Planning matters blog | Lichfields

Planning matters

Our award winning blog gives a fresh perspective on the latest trends in planning and development.

A brownfield-based planning policy? The lessons of PPG3
The Prime Minister’s Conservative Party conference speech confirmed speculation that a change in direction is afoot on planning reform[1]. Diminished is the thinking that led to the White Paper and the ‘mutant algorithm’. Ascendant is ‘levelling up’ and directing development to brownfield sites[2]. The Daily Telegraph headlined its report of the speech with “PM pledges no homes on green fields”[3] However literally we should interpret the PM’s rhetoric[4], the tilt towards brownfield and away from greenfield is worthy of exploration. It may be a response to the politics of the past twelve months, but it is not a new policy outlook, having echoes of the brownfield-first policy of the Labour Government in the late 1990s, that culminated in Planning Policy Guidance Note 3 (PPG3) in 2000. The current BBC documentary series on New Labour tells the political story of that era[5]. Unsurprisingly, its planning agenda is not centre stage, but might a review of PPG3 help frame consideration of the latest brownfield zeitgeist? This blog looks back at the genesis of PPG3, unpacks its core elements, and sketches out what happened to housing delivery.   Emergence of the policy New Labour came to power in 1997 with a focus on urban renaissance, but it went with the grain of the agenda from the previous Government[6] which had already suggested an “aspirational target” of 60% of new homes on brownfield land[7]. In 1998, Deputy Prime Minister (DPM) John Prescott published Planning for the Communities of the Future[8]a policy statement which introduced the idea of ‘brownfield first’, described as: “a sequential and phased approach to the development of all sites, which means there will be a general preference for building on previously-developed sites first, especially in urban areas” This was not a ‘brownfield only’ policy: “The principle of reusing previously-developed sites is, at first sight, the most sustainable option. However, reuse of land (and buildings) is only one aspect of sustainable development. Other aspects relate to the resource and energy implications, including reducing the need to travel. Not all previously-developed land is equally attractive to develop in sustainability terms. … Thus, in sustainability terms, some forms of greenfield development may be more attractive, such as extensions to urban areas in public transport corridors… This suggests that criteria may be needed for deciding a sequence for development at regional, and particularly local, levels. This means using a more sophisticated approach to the choices of both the form and phasing of development, with the clear aim of creating more sustainable patterns of development.” On how this related to meeting housing needs, Government was cognisant of affordability, but sought to downplay the idea of the 4.4m households by 2016 as a binding target, by introducing “plan, monitor and manage”. In his statement to Parliament, the DPM said: "The dilemma is clear cut and affects us all - how to accommodate more households and, at the same time, protect our precious countryside, without rents, house prices or homelessness spiralling upwards. It is not just a matter of how many households but where they will live…. In order to achieve greater flexibility, we are determined to get away from a simplistic 'predict and provide' approach in housing, as we have done for road building. We will treat the household projections as guidance, not house building requirements. Moreover, we will allow for greater flexibility in adjusting regional and local plans to ensure local provision is meeting local need over time…” [9] In 1999, the Government consulted on a draft of PPG3, which introduced the sequential approach. That summer, the Urban Task Force reported[10]. PPG3: brownfield-first planning policy PPG3 was published in March 2000[11]. It comprised a number of core elements: Housing targets were to be set at a regional level based on a “realistic and responsible approach to future housing provision, assessing both the need for housing and the capacity of the area to accommodate it” (No tilted balance then!). Growth was to be directed to “areas where previously-developed land is available … in preference to developing greenfield sites.” Land supply was underpinned by a brownfield target of 60% “in order both to promote regeneration and minimise the amount of greenfield land being taken for development” with urban capacity studies used to identify the potential of brownfield land. In identifying sites for allocations “authorities should follow a search sequence, starting with the re-use of previously-developed land and buildings within urban areas identified by the urban housing capacity study, then urban extensions, and finally new development around nodes in good public transport corridors.” Site selection was based on criteria in Paragraph 31 of the PPG3, but deliverability was not one of them. Brownfield sites were to be preferred to greenfield release unless they performed “so poorly” as to preclude their use for housing. The phased release of sites was to be determined in local plans based on the sequential approach, with plans required only to identify land for the first five years (and no requirement for it to be deliverable, as now), with plans to be “updated is reviewed and rolled forward at least every five years”. The only concession to deliverability was the where it said: “it is essential that the operation of the development process is not prejudiced by unreal expectations of the developability of particular sites nor by planning authorities seeking to prioritise development sites in an arbitrary manner.” Guidance was produced to assist in this process.