The people of Wales go to the polls on 6 May in the sixth general election since the formation of the Senedd (formerly the National Assembly for Wales) in 1999. This will be an election like no other that we have seen. Set against the backdrop of the Covid-19 pandemic, policies relating to health and economic recovery are central to the manifestos of all of the main parties. This will also be the first general election in which 16 and 17 year olds are able to vote. The impact of this context remains to be seen – as Labour seeks to retain the control on the Senedd that it has maintained for the past 22 years, and looks to achieve an overall majority for the first time.
This blog provides a high-level summary of the key policies of the four main parties in Wales on a number of key areas: the economy, tourism, housing and planning. It is not intended to set out in detail all of the policies of each party but instead provides a broad overview of the policy context that may shape the development industry over the next Senedd term. Whilst all of the parties seek to chart a course to the post-Covid future, with common themes including a return to the freedoms that we once took for granted, a growing economy, and a greater focus on environmental concerns, their specific targets and policies vary considerably.
As illustrated below, the economy of Wales lags behind that of the UK in a number of key metrics. This has been a long term structural characteristic, but research undertaken by Lichfields in April 2020 found that large parts of Wales were subject to a particularly high risk of economic harm as a result of Covid-19. Whilst Wales has clearly not been the only part of the UK to experience decline, its underlying structural base and differences in the lockdown restrictions have had a profound effect. Rebuilding the economy – and narrowing the divide with the rest of the UK – must be at the heart of the next government’s agenda.
Figure 1 Comparison of key economic metrics of Wales and Great Britain
Tourism is one of the key economic sectors in Wales which accounts for over 9% of total employment. Prior to Covid-19, tourism enjoyed rapid growth but there were 100m fewer visitor days in 2020 compared to 2019. The economic impact of Covid-19 on the Welsh tourism sector in 2020 amounted to £6bn – equivalent to 63% of 2019 value of the sector.
However, tourism has a significant role to play in the economic recovery of Wales with there being significant pent-up demand to go on holiday and foreign holidays remaining in doubt for 2021. Going forwards, the tourism sector will look to the Welsh Government for policies that support its future development and enable it to contribute towards economic recovery across Wales.
Like the rest of the UK, Wales is in the midst of a housing crisis. Fewer than 6,000 dwellings were completed in 2018/19, against estimates of need of between 9,000 and 12,000 which is itself is below the average of 14,000 completions each year in the 1970s.
Figure 2 Housing completions in Wales 1974-5 to 2018-19
Source: StatsWales. Note data for 2018-19 does not reflect a full year
Against this context – and in recognition of the clear economic, social and environmental benefits associated with an increase in housing delivery, it is not surprising that each of the main parties in Wales have included policies relating that address the need to increase the supply of new housing. However, the scale of growth that is anticipated by each party varies very significantly, as does the emphasis that has been placed on the provision of market – as well as affordable – housing.
The planning system is central to the delivery of all the objectives of each party relating to economic growth and housing supply. Whilst the Labour manifesto is silent on the topic, the other main parties include a range of measures that will update the system and – to a lesser or greater extent – undo many of the recent changes that have been made to the planning system in Wales.
The bottom line
We know not to focus too much on opinion polls but these continue to put Labour ahead – albeit not by enough to achieve its long-sought majority. Because of Covid restrictions necessitating the quarantining of ballot papers after the polls close, we will not know which party – or parties – will form the next Welsh Government quite as quickly as usual.
The specific shape of the legislative agenda that emerges over the next Senedd term will depend on the political landscape after 6 May, the extent to which Covid-19 continues to derail the usual business of government, and the ability of the next government to fund its package of policies in the context of a severely weakened economy and an historic national deficit.
Our ask of whichever party is in power next month would be to prioritise the following:
1. Increase the delivery of market and affordable housing – recognising the importance of housing in both sectors to build mixed and sustainable communities, house the local workforce, and ensure that everyone has access to a good quality home. Increasing the delivery of housing will also have a profound economic benefit in terms of investment, direct and indirect job creation during the construction phase, and on-going spending by residents once the homes are occupied.
2. Require a realistic assessment of need for housing and reward those authorities that meet/exceed their housing targets.
3. Support the reuse of brownfield land but recognise that there is insufficient previously developed land to meet our future development needs.
4. Focus on economic recovery, driven by emerging sectors – including environmental/green sectors – whilst also recognising the role of existing economic strengths, including:
b. High tech sectors;
e. Creative industries;
f. Tourism; and,
5. Strategies should be prepared for each of these sectors, recognising the existing strengths in different parts of Wales, the challenges and issues that exist and the policy interventions that would ensure that their future economic contribution could be maximised.
6. Maintain an adequate and well-trained workforce in order to encourage inward investment and indigenous growth.
7. Ensure that the planning system is equipped to facilitate the economic and housing growth that Wales needs if it is to complete nationally and internationally.
