The long awaited Housing White Paper (“HWP”) claims to set out ‘new measures to ensure the housing market works for everyone, including people on lower incomes, renters, disabled and older people’. A key feature of the HWP is that it embraces all types of housing and all types of needs; this includes support for private Build to Rent development and a more diverse range of affordable housing options. To facilitate this pledge there has been a significant redesign of the Starter Homes product, a seismic shift away from insisting home ownership is the only significant way forward with support for Build to Rent schemes and private affordable rent, and a restating of the Government’s commitment to affordable housing with a vow to spend £1.4 bn on the Affordable Homes Programme.
The HWP is suggesting a change to the definition of affordable housing in the National Planning Policy Framework (NPPF). This is nothing new as it was mooted in December 2015 when the Government consulted on changes to the NPPF, but it is long overdue and much needed if the Government’s aspirations to widen the choice of housing options is to come to fruition.
The proposed changes are not in themselves radical. The NPPF definition would be widened to introduce Starter Homes (see below), Affordable Private Rent Housing (see below) and Discounted Market Sales Housing (a discount of 20 per cent below local market value). The provisions for social and affordable rent and intermediate housing remain.
The December 2015 consultation recognised that a change in the definition of affordable housing may require local planning authorities to develop new policies and carry out a partial review of their plan. Initially a transition period of six to twelve months to allow the local authority to review the plan was suggested. However, the HWP is now proposing a transition period to align with other proposals set out in the HWP of April 2018.
Whilst the changes themselves are not likely to cause huge concern to developers, a transition period always tends to bring with it confusion and uncertainty. Developers need to be alert during this period to the wording in committee reports and s106 agreements with regard to how the affordable housing provision is referred to. In an ideal world you would want the wording to reflect the definition of affordable housing in the NPPF (as amended), to ensure when you come to submit your affordable housing scheme you can benefit from the wider choice of products.
Will this revised definition truly assist in offering greater choice?
To answer that question we need to consider another suggested amendment contained in the HWP which is to create an expectation that sites will deliver a minimum of 10% of all homes on individual sites as affordable home ownership products, and this policy will apply to sites of 10 units or more (or 0.5+ hectares). The suggested 10% of all homes on the site will count towards the overall percentage of the affordable housing provision. It is unclear whether the 10% affordable home ownership product takes priority over the other forms of affordable housing tenure. If viability arguments are being run, will the local planning authority be placed in a situation where rental products suffer due to the drive to provide affordable home ownership products?
The difficulty I always find with affordable housing policy is that each local planning authority takes a very different approach to deciding the housing needs of their area and what tenure is acceptable. Some are willing to embrace home ownership products but others will want to stick rigidly to the tried and tested formula of Affordable Rent and Shared Ownership, usually on a split which heavily favours Affordable Rent. Is what is being suggested much different to what we already have? Arguably, not.
The Starter Homes initiative was unveiled in December 2014 by the coalition Government, and then featured prominently in the Conservative Party Manifesto 2015 which included an ambitious pledge to deliver 200,000 new homes exclusively for first time buyers by 2020.
The Housing and Planning Act 2016 (“HPA Act”) subsequently provided the statutory framework for the delivery of starter homes, with the aim to make new build houses available to first time buyers under 40 at a discount of at least 20 per cent of full market value. The subsequent Starter Homes Regulations: Technical Consultation sought views on the details of the regulations, and received widespread criticism. In particular a mandatory 20 per cent requirement would have displaced most of the developer contributions for traditional forms of affordable housing which is arguably much more needed.
It appears as though the Government has listened carefully to those concerns as the HWP tears up the Government’s previous pledge regarding Starter Homes and accepts virtually all of the criticisms made during debates on the HPA Act and consultation.