[12] Enforcement of the policy included the Town & Country Planning (Residential Development on Greenfield) Direction 2000, requiring local authorities to refer planning applications on greenfield sites of at least 5ha or 150 dwellings - including on existing local plan allocations - to the Secretary of State for him to decide whether he wanted to make the determine the application following a public inquiry. In the first ten months of PPG3, the Secretary of State had ‘called-in’ 20 greenfield housing applications under the Direction or as a departure, with a further nine pending a decision[13]. What was the impact? In 2003, Lichfields was commissioned by ODPM to carry out research on the implementation of PPG3[14]. We found an inconsistent picture across the country as to how well the policy was being applied. Half of local authorities had reviewed their greenfield allocations, and most had either completed or were underway with urban capacity studies, but there was far slower progress on local plan preparation, with only 13% of local plans and 35% of structure plans adopted. A third of local authorities – particularly in the South East – had not begun preparing local policies (in effect they banked the restrictions on greenfield release as early as 1998 without putting in place a strategy to respond to housing needs). The Study found that barriers to implementation of PPG3 included the slow pace of local plan production and lack of resources. Plus ça change. A historic perspective on the brownfield-first policy is provided by Andrew Prichard, former manager of the Regional Planning Body in the East Midlands[15]. He found: Regional Planning Guidance targets for housing provision aggregate to around 150,000 homes[16] but with a different regional distribution: numbers were higher in the North East, Yorkshire and Humber and the West Midlands. In the North West, the Government cut housing targets by 15% to reduce greenfield development. In the South East, the Government split the difference between the SERPLAN intentions and the conclusions of Professor Stephen Crow (Inspector) who had “demolished” them. The proportion of brownfield increased (CPRE reported it to be 67% by 2005). However, net housing additions fell from 156k per annum in 1998 to a low of just 132k in 2001 despite “increasing economic buoyancy”. House building was clearly not keeping up with household growth, with shortfalls of 90,000 homes alone in 2001 and 2002. The figures for net housing additions 1998 – 2003 are shown in the Table below. Source: DLUHC: Table 109 Dwelling stock: by tenure and region, from 1991 (figures may not sum due to rounding) Whilst the rate of completions nationally had recovered by 2003, there was still a 7% reduction in the south, and national supply was historically low. London was the principal driver of increase. Andrew Prichard comments: “The extent to which PPG3 was responsible for the mismatch is of course difficult to fully establish. However, it represented a very significant shift in locational policy for developers and land owners and was strongly enforced by central Government. Research by Savills in 2004 indicated that the immediate effect of PPG3 was to ‘restrict greenfield availability rather than increase the availability or capability of development of brownfield sites’ – which in turn had implications for land prices and housing supply.” The Barker Review of Housing Supply Interim Report (2003) observed that: “The sequential test introduced in PPG 3 requires local authorities to release land for housing development in an order of preference that prioritises brownfield sites. It is not the intention of the policy to restrict land supply but some local authorities appear to have overinterpreted it to the detriment of housing being delivered. Indeed research from ODPM supports this point, arguing that local planning authorities understand ‘brownfield first’ but also erroneously believe PPG3 says ‘greenfield never’. The ‘prematurity of sites’ is often a reason for the refusal or delay of applications for housing developments. However, priority sites may not always be immediately available or suitable for development. In some local authorities, this policy is used to block development rather than actively manage the release of land.”