Disclaimer: This blog has only been able to provide an overview of policy proposals in a number of key areas. Copies of each of the main parties manifestos are available here:https://movingforward.wales/#manifestohttps://www.conservatives.wales/plan-recovery-and-changehttps://www.partyof.wales/manifestohttps://www.welshlibdems.wales/manifesto21
The reach of COVID-19 knows no boundaries. It has affected our health, our way of life and our economy. Given the centrality of housing to each of these aspects, it is entirely unsurprising that it is also impinging upon the housing market. There is widespread agreement that house prices will fall this year, although estimates of the scale of impact vary widely, with predicted reductions of between 5% and 23%. The Bank of England has suggested that the figure could be towards the upper end of that scale, at -16%. Such a scale of decline will adversely affect the Gross Development Value (GDV) of new developments and raise questions about the viability of many schemes. This will particularly be the case when set alongside:
Potentially increased costs (arising from shortages of key materials); and,
Longer development timescales (arising from lower GDV, supply-chain difficulties, and the need for social distancing on-site reducing output) which will increase finance costs.
Going forward, the issue of development viability will therefore become more acute than it has in a long time.
It is against this context that the judgment of Dove J in R (Holborn Studios) v London Borough of Hackney (2020) is particularly timely. The application for judicial review was brought on three grounds:
The failure of the Council to comply with national planning policy in relation to the provision of information in respect of viability assessments;
The lawfulness of the Council’s guidance for members of the planning committee; and,
The planning officer’s interpretation of development plan policies in relation to the retention of the existing use as an important component of the creative industries.
Grounds two and three were dismissed, but the claim succeeded on the first ground. The planning permission was consequently quashed (for the second time, having initially been quashed in 2017 for quite separate reasons).
The successful viability ground included a number of connected limbs: that the Council’s had breached “a legitimate expectation in respect of the disclosure of viability information”; that the material on viability that was placed in the public domain was “opaque and unexplained”; and that the evidence did not set out how the benchmark land value was derived. The court found in favour of the claimant in respect of all three of these points.
In respect of these matters, the judgment is important in clarifying the guidance set out in the PPG that:
“Any viability assessment should be prepared on the basis that it will be made publicly available other than in exceptional circumstances. Even in those circumstances an executive summary should be made publicly available.” (Reference ID: 10-021-20190509)
Dove J found that the London Borough of Hackney had failed in this regard. Although some information was included on the public record, this was found to include “differences and inconsistencies” that rendered it incapable of being understood. Such an approach goes against the requirement of the PPG for executive summaries to “set out the gross development value, benchmark land value including landowner premium, costs, as set out in this guidance where applicable, and return to developer.” (Reference ID: 10-021-20190509). The opportunity for the public to engage on the issue of viability on an informed basis was found to have been further compromised by the fact that “no explanation was provided as to how the benchmark land value had been arrived at in terms of establishing an existing use value and identify a premium as was asserted to have been the case.” (Paragraph 71).
In drawing these strands together, Dove J noted that “in following the approach recommended in the Framework and the PPG, standardised inputs should be used” (Paragraph 63). He went on to state in the same paragraph that the PPG “makes clear [that] the preparation of a viability assessment ‘is not usually specific to that developer and thereby need not contain commercially sensitive data’.” Despite the weight that is given the use of standardised inputs (including in NPPF paragraph 57), neither the NPPF nor the PPG provides much by way of guidance on inputs that should be applied.
Lichfields’ research on viability inputs
In response to this, Lichfields has undertaken a review of the viability evidence underpinning 80 recently adopted Local Plans and CIL Charging Schedules. This research, which will be published in a forthcoming Insight paper, shines a light on the approach taken to key metrics in order to identify commonalities and fill the gap in our understanding of a “standardised” approach.
We have found that the key inputs into viability assessments can be categorised as follows:
Categorisation of key inputs into viability assessments
In respect of Benchmark Land Values, our research found that, despite most studies pre-dating publication of the revised NPPF, 60% applied the “Existing Use Value Plus” (EUV+) approach that is now enshrined in policy. Unsurprisingly, the level of uplift was found to vary, with an increase of 20% common for brownfield sites and a multiplier of 15-20 times above EUV or an uplift of 20% plus an additional allowance of between £250,000 and £650,000/ha being applied in respect of greenfield sites. However, quantifying the scale of uplift was important in ensuring that the studies separated the two elements of EUV+ (the existing use value and the uplift) – something that was missing from the viability appraisal prepared in the Holborn Studios case.
This evidence provides a means by which we can begin to move towards a true standardisation of viability assessments. Such an approach cannot account for all eventualities – there will inevitably be specific circumstances that justify the application of alternative inputs. However, it does help to overcome concerns about the publication of commercially sensitive data and thereby allows for a more meaningful debate about development viability, both during the preparation of local plans and as part of the determination of planning applications, where circumstances permit – something that we should expect to become increasingly common during the short to medium term.
 Source: https://www.thisismoney.co.uk/money/mortgageshome/article-8312433/House-prices-fall-7-year-lockdown-extended.html Accessed 18 June 2020 The evidence base that we have reviewed is dated between January 2016 and September 2019 for CIL Charging Schedules and between January 2018 and September 2019 for Local Plans.