Planning matters blog | Lichfields

Planning matters

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

Looking into the Budget tea leaves

Looking into the Budget tea leaves

Ciaran Gunne-Jones 05 Mar 2020
​See Lichfields' "Budget 2020 - getting it done" Economic outlook for  reactions and analysis of Rishi Sunak's first Budget speech.  Rishi Sunak’s ministerial red box was already overflowing when he took office last month – handed the keys to Number 11 at short notice following the resignation of Sajid Javid – and it has been a tumultuous three weeks since. With coronavirus now weighing down heavily on the global economic outlook, the early tetchy stages of the UK’s negotiations with the European Union on future trade underway, and speculation of interest rate cuts later this year, the Chancellor may well be turning to his preferred brand of Yorkshire tea leaves for guidance.   Given the macroeconomic uncertainties, HM Treasury officials are reported as saying that next week’s Budget will be the first installment in a “trilogy” of statements this year – something for the aficionados to relish. Some decisions on tax, spending and borrowing are likely to be pushed back to the autumn, a year after last November’s Budget was itself postponed due to the general election. However, the Budget is one of the key set pieces of the parliamentary calendar, and is particularly important in the context of a new government keen to deliver quickly on its manifesto promises. So what might the Chancellor’s red box hold in terms decisions on planning, infrastructure and regional economic policy? Here’s a round-up of 10 key points to look out for next Wednesday: Economic growth – tea leaves aside, the Office for Budget Responsibility (OBR) – the independent fiscal watchdog – will publish its latest UK economic forecasts alongside the Budget. It is widely expected that the OBR will downgrade their forecasts from those published in March 2019. This matters because it would result in higher forecasts for government borrowing and, in theory, give less bandwidth to increase public spending if the Chancellor also wants to limit tax increases in line with manifesto commitments. ‘Levelling up’ – the phrase that featured prominently in the Conservative election campaign, and is already permeating into the policy sphere (seemingly replacing the ‘rebalancing’ lexicon which became popular in the Osborne and Hammond eras). The Queen’s Speech in December referred to making investments, “in order to unleash productivity and improve daily life for communities across the country.” Following success in breaking the so-called ‘Red Wall’ in the North and Midlands, the government have been clear that levelling up will be a key factor in all future policy and decision-making, so we can expect this theme to be writ large. Practically, this could extend to creating a new hub for HM Treasury officials on Teesside. Revisions to the Green Book – the ‘Green Book’ (HMT’s guidance for appraising public spending decisions) was an unlikely media star over the quiet Christmas news cycle when it was reported that significant revisions are in the works aimed at boosting investment in the North and Midlands. We considered the implications in an earlier blog. The Budget will provide an opportunity for the Chancellor to set out the details on how this will work in practice, but clarity about how decisions on local infrastructure spending will be decided will be keenly sought from both north and south. Devolution White Paper – government has committed to publishing a Devolution White paper, promising a review of more directly elected mayors in the mould of the Metro Mayor, and the possibility of more combined authorities and unitary authorities. These policies reflect wider effort to devolve decision-making to the local level. The future of sub-national partnerships such as the Northern Powerhouse, Midlands Engine and Oxford-Cambridge corridor will also depend on any funding and powers devolved to them over the next few years. Planning White Paper – in the works since being