[17] A change in direction By 2003, there was a shift. The DPM launched Sustainable Communities: Building for the Future, with plans to “tackle the housing shortage, especially in London and the wider South East by creating conditions in which private house builders will build more homes of the right type in the right places” [18]. This approach included the four new growth areas[19]. Barker’s final report (2004) said the planning system should be more responsive to market signals[20]. On the brownfield first policy, it recommended that: “PPG3 should be revised to require local planning authorities to be realistic in considering whether sites are available, suitable and viable. Any site which is not available, suitable and viable should be disregarded for the purposes of the sequential test.” In 2006, PPG3 was replaced by PPS3[21]. This maintained the 60% brownfield target, but crucially brought back the requirement for a rolling five-year land supply of deliverable sites and set a requirement for developable land for years 6-10 and, where possible, 11-15. By 2008, housing supply was 40% above its 2003 level. This policy was carried forward into the NPPF (2012) alongside the presumption in favour of sustainable development. This dual approach – of allowing local authorities to select brownfield sites in preference to greenfield, but still ensure they have a portfolio of sites that will secure a sufficient supply of housing in reality – remains part of the current policy framework[22]. Ten lessons for today This canter through one aspect of New Labour history tells us something about the factors this Government should consider if it is genuinely contemplating a more overt brownfield-focused policy: Even at its zenith, PPG3 was never a brownfield only policy, even though some Councils sought to interpret it as such. Plan makers were able to choose to release greenfield land for housing. Such a policy (that takes effect as soon as there is an expectation of a change[23]) will result in an immediate reduction in new housing supply, with the greatest downward impact in the south of England, where affordability problems are greatest. A brownfield-based policy does not, in of itself, make brownfield land more deliverable for housing. Barker’s interim report found that 69% of all National Land Use Database brownfield sites were not suitable for housing development and over half of the suitable land was in an existing use.[24] There is no evidence there is enough brownfield land, in any region, to deliver anything close to 300,000 extra homes per annum[25]. CPRE’s annual review of brownfield land[26] identifies capacity for 1.3m homes (1.1m of which was on brownfield registers, and 0.6m already consented). Registers can be a helpful indicator of brownfield potential, but crucially a) local authorities’ assessments of site deliverability are not independently tested; and b) they measure capacity looking ahead 15 years. At best it would equate to less than 87,000 homes per annum. In the north of England, the brownfield register capacity equates to just 44% of the Standard Method over that period[27]. In London, the South and Midlands, it is less than a quarter. Relying on brownfield land alone is likely to reduce the supply of affordable housing rather than increase it. The CPRE analysis also highlights that brownfield capacity is not a silver bullet for putting more growth in the north. Of the 1.1m homes capacity on brownfield registers, 55% are in London and the South of England, compared to 45% in the midlands and the north (almost exactly in proportion to population). PPG3 relied on regional planning to do the hard work of strategic spatial choices. Unless the Government chooses to introduce a new strategic planning tier, attempts to skew housing targets towards brownfield areas, and to the north of England, will require a further recalibration of the Standard Method. Directing housing targets to urban areas does not itself drive up the supply of brownfield land. The December 2020 changes to the Standard Method added 35% to the housing need figure for the 20 largest cities, but it is already clear there is no realistic prospect of this being met; plan makers in London, Leicester, Southampton, Bradford are among those already stating they do not have the land capacity to meet the inflated figure[28]. The practical limitations to the flow of brownfield development help explain why, throughout the life of PPG3, net housing additions hovered around half the 300,000 figure. The subsequent coupling of a brownfield focus with a parallel requirement to have a realistic supply of land (in PPS3 and now in the NPPF) coincided with an increase in supply.   It impacts on mix too. An overzealous drive for brownfield leads to high density flatted development in town and city centres. This may not be undesirable itself, but the rationing of land release means this can come at the expense of family homes with gardens, which may be what is most needed to make some cities attractive to families.   The growth in brownfield development that occurred in the second half of the 2000s coincided with a boom in buy-to-let mortgages[29] and a major public sector funding of housing-led regeneration programmes. Looking at the situation today, one would need to understand whether equivalent market drivers exist to accompany any change in policy, and bridge the gap between rhetoric and real-world delivery.   [1] Conference speech text here[2] In this blog ‘brownfield’ is used as shorthand for previously developed land (or PDL).[3] Daily Telegraph article here (£)[4] Welywn Hatfield Council has interpreted it very literally and put its delayed (very delayed) local plan on hold – see here.