Right homes, right places, right now

On 14 September, the Government published a consultation entitled ‘Planning for the right homes in the right places’. This fulfils the commitment to consult further on specific issues contained within the Housing White Paper¹ published earlier this year and is a precursor to the publication of a draft revised National Planning Policy Framework (NPPF) planned for early 2018.

The headline issue in the consultation, which has unsurprisingly received the most attention from commentators to date, is the much-anticipated proposed standard methodology for calculating local authorities’ housing need. This was foreshadowed in the Housing White Paper and the consultation provides details of the Government’s proposals to simplify and streamline the current approach.

Once readers have progressed beyond the intricacies of housing need formulae, the consultation introduces proposals for the following: strengthening the ‘duty to co-operate’ between local authorities; ensuring that plan makers identify the types of housing needed as part of their overall assessment; assisting neighbourhood planning groups with the assessment of housing need; making the use of viability assessments simpler, quicker and more transparent; and further increasing planning application fees in ‘successful’ local authorities.

In many fields of enterprise, the nuances and differences between local authorities are to be celebrated. While a weekly bin collection is favoured in one authority, a fortnightly bin collection is welcomed in others; different local cultures prevail. Well, perhaps not when it comes to bin collections. When it comes to assessing local housing need, however, the Government has tired of the ‘little platoons’ and yearns for nationwide homogenisation.

The pretext for the Government’s proposal of a standard method for calculating local authorities’ housing need (which would be enshrined within national planning policy) is the perception that the current approach is costly, time-consuming and lacks transparency. Instead, the Government has set out a three-step approach which would be used by local authorities to set housing requirements in their area.

The first step retains the fundamental tenet of the existing approach; an assessment of housing need founded on demographic change. It involves setting the demographic baseline which is proposed to be the annual average household growth over a ten-year period in each local authority area. The second step is to adjust this figure to take into account market signals (the price of homes); the Government considers that this adjustment should be based on median affordability ratios which compare the median house prices to median earnings in a local authority area. In order to achieve projected housing need, the Government’s modelling proposes that each 1% increase in the ratio of house prices to earnings above 4 results in a 0.25% increase in need above projected housing growth; cue formula for adjustment and some worked examples for the less mathematically inclined. However, simplicity cannot come without complexity and the Government’s application of the standard approach in each local authority area has clearly produced some slightly alarming results (more diplomatically termed ‘a significant increase in the potential housing need’). As such, the third step involves the creation of an exception to the formulaic rule which is to cap the level of any increase according to the current status of any authority’s local plan at 40%².

To accompany the consultation, the Government has published the housing need for each local authority using the proposed standard method on the basis of current data. This creates a total housing need across the country of 266,000 homes. When announcing the consultation to MPs, Sajid Javid (Secretary of State for Communities and Local Government) noted that, for almost half of the local authorities which the Government has data for, the new assessment of housing is within 20% either way of the authorities’ original estimates.

The consultation proposes transitional arrangements for the introduction of the new standard approach which differ according to the progress made by local authorities with their local plans. In brief, the standard approach should be used by local authorities whose plans are over five years old or by local authorities whose plans have not been submitted to the Secretary of State before the later of (i) 31 March 2018 and (ii) the publication of the revised NPPF.

Standardisation is coming; deviation from the new method will only be permitted in ‘compelling circumstances’.

Just as ‘all politics is local’, so too is all housing local (at least insofar as the general thrust of UK planning policy is concerned). But how local is local? Ideally, each local authority sets its housing need in accordance with the proposed standard method. Yet the neat compartmentalisation of housing delivery on a local authority by local authority basis fails to reflect the frequent need for cross-boundary strategic planning for housing and infrastructure. Notwithstanding the ‘duty to co-operate’ enshrined within the Localism Act 2011 (and the NPPF requirement for local authorities to produce strategic housing market assessments where housing market areas cross administrative boundaries), the consultation cites the failing of the duty to co-operate as one of the most regular reasons for local plans being found un-sound by the Planning Inspectorate.

