remain viable.
An expansion of the Levelling-Up Partnerships programme, which brings together public and private partners to deliver targeted Levelling-Up investment, was also announced. This included an £80 million package to expand the programme to four local authorities in Scotland, as well as a further £50 million to support regeneration in Bolsover, Warrington, Monmouthshire, North Norfolk, Eden, and the Isles of Scilly.
Following the launch of the third of 12 English Investment Zones in West Yorkshire yesterday, the Chancellor launched a further three Investment Zones in the West Midlands, East Midlands and Greater Manchester. The West Yorkshire Investment Zone will be focused around the region’s life sciences cluster while the others are targeted at promoting advanced manufacturing and have already received anchor investment from the private sector. As part of the launch, the Chancellor announced that the Investment Zones programme in England will be extended from five to ten years and that the investment and tax relief offered to each Zone by Central Government will also be doubled from £80 million to £160 million.
Further devolution deals were announced for the West Midlands and Greater Manchester Combined Authorities and include a commitment to implement a single funding settlement for both authorities at the next spending review. Level 3 devolution deals as set out in the devolutionary framework, were agreed with Greater Lincolnshire and Hull and East Yorkshire, while non-mayoral Level 2 deals were agreed for Cornwall and Lancashire.
  
 
Housebuilding
With the LURA recently passed offering new planning ‘hardware’ for change, and the upcoming NPPF update providing new policy ’software’, it is also notable that the OBR’s forecast for mortgage rates and house prices were also updated. The longer tail of high mortgage rates (figure 4) will be a significant concern to the industry and a reflection of the persistent inflationary forecast.
Figure 4: Mortgage rates and house prices
The combined effect for the development industry is acutely concerning, the OBR housebuilding forecast shows a significant drop in housebuilding both from today’s already low rates and March’s forecast. The result is that housebuilding is set to drop to 199,100 in 2025/26, almost 30,000 down on March’s forecast and just two thirds of the Government’s target (figure 5). 
Figure 5: OBR housebuilding forecasts March vs. November 
 

Conclusions

The Chancellor took the opportunity today to celebrate that the economy is primed for growth and used the resultant headroom to offer pro-growth tax cuts and investment boosting measures. This seemingly positive news however was cast against a troubling economic outlook in the OBR’s forecasts; together, persistent low economic growth, low productivity and lingering inflation will bring serious challenges for the remainder of this and the next Parliament.
This economic outlook and the drop in housebuilding shows the importance of the upcoming policy and legal changes to the planning system, through the NPPF and LURA, both to the development industry and as part of the Government’s push for economic growth more widely.
 
  

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