[5] Blair & Brown: The New Labour Revolution available on BBC iPlayer[6] For example the 1995 White Paper: Our Future Homes – Opportunity, Choice, Responsibility included proposals for “the planning system and public investment to encourage more development in existing urban areas and less on greenfield sites”  and the aim to “build half of all new homes on re-used sites”,[7] In its 1996 Green Paper – Household Growth: Where Shall We Live – which looked at how to address the 4.4m additional households expected between 1991 and 2016.[8] Available here[9] Available on Hansard Volume 307, debated Monday 23rd February 1998[10] The Urban Task Force was chaired by Lord Rogers. Its Mission Statement was “The Urban Task Force will identify causes of urban decline in England and recommend practical solutions to bring people back into our cities, towns and urban neighbourhoods. It will establish a new vision for urban regeneration founded on the principles of design excellence, social well-being and environmental responsibility within a viable economic and legislative framework.”[11] The 2000 PPG3 is available here[12] Planning To Deliver - The Managed Release Of Housing Sites: Towards Better Practice available here[13] Written Answer in Hansard[14] PPG3 Implementation Study (2003) available here. This blog author was part of the research team.[15] In Chapter 3 of the English Regional Planning 2000-10, edited by Corinne Swain, Tim Marshall, and Tony Baden[16] Broadly equivalent to the 3.8m extra households set out in the 1996-based household projections.[17] The Interim Report of the Barker Review is available here[18] Available here[19] Thames Gateway; Milton Keynes/South Midlands; Ashford; London - Stansted – Cambridge. These flowed from recommendations of Professor Crow’s report on the South East Plan.[20] The Final Report of the Barker Review is available here[21] PPS3 (2006) is available here[22] For example, see paragraph 120 of the current NPPF which sits alongside paragraph 68[23] As evidenced by Welywyn Hatfield’s pre-emptive pause of its Local Plan following the PM’s Conference speech[24] See para 9.9 of the Interim Report: 32% was subject to flood risk or in the Green Belt; and 58% was in weak housing markets (which would impact on values capable of overcoming inevitable abnormal costs). Just 31% was in neither category, but most of it was already in use, leaving just 11% available for development. Add on to this, some of the 11% would have site-specific constraints. [25] This was clear from the NLUD data, as this 2014 Lichfields publication showed[26] CPRE – Recycling our Land: The State of Brownfield Report 2000. Available here[27] Based on the Standard Method as calculated at December 2020 to correlate with the CPRE Brownfield Register base date.[28] Examples are in this Inside Housing article[29] Reported as representing 30% of all house purchase mortgages by 2008 (Sprigings N, 2008, “Buy-to-let and the wider housing market” People, Place & Policy Online 2(2) 76–87).  

CONTINUE READING

Use it or lose it: the taxing problem of undelivered homes
Recent media reports have reignited the spectre of unimplemented permissions for housing and the prospect of a new ‘use it or lose it’ power. Off the back of its annual speculation of how many unimplemented homes might exist[1], the LGA advocated on 8th May 2021 that: "To help councils get developers building more quickly, the Queen’s Speech should bring forward legislation that enables councils to charge developers full council tax for every unbuilt development from the point the original planning permission expires. It should also make it easier for councils to use compulsory purchase powers to acquire stalled housing sites or sites where developers do not build out to timescales contractually agreed with a local planning authority." On the 14th May 2021, the Times reported[2] that: "Developers will face new “use it or lose it” taxes for failing to build homes on land that already has planning permission amid concerns that more than 1.1 million have been left unbuilt in the past ten years. Ministers are privately considering different ways to encourage higher rates of building. Under one proposal housebuilders would pay full council tax on all the properties in a project from one to two years after securing planning permission, regardless of whether they have been built." So, we can see two possible policy strands here: A levy on homes unbuilt when a planning permission has expired (i.e. has not been started).  Measures to drive the rate of build out of homes on a planning permission that has started but has not yet been completed, either through a levy on unbuilt homes or through a contractually-agreed timescale with CPO or a levy as a penalty. In this blog, I consider each strand, drawing upon previous considerations of this type of policy by Dame Kate Barker (2006)[3], Sir Michael Lyons (2014)[4] and Rt Hon Sir Oliver Letwin (2018)[5]. The validity of the 1.1m unimplemented permissions claim we will leave for another time, but watch this space.  