Planning matters

The Ministry of Housing, Communities and Local Government [MHCLG] recently announced that it would be postponing the results of the 2019 Housing Delivery Test [HDT] until after December's general election. This is due to ‘purdah’ rules, which forbid government departments from making political announcements during an election campaign[1].

As many will now be aware, the HDT forms the basis for assessing whether Councils are delivering the homes they need, by comparing past housing delivery to housing need. A series of graded ‘penalties’ are imposed depending on the extent of any shortfall (Figure 1), with the bar continually raised up to November 2020.

If a Council falls below 95% of their required delivery, they will be expected to produce an Action Plan within 6 months which:

1. Identifies the reasons for under delivery;
   
   
2. Explores ways to reduce the risk of further under-delivery; and,
   
   
3. Sets out measures the authority intends to take to improve levels of delivery.

However, it is unclear what the sanction will be for Councils that fail to comply with this requirement.  The 2018 HDT results were published back in February 2019, and yet a number of authorities in the North West [NW] have yet to produce their required Action Plan.

This blog explores this lack of action in more detail and provides analysis of the Action Plans which have been produced in the NW so far.

From a NW perspective, the region is generally not performing well against the HDT (Figure 2).  No authority failed the test completely, though 13 of 39 Local Authorities fell below the 85% threshold in 2018, and should therefore produce an Action Plan (as well as apply a 20% buffer to their housing land supply). 

Based on analysis conducted by Planning Magazine[2], of the 13 NW Councils requiring intervention, 4 authorities had not produced an Action Plan within 6 months as required by national policy (Warrington, Blackburn, Tameside and Rossendale)[3]. Warrington in particular had not produced an Action Plan despite delivering just 55% of their LHN requirement.  

On a national scale, of the 108 authorities required to produce an Action Plan, only 20% had managed to publish one by the August deadline. Considering the emphasis that the Government has placed on the HDT, this is a disappointing statistic, but one which should improve as Councils become more familiar with the process.

However, there appears to be no explicit sanction for failing to produce an Action Plan within the 6 month deadline (of the HDT’s publication). The Practice Guidance[4] states that Councils are ‘expected’ to produce Action Plans. It is clear that Action Plans are not viewed as a punishment, but rather as a solution to under-delivery to redress poor performance.  The question is, whether they contain ‘actions’ that will deliver any meaningful increase in housing delivery. 

The Practice Guidance[5] sets out a list of actions which Councils ‘could’ consider as part of an Action Plan (Figure 3).

Based on the Planning Magazine[6] analysis, which assessed the content of all published Action Plans across England and Wales, it becomes clear that many authorities have chosen the easier of these options. The majority of the actions do not provide any real bite, with many actions containing soft buzz words such as ‘encourage’, ‘promote’ and ‘consider’. 

Analysis of the first group of nine Action Plans published across the NW reveals that actions such as ‘member training’, ‘shifting resources towards planning departments’ and ‘increased engagement with developers’ appear with regularity.  Crucially, there appears to be limited provision for practical improvements to boost supply, such as committing to release safeguarded land or delivering infrastructure or funding to bring forward / unlock stalled sites.

There are some good initiatives being put forward, such as policy requirements to build at higher densities and developing small sites, though these have not been consistently proposed across the North West.  The creation of Council-owned development arms provides another potentially helpful initiative, with numerous Councils citing this within their Action Plans.  Though realistically, this could only have a meaningful effect in the longer-term, and is unlikely to be a short-term solution. So far, the requirement to produce an Action Plan appears to be a mechanism simply ‘encouraging’ Councils to boost delivery rather than ensuring meaningful solutions.  

Where an Action Plan has yet to be produced, we may begin to see Inspectors using the absence of an Action Plan at appeal as further evidence in the planning balance for or against housing, if Councils are not engaging with the process or demonstrating a commitment to boost housing delivery.  If Councils are unable to demonstrate the implementation of their Action Plan, then this could also weigh in favour of a proposal.

In 2020 the HDT thresholds will increase further.  Unless delivery significantly increases we could see a number of Councils across the NW failing the test and triggering the presumption in favour of sustainable development. Based on an initial analysis, there is limited evidence to suggest that Action Plans will provide the boost to delivery required to ensure the presumption in favour is not triggered.

This is particularly worrying for Greater Manchester, as well as the Liverpool City Region, both home to a number of significantly underperforming authorities.   

A number of the Greater Manchester authorities are constrained by Green Belt, and this has certainly compounded the issue.  The timely adoption of the Greater Manchester Spatial Framework [GMSF] is widely seen as the long-term solution to the sub-region’s persistent under-delivery.  Adoption of the GMSF remains a crucial way of unlocking sites and boosting delivery. However, the latest delay rules out a further draft of the GMSF being published before next year’s Mayoral and local elections taking place in May 2020.

