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Planning matters

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Despite the bulging in-tray, the new Prime Minister needs to support plan making to avoid another decade of housing crises
After the ‘longest job interview in history’ the new Prime Minister now takes on, what the BBC describes as the “gargantum task of Governing when millions are confronted by unpayable bills. Governing during a war in Europe and in the aftermath of a pandemic. And governing a party that's already been in power for 12 years.”  In the context of the myriad crises, political priorities might lie elsewhere, but housing cannot be ignored. Recently, in the context of the energy supply crisis ten year old footage of various political leaders writing off investing in nuclear power infrastructure has emerged, declaring a decade ‘too long to wait’ for a stable, functioning energy market given the affordability crisis of the day. It reminded me of the costs of temptation across the political spectrum of grasping quick wins to alleviate demand rather than addressing the long term fundamentals of supply. It might be ‘Unprecedented Times’, but if the last few years of perma-crises have taught us anything, it is that the Government cannot afford to wait for calmer waters tomorrow to take the tough decisions and this is the case for housing and planning. Looking for clues as to how the Prime Minister might see housing and planning policy is complicated. As the crises mount up, housing is slipping down the priority list. The new Prime Minister has highlighted the primacy of building more homes to ensure home ownership is an option for future generations (of potential Conservative voters) but she has distanced herself from the previous plan for a million homes on London’s green belt. The Prime Minister has favoured (during the leadership debates) a ‘free market philosophy’ to the housing crisis but housing requires effective planning. Ms Truss also supports local areas’ having more say in where homes are built, but the familiar realities of local planning politics will take hold quickly. The party leadership debates might have seen her appetite soften for planning reform but the political reality is that house prices, productivity, and well being will all suffer if the trajectory of housing supply continues downwards. Through the Standard Method (denounced as creating Stalinist targets during the debate) local planning authorities are tasked with, assessing, and planning for enough homes to meet their ‘local housing need’. In many areas, the local political incentive is firmly behind building the least amount of homes possible, despite the cost nationally to higher house prices and lower productivity growth. If house building targets which are designed to counter the local political challenges, are removed in favour of an incentive based approach, it will take a colossal shift in the tax system and economic orthodoxy of the country towards something akin to a land value tax with significant local benefits to new building to outweigh the local political costs which currently ‘win out’. If the PM really wants to deliver improved housing outcomes without causing a long hiatus in house building while changes trickle through, and clogging up the legislative agenda and political landscape for the remaining parliament and beyond, other less dramatic improvements can be sought which could help achieve the ‘300,000 homes a year’ manifesto commitment. To address the housing crisis, the Prime Minister can make significant gains by working with the grain. A reason to be optimistic is that it’s a good time to think about housing and planning policy, with The Levelling Up and Regeneration Bill in Commons committee, the PM can drive forward the Bill’s passage. As we have previously covered, the Bill itself is far from its revolutionary roots and now its focus is on tweaking and smoothing the planning system ‘as is’. It will however bring some positive changes. To achieve some of the bolder changes required to build more homes, the most significant target should be the issues which are stymying and stultifying the local plan system at the moment – this can in part be done through the NPPF prospectus. This policy document will be at least as important for changes to planning and housing than the LURB itself. In this context, several important factors need to be considered. The plan-led system can be effective in delivering the right amount of homes that are needed in each area, but at the moment it is slowing with local plan making grinding to a halt. The Government needs to be clearer about the expectations for local planning authorities to deliver homes, the standard method was a way of doing this, this is not about supporting ‘Stalinist policies’  or lining ‘greedy developer’s pockets’ (Feeding the Pipeline, Lichfields) but to deliver the homes we need, we must plan for sufficient homes to be built. This means supporting local planning authorities to make the tough local decisions needed to be pro-development and pro-growth, and genuinely disincentivising those authorities which are dragging their feet on the hard decisions. It also means slickening aspects like the duty to cooperate so that areas work together better (something the LURB is helping to support through more devolution). The Prime Minister also wants to support an increase in home ownership. Lichfields research on the latest census showed around 600,000 households were prevented from forming over the last decade . The Prime Minister is right to say that supporting more of these households to become home owners, or renting a place of their own will dramatically improve their