1. Unbuilt homes on expired permissions Under this strand, a levy (such as Council Tax) would be imposed on homes unbuilt when the planning permission expired. Planning permissions are granted subject to a condition that they must be implemented within a set period of time, usually three years from the date it is granted. For outline planning permission, reserved matters must be submitted for approval, which is normally within three years, and the works must be begun normally within two years of the final approval of the last reserved matter. Alternative time limit periods can be set – either shorter or longer – depending on the circumstances[6]. If there has been a meaningful start of lawful construction works on site (which also means pre-commencement conditions have been discharged) then the permission will remain ‘live’. This could mean beginning earthworks or putting in a new highway access. If no construction works start on site, the permission expires. How big a problem are expired permissions? Work by MHCLG in 2015 suggested around 10-20% of permissions ‘lapse’ or ‘drop out’ without being implemented, but that the number of permissions “on hold” had reduced from 23% in October 2013 to just 10% in 2015. Research in 1995 for the RTPI and DoE by Roger Tym and Partners found a 10% rate of non-implementation (and this is often used as a ready-reckoner for five year land supply purposes). Local evidence for the South Worcestershire Development Plan found a 5% non-delivery discount was appropriate[7].  All of this suggests the number of permissions targeted by this measure is going to be relatively small. This aspect of a ‘use it or lose it’ policy was looked at in the Lyons Review[8]. Lyons favoured such a measure, and also proposed requiring greater substantive progress to be demonstrated that works represent formal commencement. However, he suggested a five-year time limit for implementation, and suggest it be optional for the LPA. He also recognised the complications of such a power: "Clearly, it is important that landowners are not unfairly penalised. There are some developments, particularly large, complex sites which will take more than 5 years to implement. These charges should only be applied if they are reasonable in the context of the individual site and only where the site has been volunteered by the landowner. There might be good reasons why an application could not be started for example, problems with viability or the absence of important supporting infrastructure. If the site is not viable and cannot be taken forward by the landowner, local authority or New Homes Corporation it would not be deemed deliverable and the charge could not be applied. Landowners and developers would also have the right to appeal." A series of industry reviews have concluded that there is no commercial incentive for allowing permissions to expire[9]. Applicants can re-apply but there is a risk of more onerous conditions or obligations being imposed, and – if the wider planning context has changed – a refusal is possible. Some permissions are not implemented because the applicant redesigns the scheme to increase the number of homes it produces.  Therefore, for the small number of permissions that do lapse and are not re-planned, it is more likely than not this is because of problems with the site[10], for example: land ownership, viability problems (perhaps due to previously unknown site constraints), a developer not being able to secure finance or meet the terms of an option, supply chain or labour problems, or there not being sufficient demand for the product. Self-evidently, many of these issues are more likely to occur on more complex, brownfield sites. And smaller housebuilders - with less resilient finances, shorter land pipelines and fragile supply chains - may experience more problems than larger builders[11]. In this context, questions that would need to be answered in designing this type of policy include: How big should the levy be? And over what period should it be applied? Would it be mandatory or optional for LPAs? If optional, what would be the extent of take-up? How would any appeals system be administered? How many ‘lapsed’ permissions are there in reality, and what would be the housing additionality? Would otherwise lapsed permissions simply displace alternative schemes that would have come forward via applications due to a lack of five year land supply? Would the levy have unintended consequences? For example, how could we be confident it would not simply reduce the appetite of developers (especially SMEs) to promote more challenging sites or projects that are at greatest risk of stalling? What effect would it have on the prospect of developers revisiting permissions to see if they can increase the housing delivered on sites? 2. Unbuilt homes on sites that have started The second strand of a possible ‘use it or lose it’ policy is to drive an increased rate of build out on sites that have started. This relates to a much greater number of sites with permission than the first strand, because a significant number of permissions have been issued (in outline or full) for schemes of 500+ homes that typically build out over a number of years. The build-out rate debate is typically encapsulated by the concept of market absorption and the process is clearly explained in the OFT report[12] and by Letwin[13]. The latter concluded that, under market conditions, increasing the rate of housebuilding on larger sites is more likely to come from increasing the number of different housebuilders (or flags) building on a site (including the mix of types of homes built as endorsed now by the NPPF 2018/19), rather