first announced by Theresa May in March 2019, and now anticipated around the time of the Budget or shortly thereafter. A recent Ministerial Written Answer confirmed, “the purpose of the White Paper will be to make the planning process clearer, more accessible and more certain for all users, including homeowners and small businesses. It will also address resourcing and performance in Planning Departments.” It remains to be seen what influence Jack Airey’s (co-author of Policy Exchange’s report in January on ‘Rethinking the Planning System’ for the 21st Century’) recent appointment as No. 10 housing and planning adviser will have on policy proposals. Local Industrial Strategies – Mayoral Combined Authorities and Local Enterprise Partnerships (LEPs) across the country have been busy preparing their local response to the national Industrial Strategy since 2018 through the form of Local Industrial Strategies (LIS). So far, seven LIS have been agreed and published but some thirty remain in the pipeline still to be agreed with central government. At the very least, an extension to the deadline for nationwide coverage by March 2020 seems inevitable – or potentially a shift to something different as has been rumoured. The Budget could usefully provide some clarity. Big infrastructure – the recent confirmation of HS2 might signal that the government is moving towards funding big ticket infrastructure investment, relaxing its fiscal rules. Eyes will be on the Budget to see whether this is backed with investment for Northern Powerhouse Rail and an indication on the future of the Oxford-Cambridge growth corridor. A further indication of the priorities of this government might be its omission of major road investment announcements (so far transport infrastructure spending announced has been for trains, busses and cycling), but this will need squaring with the legally-binding target of net zero greenhouse gas emissions by 2050. Research and development – in the spirit of levelling up, the Prime Minister and his Special Adviser Dominic Cummings are looking closely at R&D funding nationally, pointing out that more than half of the national gross domestic expenditure on R&D is spent in London, the South East, and East of England. This might be through investing into nationally-significant hubs like the “MIT for the North” and the Midlands “Gigafactory”. Options include strengthening the existing Catapult Centres, National Productivity Investment Fund and Strength In Places funds, or through new initiatives. UK Shared Prosperity Fund – further detail on the plans to replace the £2.1billion EU structural and investment funding, the proposed UK Shared Prosperity Fund, is long awaited. A consultation period is expected before the fund kicks in. While the fund is committed to tackling inequalities between communities by raising productivity in areas of the country that are ‘furthest behind’, clarity is needed to ensure local authorities have certainty over long term funding arrangements in order to effectively plan for future interventions. Freeports – a key policy for government, given the aspirations for global trade following Brexit. They will operate similarly to enterprise zones but specifically for port areas, in which goods are only charged tariffs when they leave the freeport area. With a 10-week consultation recently launched by the Government aims to announce up to 10 new freeports across the UK at the end of this year to be operating in 2021. The Budget provides the Chancellor with the opportunity to say more about the potential funding and regulatory framework for this initiative. With a promised dose of new public spending, a significant parliamentary majority and a new phase of Brexit and global macroeconomic developments, next week’s Budget will be significant not just for the decisions made but how this sets the tone for policy and funding for the years ahead. Lichfields will be providing further comment on the Budget in due course. Click here to subscribe for updates (opens in email) Image credit: Rishi Sunak (@RishiSunak)  