lives, local economies and improve the stability of house prices. The focus must however be on building more homes, rather than the politically appealing short term demand side boosts that cause house price rises in the absence of supportive supply side boosts. In practice, to build the homes we need, we need to plan for significantly more homes than we do currently and in the absence of sufficient local incentives this needs to be driven nationally. Far from a ‘stalinist approach’ the housing market needs support and policy to be an effective market. Lichfields' research Tracking Progress shows that to deliver the 300,000 homes a year the current manifesto calls for -  all being equal we need 520,000 permissions per year need to be granted in the short-tomedium term to build up a bank of permissions - but are currently working with around 370,000. During the leadership election, Ms Truss distanced herself from previous plans to build on the greenbelt, as Mr Sunak called for ‘gold-plating’ the greenbelt. Clearly much of this politicking was speaking directly to Conservative members, but the practical realities of governing must now prevail. Lichfields' Banking on Brownfield research showed that Brownfield land alone cannot provide the solution, especially in the highest demand, most productive areas. Alongside this, another myth aired throughout the Summer has been that ‘greedy developers’ just need to be incentivised through a ‘use it or lose it’ tax system, our analysis also shows why this neither the solution, or even a significant problem. We need to do this now. The prospects for the next decade could arguably be worse than the current crisis unless measures are taken to address the planning system. The flow of new planning permissions is starting to decline. Recent data on permissions shows the steady upward trend seen between 2012 and 2018 has halted and in fact the flow of permissions has started to decline. If rates of permissions were sustained at around 372,000 per year there would be a shortfall of almost 293,000 permissions by 2023. This points to the need for an uptick in permissions in the next 1-2 years in order for these homes to be delivered by the mid-2020s. And this is worse for our more productive areas. The politics of this are unquestionably hard, and with finite political capital and multiple crises to tackle, during the leadership debates both candidates might be forgiven for dodging talking about the most difficult trade offs. However now in post, the Prime Minister must act quickly to deliver on the LURB, and use the NPPF prospectus to project a clear unambiguous focus on ensuring local planning authorities have plans which deliver sufficient permissions to meet their housing needs. If we do not plan for the homes required, we will still be facing the same questions, and stuck in another housing crisis a decade from now.    Image credit: Nick Kane via Unsplash  

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What can the latest devolution deal tell us about the progress of levelling up? The Secretary of State for Levelling Up, Housing and Communities and the four constituent councils of Derby, Derbyshire, Nottingham and Nottinghamshire have agreed the first of the Mayoral Combined County Authority deals for the East Midlands (EMMCCA). After years of attempted devolution deals in the area, it is a notable achievement for the new model that the constituent authorities came together in February following the publication of the Levelling Up and Regeneration Bill. The devolution deal, is contingent on the LURB passing through in to law, and will become one of the first Mayoral County deals, a ‘level 3 devolution deal’ as proposed in the LURB’s framework. The deal covers an area that matches the D2N2 Local Enterprise Partnership – Derbyshire, Nottinghamshire and the two cities of Nottingham and Derby, this provides a significant scale for strategic decision making (2.2 million residents and a GVA of over £50.5 billion). Amongst urban geographers and economists, there has been some debate about whether the new deal matches the economic geography of this area, the same has also been said for the D2N2 LEP, pointing to the difficulties of managing two distinct city economies of a similar size under a single East Midlands deal. However, the experience of the West Midlands and its three cities (albeit with a clearer hierarchy of city sizes) provides a successful model to pursue. Supporters of the deal point to the new funding already agreed and ensuring the region has a ‘seat at the table’ for further funding rounds and new powers that are unlocked through this devolved governance structure. These benefits it is suggested will ensure that the East Midlands keeps up with their Midlands Engine neighbours, with the accelerated investment and decision making in the West Midlands Combined Authority. After a number of years of negotiations for differing devolution deals, it is useful to look into the details as to how this new model has been negotiated so that both the constituent authorities and the Government have signed up.   