than expecting an individual housebuilder to increase its volume from an outlet beyond the typical 50-60 dpa. What currently happens? The NPPF (paras 72-73) requires local plans to have a trajectory illustrating the expected rate of housing delivery and to set out the anticipated rate of development for specific sites. The Planning Practice Guidance identifies the need to gather information on specific sites to assess the timescale within which each site is capable of development, including lead-in times and build-out rates[14]. The contribution an application site is expected to make to housing delivery in early years can be material to whether it is approved to address shortfalls in the five-year land supply. An LPA can consider how much large sites might deliver within a plan period in deciding which sites to allocate. However, this information is evidence and not a binding contract. In recent years, Central Bedfordshire Council has sought to introduce a ‘housing delivery clause’[15] which it explains as follows: “For any applicable site, the Council will seek a delivery timetable to be put forward by the site promoter … which will then form part of the accompanying section 106 agreement…. The delivery schedule (for both market and affordable housing) should ensure the timely delivery of the balance of homes that it is considered can be realistically delivered within the first five years following the signing of the agreement. This approach supports the expedient delivery of new homes and allows the local planning authority (LPA) to exercise some degree of control.” This clause – which applies to the first five years only – is claimed by the Council to be a legitimate use of a s.106. However, its practical impact is uncertain. An Inspector on a s.78 appeal in the District[16] concluded that: “I have concerns about the necessity of this type of obligation and how effective this obligation actually would be in the event of slippage in the programme. The Council was not able to provide any assurances on how the use of an injunction would be an effective remedy. The obligation is useful in so far as it is primarily an indication of what the developer considered to be deliverable when the obligation was executed. ... It is not necessarily or may not be sufficient assurance as to the timing and number of units completed over the time period.” (Para 116) In practice, the clause lacks teeth which is presumably why some developers have been content to sign-up to its provisions. Implications of a new measure to drive the rate of build out Large housing development sites are not homogenous. Their rate of build out will be impacted by a number of factors[17], including underlying levels of housing demand, housing mix and variety (including tenure), the physical characteristics and composition of the site and the phased delivery of infrastructure, particularly highway improvements. The delivery model for sites (for example, is the site led by a master developer, a consortium of builders, or a single housebuilder?) will also play a role. Rates of build out vary significantly between different sites[18], and crucially, they also change over the lifetime of the development with some sites seeing peaks 2-3 times the average rate as circumstances change over the life of the development for example linked to economic cycles[19]. The report in the Times flags two policy models being considered for this issue: a levy on all unbuilt homes following the grant of permission, with the aim of providing a financial incentive to build out more quickly. a penalty system linked to progress against an agreed trajectory (essentially, the Central Bedfordshire approach, but with teeth) Both Barker and Letwin identified challenges with these approaches and whilst seeing a superficial attraction, ultimately rejected them. The Barker Review Final Report said: "6.23 Attempting to increase build-out rates through a fiscal measure would potentially have the effect of changing builder behaviour by increasing the cost of holding land. However, such a measure could have a number of negative side effects: Housebuilders rely on phasing sites to ensure adequate cash flow, so that profits from previous sales fund future development. Reducing cash flow could prevent development. Some sites would not get developed, as the costs of development would be increased. This may be particularly true on complicated brownfield sites where land assembly and construction are typically more difficult to achieve. It could also impact on higher density development, particularly high-rise. Furthermore, housebuilders may become more risk averse under such a policy, as they will face higher penalties for getting a housing development decision ‘wrong’ and thus finding that it is necessary to build a site out more slowly or to postpone development. Increased risk aversion would lead, overall, to a drop off in development, as marginal projects become unviable. 6.24 As the Interim Report noted, slow build-out rates and the exercise of market power are only likely to be of concern for large sites. Applying a fiscal measure of this sort to all sites could both increase administrative burdens on local authorities as they monitor output, and/or end up penalising those developments that run into unexpected problems following the granting of planning permission. 