The previous Starter Homes provision has cast a black cloud over the affordable housing sector for the last two years and for some the watered down provision is potentially cause for celebration. Looking at the changes to Starter Homes in more detail:
It is disappointing that once again the Starter Homes provisions seem to raise more questions than they answer. How will the repayment provisions work? Is the money repaid to the local planning authority? Will it be repayable on a tapering basis? What about the previously referred to price cap? Is the previous definition of Qualifying Person now dropped?
Clearly more detail is needed before an opinion can be formed as to how useful this product will be to the market. However, the HWP does return the proposals back to original policy on Starter Homes, thus avoiding Starter Homes to become the dominant tenure of affordable housing provision.
Build to Rent
The push for the private rented sector indicates a shift in Government priority from promoting home ownership to promoting house building in general. The Build to Rent market is neither ground breaking nor new; erecting purpose built properties solely for rent has been around since the 1920s and 1930s and whilst the number of new Build to Rent homes constructed is steadily increasing, the Government has been made aware by developers and investors that barriers to development remain in place and that capital available for investment could be deployed faster if those barriers are overcome.
One of the barriers has been policy uncertainty and a need has been flagged for the Government to ensure policy provision is put in place to ensure this product becomes an enduring feature of the housing market. The HWP is suggesting a change to the NPPF so authorities know they should proactively plan for Build to Rent where there is a need, and make it easier for Build to Rent to offer affordable rental homes instead of other types of affordable housing provision which do not fit well with the Build to Rent model. In addition, the HWP seeks to offer schemes which allow for a family friendly tenancy of three years or more to those tenants that want one.
One of the obstacles for Build to Rent schemes has been the insistence by some local planning authorities that developers try to accommodate affordable housing products that do not sit happily within such a scheme. To overcome this problem one of the amendments in the HWP is that the definition of Affordable Housing should be altered specifically to allow ‘affordable private rent housing’. Some will argue that the definition of ‘affordable private rent housing’ is a slight contradiction in terms, given the location of successful schemes, and perhaps in certain parts of the county even a 20% reduction of local market rent will take this out of the reach of most.
That said, with quick construction methods and high density, increased provision of Build to Rent will assist in boosting housing supply, offer greater choice and living standards for people living in private rented homes. A consultation paper entitled Planning and Affordable Housing for Build to Rent is out for comment until 1 May 2017.
As part of drive to offer a wider variety of house types the Government wants to support the growth of custom built houses. These allow purchasers to help choose the design and layout of their home, while a developer finds the site, secures the planning permission and builds the property. The main barriers to custom built homes are access to land and finance. Mortgages have historically been difficult to come by, however Virgin Money has thrown their hat into the ring to start lending on such projects.
The Home Building Fund will help custom build firms and in addition the HWP sets out the Government’s intention to promote the National Custom and Self Build Association’s portal for Right to Build, ensure the CIL exemption for self-build remains in place and support custom build through the Accelerated Construction Programme.
Homes and Communities Agency
The Department for Communities and Local Government carried out a review of the Homes and Communities Agency (HCA) and it concluded that while the HCA should continue to have a central role in the delivery of more homes it needs to do more to increase the scale and pace of house building.
To achieve this, the HCA is going to be re-launched as ‘Homes England’ and will have a clear purpose ‘to make a home within reach for everyone’. At the heart of this renewed purpose will be the ambition to get more homes for communities across all housing tenures and put in infrastructure to unlock housing capacity. The role of putting in infrastructure could prove to be most welcome in certain areas of the country, as often this is a prohibitive cost which prevents development coming forward.
These are interesting times for the sector and we wait eagerly to see what the Government’s next steps on the proposals in the HWP and other consultations will be.
Howes Percival’s planning team are running a series of planning update seminars in Leicester (14 March 2017), Cambridge (15 March 2017) and Norwich (16 March 2017) which shall include a summary on the implications of the HWP, supporting consultations and recent case law. Please contact Victoria Wozencroft - Leicester (email@example.com), Harriet Green – Cambridge (firstname.lastname@example.org) or Katrina Tipler - Norwich (email@example.com) to book a place at either of these seminars.