The government’s proposed changes to English planning policy is an opportunity to reform a static system – one that hasn’t evolved despite major social, economic and human changes.
Housing in England has now surpassed crisis point, with a colossal shortage of new homes. In particular, the failure to build more affordable housing is excluding many people from homeownership – often punishing the most vulnerable in society.
Recent figures published by the Ministry of Housing, Communities and Local Government reveal that 57,644 affordable homes were delivered in England in 2019-20. This is in stark comparison to the 145,000 estimated to be needed per year by the National Housing Federation.
While publishing the Planning for the Future white paper was an important step in recognising the scale of the UK housing crisis, the government’s proposed changes risk jeopardising the supply of new affordable housing even further.
It is clear that planning reform must take place, however, the changes made must positively impact the delivery of new affordable homes across the country.
Establishing a new consolidated Infrastructure Levy
Up to now, the Community Infrastructure Levy and Section 106 agreements have formed the bedrock of the supply of affordable homes in England.
Requiring developers to make contributions towards affordable housing and infrastructure improvements, Section 106 agreements specifically helped deliver around 28,000 affordable homes in the UK in 2019. This represents almost half of the entire supply.
While helping to deliver affordable homes, Section 106 agreements can sometimes be difficult to follow – often applied differently by each local authority which can cause confusion for developers.
A simpler, more uniform approach towards planning obligations does therefore seem like a good step. The proposed consolidated Infrastructure Levy would see developers charged as a fixed proportion of a development above a set threshold, providing a level of clarity for when calculating how much they will be likely to pay.
There are, however, a number of problems with the proposed shift to a consolidated Infrastructure Levy which are investigated below. The way the levy is set and managed, as well as how local authorities manage the funding collected is critical to the success of the planning system and delivery of affordable homes in the UK.
A recent Anthony Collins Solicitors-led poll revealed that 74% of housing professionals believe that without addressing potential issues, the consolidated Infrastructure Levy would lead to less affordable housing being delivered. Zero of those polled thought it would lead to more.
Combatting regional imbalances
The government has committed to ‘levelling up’ the regions, focusing specifically on reducing regional disparities in economic growth across the UK.
However, one aspect of the proposed changes to the UK planning system works in direct opposition to this. The proposed decision to set the consolidated Infrastructure Levy in line with the final value of a development could create imbalances in the proportion of funding collected by local authorities.
In the South of England, where land values are much higher, this type of levy will collect more funding from developers than in the North or Midlands where land values are lower. This is despite relatively similar construction costs – leading to a levelling down of the regions, with less money reinvested into infrastructure and affordable housing.
To avoid this outcome, the government must focus on how the rate is set, utilising instead a more local approach that takes into consideration the regional and sub-regional differences in the English property market and housing availability.
Establishing the rate at local level
The proposed consolidated Infrastructure Levy must be a national obligation for local authorities and developers. While being a national system, it is key that the rate is set at a local level to avoid regional imbalances.
Local authorities are currently free to set the existing Community Infrastructure Levy independently and at different levels within their boroughs. This is an important tool in helping to strategically encourage development in certain areas.
If a flat rate is set nationally; this benefit would be lost – with developers creating homes in the most profitable areas, rather than where needed most.
By empowering local authorities to take responsibility for setting the new consolidated Infrastructure Levy, the government would provide authorities with greater flexibility in managing development in their different borough areas. This localised approach could also be established in line with varying land and development costs, allowing the new Levy to be enacted in a way that will help better redistribute development across the country.
New role for local authorities
A consolidated Infrastructure Levy that is set at a local level could be vital in enabling local authorities to collect a fair amount of funding from developers. However, with increased flexibility comes more responsibility.
The COVID-19 pandemic is stretching local authority finances further than ever before and there is no guarantee that the funding raised will be used to increase the delivery of affordable homes. Some local authorities may believe funds could be better utilised elsewhere.
Giving more freedom to local authorities over how they spend the new consolidated Infrastructure Levy must be accompanied by robust policies, including ringfencing funding towards to creation of new affordable homes. While it is hoped that local authorities should recognise the importance of doing this anyway, setting this out in policy would help protect the current supply of affordable new homes.
Again, this ringfencing must also take into consideration local factors, with the minimum amount ringfenced set in line with local housing availability and needs.
Building back better
By recognising some of these issues, as well as those raised in its wider consultation, the government has a chance to improve the UK planning system.
However, as the housing crisis currently shows, continuing to rely on ringfencing or minimum requirements creates a system where little progress is made in delivering the amount of new affordable homes needed every year.
In practice, providing local authorities with greater powers to set and increase the consolidated Infrastructure Levy could lead to more funds being made available. But, it is down to central government to take on the role of championing affordable housing and encouraging developers and local authorities to reassess their approach – shifting away from delivering the bare minimum.
The same logic applies also to the quality of affordable housing being delivered, with recent announcements regarding proposed changes to the process of converting commercial, business and service facilities into residential space setting off alarm bells regarding building safety and the liveability of homes.
If the government really wants to ‘build back better’, it must realise that changes to planning policy must be accompanied by an attitude change towards affordable housing in England.
Raising rates and collecting more funding through a consolidated Infrastructure Levy is only part of the solution. To combat the housing crisis effectively, the importance of creating more affordable homes must remain at the centre of English planning reform, with local authorities working with developers and other housing providers to use policy changes as a way of increasing supply and ensuring people have a safe place to live and grow.
Jane Trevithick is a partner and Stuart Evans is legal director and head of planning at Anthony Collins Solicitors.
Read Anthony Collins Solicitors’ full consultation response to the government’s Planning for the Future white paper.