6.25 It is also questionable whether such a measure would be effective. If an extra cost were to be placed on housebuilders, it is likely that this would be factored into their calculations and ultimately capitalised back into land prices offered to landowners. By reducing residual values, some developments, particularly marginal brownfield sites, could be prevented. 6.26 Policy changes that result in more land coming forward for development overall would increase the amount of new housing coming onto the market, even if it was ‘trickled-out’ at present speeds, without distortions to developers’ business practices. To encourage increased build out rates, it may therefore be simpler instead for local authorities, faced with a large site awaiting development, to award a higher number of smaller permissions for the site and allow market competition to provide incentives for swift development." The Letwin Review said: “it would not be sensible to attempt to solve the problem of market absorption rates by forcing the major house builders to reduce the prices at which they sell their current, relatively homogenous products. This would, in my view, create very serious problems not only for the major house builders but also, potentially, for prices and financing in the housing market, and hence for the economy as a whole.” Were such measures to be introduced, for developers there would need to be a triangulation between: the cost of the levy on unbuilt homes; the value of homes built on a site (with a faster sales pace or alternative tenure likely being associated with a reduced valuation); and the practical construction and phasing challenges of each site (including planning obligations). The impact of the levy would have to be priced into the development appraisal[20]. The intention of recent planning system reform has been to ‘up-stream’ viability considerations to the local plan process, so there are practical considerations: The residual land value approach means that, theoretically, the ‘cost’ of the levy or threat of CPO (however incurred[21]) would come off the land value. However, if the appraisal showed the residual land value below the Benchmark Land Value[22], the Local Plan process would see the planning obligations (e.g. for affordable housing) reduced and some developments (especially on sites with heavy infrastructure burdens or abnormal costs) might not be viable[23]. Subject to scale of the levy, it could act as a disincentive for promotion of large sites, and developers might just scale down the developments they put forward, to reduce the number of homes subject to the levy[24], perhaps then re-planning in phases to drive up the numbers. If the levy was too punitive, it might simply see land not being put forward at all, as landowners sit out the policy (the bane of land value capture throughout history). Arriving at a trajectory for build out to form the basis of a contract with financial implications would be time-consuming and add to the length and complexity of the planning process (perhaps akin to bolting on PFI-style contract arrangements to the planning system). It might require an approach (as suggested by the Lyons Review), in which the levy or penalty was applied only to the unbuilt homes in individual phases: "Large complex developments will have a number of phases and the two year timescales should apply to the phases individually but in the context of an approved masterplan. This will ensure timely implementation of each phase and will also allow for further negotiation to take account of increase in value during the development of the scheme by avoiding too much of the detail having to be locked up in the original planning permission." This would mean arriving at an agreed segmentation for the site and then revisiting assumptions about the rate of build out for each phase as development proceeded. This would add a layer of complexity at a time when the planning system is seeking simplicity. The LGA also proposes increased powers for use of CPO. CPO is already available as a tool for bringing forward stalled sites. For developments that are progressing, but are considered to be building out too slowly, would this really be a proportionate use of Council resources? What value would be paid for the unimplemented portion of the site? As a threat it would only work if developers believed it to be real, and given the difficulties many LPAs have in resourcing even basic planning functions, this seems unlikely. Not mentioned by the LGA is the use of completion notices (reform of which was proposed in the Housing White Paper).  