CONTINUE READING

Welsh Government Housing Need Estimates by Tenure
On 5 June 2019 the Welsh Government released a publication that splits its 2018-based national and regional estimates of housing need for the years 2018/19 to 2022/23 into two tenures: Market housing (defined as owner occupier [1] and private rent); and, Affordable housing (intermediate and social rent) [2]. The methodology applied to generate these figures, which is based on the Housing Need and Demand Assessment (HNDA) tool developed by the Scottish Government, is illustrated in Figure 1. Figure 1: 2018-based housing need estimates: Methodology Source: Welsh Government Statistical Article (5 June 2019) This latest publication takes the overall levels of housing need published in January 2019 as its starting point and so carries forward the assumptions previously applied – assumptions which, as recognised to some extent by the Welsh Government, serve to suppress the level of need. Five different scenarios are presented, based on different demographic and migration patterns. Of the central estimate of need of 8,300 dwellings per annum across Wales from 2017/18 to 2022/23, the Welsh Government breaks this down into: 4,400 dwellings per annum (53%) as market housing; and, 3,900 dwellings per annum (47%) as affordable homes. Table 1: National estimates of housing need by tenure (5-year averages: 2022/23) Source: Welsh Government 2018-based estimates housing need These arresting figures indicate a need for almost half of all new dwellings in Wales to be provided as affordable housing. It is unclear how this level of provision could be met using existing mechanisms, given that a substantial proportion of affordable housing is delivered through section 106 agreements, where viability considerations will (to a greater or lesser extent) limit the proportion of affordable homes that can be provided. Experience from existing viability assessments demonstrates that even in the strongest market areas affordable housing provision is rarely higher than 25 to 30%. In many parts of Wales, the level of provision that can be justified is significantly lower. By comparison, in the 20 years from 1999/2000 to 2018/19, affordable housing constituted only 11% of all completions. This indicates that a requirement for almost half of all housing delivery to constitute affordable homes is not realistic under current delivery mechanisms. If increased levels of affordable housing are to be delivered this will have to be accomplished in ways outside of the traditional section 106 approach. There is also a need to consider the extent to which overall housing delivery should be increased to help deliver additional affordable homes through section 106 agreements. For example, while the delivery of 3,900 affordable homes per annum would not be feasible under a requirement for 47% affordable housing (out of a total of 8,300 homes), it would be more likely as a smaller proportion of a larger overall housing requirement (e.g. 30% of a total of 13,000 homes). Increasing overall housing delivery would also have the added benefit of improving affordability of open market housing. It is therefore imperative that policymakers heed the Welsh Government’s admonition that these figures should not be translated directly into housing targets. As is the case with the overall housing need estimates, the Welsh Government has clearly stated that they are merely intended to form a basis for discussion to aid policy decisions. If enacted in policy, the published figures would serve to choke off essential delivery of all types of housing, as development would simply be unviable. The tenure breakdown of the central estimates for the three identified regions of Wales (2018/19 to 2022/23) is indicated in Table 2. Table 2: Regional estimates of housing need by tenure (central estimates) (5-year averages: 2018/19 to 2022/23)   Source: Welsh Government 2018-based estimates of overall housing need  The estimates of housing need broken down by tenure cover a five-year period only – to 2022/23 (at the end of which Welsh Government expects the existing levels of unmet need to have been cleared). The Welsh Government intends to review the overall estimates of need with the next publication of the household projections (due to be released in October 2019). It is not yet known when the estimates broken down by tenure are likely to be published. Alongside the estimates, the Welsh Government has helpfully published an Excel-based tool to allow users the opportunity to test the impact of alternative assumptions on both the overall need for housing and its tenure split. The key assumptions that can be flexed include: Household projections (official projections or modelling provided by the user); Existing unmet need; Household income (current and future (and distribution)); Private rental prices (current and future); and, Affordability criteria. The tool also enables a further breakdown into a total of four tenures, with market housing split into owner occupied and private rented and affordable housing split into intermediate and social rented. The Welsh Government has recognised that adjustments to the assumptions applied within each of the model’s criteria can make a significant difference to the estimates for Wales and its regions. For example, the default assumption is that households that can afford a 2- or 3-bedroom property based on spending 30% of their household income should be considered suitable for market housing. When considering this variable, policymakers should be careful not to assume that it is acceptable for households to spend large proportions of their income on housing out of necessity. If the affordability threshold is reduced from 30% to 25% of household income, the proportion of need for affordable housing would increase from 47% to 55% in the central estimates for Wales. It is therefore vital that policymakers test a range of possible scenarios when setting housing requirements. This is particularly important given the current national context of economic uncertainty. The publication of the estimates of housing need by tenure is to be welcomed as a credible starting point for the assessment of need that will inform housing requirements in the emerging NDF and forthcoming SDPs. More importantly, it is reassuring to see that the Welsh Government has acknowledged the need to test the impact of different assumptions and has highlighted a number of these sensitivities. However, it is vital that the estimates are treated as a starting point only. What is noticeably absent from the analysis is a consideration of the links between homes and jobs, which are so important for the functioning of sustainable communities. In South East Wales, the Cardiff City Deal is seeking a step change to achieve “truly transformational change” in order to boost the local economy. This will rely on moving away from past trends (which are reflected in the 2014-based household projections) to result in different outcomes in the future. Fundamentally, the estimates do not (and cannot, as policy-neutral statistics) seek to identify the number and tenure split of homes required to attract and retain workers to support the Welsh economy. It is therefore up to policymakers to take this next step to ensure that housing and economic objectives are aligned in the emerging NDF and future SDPs.   [1] Including Help to Buy and Intermediate Low Cost Home Ownership (e.g. Homebuy and Shared Ownership) [2] This differs slightly from the Technical Advice Note 2 Planning and Affordable Housing (2006) definition of affordable housing, which includes intermediate housing for purchase, including via equity sharing schemes (for example Homebuy).  

CONTINUE READING