With a continuing absence of tangible, alternative solutions to addressing the under-delivery of housing, alongside a clear reluctance to release Green Belt, it is likely that related issues such as housing affordability will continue to intensify across the region. 

The delivery of robust, practical Action Plans where required can, and should, act as a remedy to help prevent this. However, the lack of bite to the penalties imposed by the HDT, and the absence of any meaningful sanction for either non-conformity or lack of progress delivering the Action Plan, is a clear concern.

The HDT represents a key monitoring tool for the Government to incentivise local Councils to deliver the homes they need. However, it is clear that the Action Plan process may lack any real teeth, and it is disappointing that across the North West some Councils failed to produce an Action Plan within the deadline. Although we may see some implications for Councils at appeal, there appears to be no formal sanction for non-compliance. 

This prompts the question - are Action Plans really providing the level of incentivisation that already underperforming authorities require in the North West?

It is clear that the overall Action Plan process needs significantly strengthening, with publication of an Action Plan perhaps becoming a requirement rather than an ‘expectation’, with associated penalties for non-compliance.

It may be too soon for this to happen before the next round of (delayed) HDT results, but a process of reinforcement should certainly be considered before the 2020 results are published in November next year.

Last month’s London Plan Panel Report confirms what was widely suspected – that London’s future industrial land needs are probably higher than first thought, mainly because of growth in demand for storage and warehousing within and close to urban locations. Whilst the evidence indicates a modest reduction in the amount of land needed for manufacturing uses (c.170 ha), this is more than counterbalanced by predicted growth of land needed for distribution uses (c.280-400 ha), driven by a combination of London’s population growth and the shift to online retailing and e-fulfilment centres.

The draft Plan assumes achieving a 65% plot ratio average to accommodate the future balance of industrial needs. But evidence submitted to the Examination pointed to this being challenging (indeed, our research last year across a sample of sites in Outer London found the current average ratio closer to 33%), and not necessarily applicable in all cases. This led the Panel to conclude, “whilst this does not mean that the average of 65% could not be achieved in the future, it does suggest it may be challenging in some locations and for some types of development.” In other words, intensification of industrial land is not in itself likely to absorb the full level of industrial land needs identified, and in any event there is uncertainty about how deliverable this would be in practice.

To complicate matters, the pipeline of industrial land release is also now much greater than was originally assumed. In 2015 about 12% of existing industrial land, equating to 838ha, either had planning permission for non-industrial development or had been identified by boroughs has having potential for redevelopment, with no certainty that any industrial capacity would be retained. The 2017 SHLAA indicated that this figure had increased by 106ha to 944ha, implying that future losses of industrial land will probably be higher than was first thought – much to help meet the Plan’s housing requirements.

Furthermore, the Panel noted that the vacancy rate of existing industrial land and premises in most boroughs is less than 5% – referred to as “a reasonable benchmark to assume in an efficiently operating market” – so there’s not even much slack within the current land supply to provide more capacity (apart from a small number of east London boroughs where vacant supply is potentially higher).

Taken together, these factors led the Panel to report, “there is likely to be a need, in quantitative terms, for more industrial land to meet future demand over the plan period to 2041 than assumed in the Plan.”  However, it’s not just a quantitative issue. Whilst existing industrial land supply may be distributed across property markets and in locations that are generally suitable for the types of industrial use that are expected, the Panel also identified that there will almost certainly be a need to meet new locational and site specific requirements of some businesses including in and around the CAZ and other accessible locations. So not only does London need more industrial land, but it needs to broaden the portfolio of sites and locations it has to offer.

In this context, the Panel concluded:

There was significant debate about the policy detail at the hearing sessions in March, as we reported in an earlier blog. Modifications are suggested to help the effectiveness of these policies E4 to E7 in the short to medium term, but the Panel is unequivocal that planning for medium to longer term industrial land needs should fall within the remit of the future strategic, London-wide Green Belt review that is recommended.

The context for this is that in the 15 years since the first London Plan was adopted, there has been a general presumption in favour of industrial land release across London within specified benchmarks. However those benchmarks were significantly exceeded, with the end result being far greater release of industrial land than was ever anticipated (Figure 1). The effect of this has been not only to reduce London’s industrial capacity beyond what structural trends allowed for, but also to narrow the range of industrial locations (particularly within inner London) available to accommodate the wide range of business uses that can exist on industrial sites.

In response, the draft Plan proposes a far more stringent approach to better guide the management of remaining industrial capacity, but relies heavily on intensification and co-location of industrial uses (plus introduces – but doesn’t really articulate in any detail – the concept of ‘substitution’ whereby industrial needs could be met outside of London). However, the Panel was evidently not convinced that the capital’s current and likely future demand-supply balance for industrial land could be met solely in this way, and indicates a bolder approach is called for in the longer-term. The risk is that the issue simply ends up in the long grass, whilst in the meantime a buoyant industrial market adds more pressure. It will be interesting to see how the Mayor responds.