Where does this leave us? If press reports are to be believed, ‘use it or lose it’ is on the political agenda. Scrutiny of such an approach (however formulated) is required, including looking at the reasons it was rejected by Barker and Letwin, and grappling with the practical complexities identified by Lyons. And stepping back for the moment, two things are clear: The number of homes with permission that expire is small (10% or less) and on most occasions this will be for a good reason. A policy that penalises those who bring forward sites at greatest risk of failure may simply reduce the number of more difficult sites that come forward in the first place. Is this compatible with the brownfield agenda? To address the country’s housing crisis, the ambition for 300,000 homes per annum needs to be sustained over a long period[25]. Planning involves thinking long term, and some areas are now looking forward to 2050[26]. Even the very largest sites – including the Government’s Garden Communities – will build out in full by that time[27]. The strategic challenge is how needs are met over that long period; the ‘use it or lose it’ debate is arguably more about sequencing, whilst not changing the amount of land that ultimately needs to be allocated[28]. The 'use it or lose it' policy brand will sound attractive to many. But looked at strategically, the size of the prize is unclear and its practicalities yet to be worked through. Policy makers will need to be confident such a policy could be a more positive way of boosting housing delivery than requiring LPAs to formulate effective land supply strategies, and that its theoretical policy gains outweigh the real world risks identified by previous reviews.   [1] The LGA produces an annual comparison of homes granted permission and numbers completed. Its latest iteration is here.[2] Article is here (paywall)[3] The Barker Review of Housing Supply[4] The Lyons Housing Review: Mobilising across the nation to build the homes our children need[5] In his 2018 Review of Build Out[6] See the PPG at ID: 21a-027-20140306[7] SWDP Inspector’s Interim Findings[8] Pages 67-68 of his review.[9] In addition to the Letwin Review and Lyons Review. For example, the Calcutt Review, the Barker Review, the Office for Fair Trading Homebuilding Market Study, and the Chamberlain Walker research on land pipelines.[10] An analysis of sites in London by Quod and Molior from 2019 – see here – found that of the 175,963 homes with permission at that snapshot moment in time, the overwhelming majority were underway, about to start on site, awaiting discharge of conditions, CPO or externally funded infrastructure. Some (10%) were being re-planned to improve design (and in many cases to increase the number of homes). Around 12% were schemes that had not started, but where there was an existing active use on the land (with business and jobs). Less than 7% (just 12,000) homes were on schemes not started and where progress was unknown.[11] See for example this 2017 report here exploring the land and planning, finance and ‘red tape’ barriers for SMEs housebuilders [12] See para 4.36 – 4.44 of the OFT report[13] See para 4.6 – 4.16 of Letwin’s Interim Report[14] ID: 3-022-20190722[15] In its Housing Delivery Clause Technical Note (available here)[16] APP/P0240/W/16/3164961[17] See the analysis on pages 14-17 of Lichfields’ Start to Finish (Second Edition)[18] See Figure 8 of Start to Finish (Second Edition)[19] See Table 5 of Start to Finish (Second Edition)[20] This itself would cause practical ‘Red Book’ valuation difficulties, as the appraisal would need to make an assessment of the impact of increased rates of build out on the price of new homes. Securing agreement would itself be a cause of difficulty in the Local Plan process.[21] Via the cost of the levy itself, or a reduced sales value due to faster build out, and/or extra developer margin to account for risk of CPO or levy [22] Which the PPG defines as “existing use value (EUV) of the land, plus a premium for the landowner. The premium for the landowner should reflect the minimum return at which it is considered a reasonable landowner would be willing to sell their land. The premium should provide a reasonable incentive, in comparison with other options available, for the landowner to sell land for development while allowing a sufficient contribution to fully comply with policy requirements.”[23] In the context of large sites, the NPPF 2018/19 enables LPAs to impose planning obligations (including high levels of affordable housing) up to a scale that leaves a landowner with no more than a benchmark land value[24] It is notable that Central Bedfordshire applies its housing delivery clause only to the first five years of a development, which in practice will mostly mean schemes of 500 homes or fewer, and therefore does not address later phases of larger scale sites such as sustainable urban extensions or new settlements. [25] The Redfern Review suggested that “new supply of 300,000 dwellings per year over a decade would be expected to cut house price inflation by around 5 percentage points (0.5 percentage points a year). This could be further reinforced by changing house price expectations (not modelled). In other words boosting housing supply will have a material impact on house prices, but only if sustained over a long period.” [26] For example The Oxfordshire Plan 2050 [27] See Figure 8 of Lichfields’ research on the Garden Communities programme.[28] By way of example, if an area’s contribution to long term housing supply was hypothetically to build 20,000 homes over 25 years, it could achieve this with four sites of 5,000 homes building concurrently at 200 homes per annum, or it could have two pairs of sites building out sequentially, but at a rate of 400 per annum.  Fundamentally, the number of homes built by the end of the period would be the same, and the price of more rapid built out on individual sites might be to see lower contribution to planning obligations.   

CONTINUE READING