What is included in the East Midlands Devo deal? The deal agrees a long term (30 year) funding envelope of around £1bn investment, on a per capita basis, UK Onward analysis puts this at a similar level of per capita spending as the other devolution deals (around £17/18 per capita per annum). Interestingly it does not appear at this stage to vary between established ‘first wave’ devolution deals and the newer Mayoral Combined County Authority deals, whereas the powers that are devolved and the structure of the institutions does differ. The directly elected East Midlands Mayor will be a new high profile figurehead responsible for the area. Significantly, their new powers will include the power to designate a Mayoral Development Area and then set up a Mayoral Development Corporation. This could see the next stage of the East Midlands Development Company given a significant boost. The Mayor will also have housing and land acquisition powers to support housing, regeneration, infrastructure and community development and wellbeing. However the proposal is also careful to navigate the complex local governance tapestry, as such the EMMCCA is made up of the mayor, and eight elected members (two from each constituent council including each lead member). “Devolution of power and responsibilities will be to the two upper tier and two unitary authorities but the deal respects the importance of the continued role of the eight Derbyshire and seven Nottinghamshire district and borough councils. The deal principally devolves national powers ‘down’ rather than powers from across the constituent councils ‘up’. This means place making functions will be delivered through the existing local planning authority arrangements. This also includes the power of county members to ratify development corporations if any of the mayoral development area includes their area. Indeed the agreement makes clear: “No local authority functions are being removed from any local authority in the area, excluding transport functions as agreed with the Constituent Councils. Where existing functions or resources currently held by Constituent Councils are to be shared with the mayor and the MCCA, this must be agreed by the Constituent Council(s).” As our previous research set out, the importance of effective structures and institutions will be key to effectively targeting investment priorities.   What are the routes to growth for the East Midlands? The devolution deal comes with new regeneration, housing and land funding (Over £17 million for new homes on brownfield land in 2024/25, and £18 million capital funding committed over this Spending Review period to support the delivery of housing priorities). Alongside the funding, The Government has also committed to “using the platform of this deal to … unlock transformative regeneration and housing opportunities”, Previous Lichfields analysis of the need and opportunity for levelling up investments was set out in Routes to Growth. According to our ‘high level’ analysis, four of the 16 local authorities across the Combined Authority are in the highest of three priority groupings for both socio economic need and opportunity for investment. Although only designed to indicate a broad geography of need and opportunity, it is these areas which are both seen as a priority for ‘levelling up’ efforts, and might offer the opportunity to capitalise on new investment quickly due to higher commercial and residential vacancy levels and brownfield land opportunities. All these areas (Bolsover, Chesterfield, North East Derbyshire, Bassetlaw) are to the North of the EMMCCA and are neighbouring areas which also gives a strategic geography for where decision makers might choose to target some ‘levelling up’ investment.   Figure 1 Opportunity for Investment (Priority group 3, Blue areas have more opportunity for investment) Source: Lichfields 2022, Routes To Growth   Figure 2 Socio Economic Need Index (Priority group 3, Blue areas are more in need) Source: Lichfields 2022, Routes to Growth   Reflections Following the publication of the Levelling Up and Regeneration Bill, the incentive for more areas to come forward with plans for devolution deals is clear. Leaders of the East Midlands councils hope that the scale, funding and status of a new deal will ensure they are ‘at the top table’ for current and future rounds of devolved decision making and investment. As we reflected in February: areas will need to create new structures and political arrangements if they want to maximise the potential for devolved funding and powers to be agreed locally. Established and effective institutions will be better placed to make decisions and allocate funding more efficiently. The Government make the point that this is a first step: “This agreement is the first step in a process of further devolution. As institutions mature, they can gain greater responsibility, and the East Midlands MCCA will be able to deepen their devolution arrangements over time on the same basis as existing Mayoral Combined Authorities (MCAs), subject to Government agreement.” In practice, the EMMCCA deal, although long in the making could provide considerable positive outcomes for the region. Having a new Mayor and the first MCCA structure should help to win funding, drive investment and organise strategically to make the region more productive and competitive. As others have pointed out, it will be incumbent on the constituent authorities and all parties involved to strategically target resources effectively across the area, and build up their institutions to tackle the area’s strategically important priorities. The extent to which the new Prime Minister continues to prioritise ’Levelling Up’ through funding, political capital and devolution will be a key part of how they are scrutinised over the next few months, however, assuming that this new type of deal is ratified, it will also be important to continue to devolve more decision making and funding. The new MCCA deal clearly provides the East Midlands leaders with the (long awaited) model of devolution and potential new institutions and structures they believe are needed to deliver change for their area, whether this momentum carries on to new deals for more areas - is a key question for the next Prime Minister.  

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