The consultation identifies three problems with the current duty to co-operate; firstly, a lack of transparency in respect of cooperation between local authorities in the early stages of plan making; secondly, the testing of co-operation is only at the end of the plan-making process at which point it is too late to remedy any failures and, thirdly, local authorities are not legally required to reach agreement on cross-boundary issues.

The solution proposed in the consultation is to require all local planning authorities to produce a ‘statement of common ground’ over the housing market area or another agreed geographical area where justified and appropriate. The statement is intended to be both a road-map and a record for cross-boundary co-operation on strategic planning matters. Crucially, this will have a fairly immediate impact, as it is expected that local authorities should have a statement of common ground in place within 12 months and an outline statement in place within 6 months of publication of the revised NPPF. The statement of common ground is to be a living document, evolving throughout the plan-making process as new agreements are reached.

Notwithstanding the impending need to prepare a statement of common ground (regardless of the stage reached by a local authority in the plan-making process), co-operation will continue to be tested when a plan is submitted for examination. The Government predicts that the publication of the statement much earlier in the plan-making process will be sufficient in and of itself to focus the collective minds of local authorities and improve compliance with the duty; however, there is also the threat of the Government flexing its regulatory muscles in the event that this proves insufficient to nudge behaviour in the right direction.

The consultation emphasises the importance of local authorities’ assessment of need not just producing a number but rather a number of numbers. The Government proposes that plan makers should disaggregate the total housing need into the overall need for each type of housing, before taking into account any constraints or other issues which may prevent them from meeting their overall housing need. This could include affordable housing, student accommodation, private rented sector and build to rent housing (among other categories of housing).

From the trans-boundary to the neighbourly; the consultation proclaims the much-vaunted success of neighbourhood planning, citing the introduction of over 400 neighbourhood plans. However, it goes on to identify difficulties encountered by neighbourhood planning groups in planning for the housing needs of their area. In essence, these can be summarised as an unclear interaction between local plans and neighbourhood plans in respect of housing need.

Building on the principles set out in the Housing White Paper, the consultation proposes that local authorities should provide neighbourhood planning groups with a housing need figure by making a reasoned judgment based on the settlement strategy and housing allocations in their plan, as long as the local plan provides a sufficiently up-to-date basis to do so. This is designed to ensure conformity between the respective plans and might extend to local plans having to set out a housing figure for designated neighbourhood planning areas in the future.

The consultation proposes a revised approach to viability assessment, arising from intelligence suggesting that the use of viability assessments in planning permission negotiations has expanded to a degree that it causes complexity and uncertainty and results in fewer contributions than required by local policies. Matters take a somewhat more intriguing turn as the consultation refers to allegations of the current system being ‘susceptible to gaming’, ‘manipulated’ and ‘viewed with suspicion by authorities, communities and other observers’. Further still, the process is shrouded in mystery as appraisals are often not published on grounds of commercial confidentiality. Hence the Government’s mission to reform the viability assessment process by increasing certainty in viability assessment for plan-making and decision-taking and making viability information more readily available.

The Government proposes amending national planning policy to provide that local authorities should set out in their local plan the types and thresholds of affordable housing required, the infrastructure needed to deliver the plan and expectations for how these will be funded and the contributions which developers will be expected to make. In sum, by prescribing more clearly the requirements for assessing viability at the plan-making stage, the Government hopes to lessen the need for this be revisited at the planning application stage. As such, the Government proposes amending the NPPF to provide that, where policy requirements have been tested for their viability, the issue should not usually need to be tested again at the planning application stage and applications meeting the requirements set out in the plan should be assumed to be viable.

In terms of the availability of viability, the consultation notes that full and open publication of all viability assessments (where still required) would greatly increase transparency but fails to openly endorse such a remedy. Instead, there is a rather vague commitment to updating planning guidance to help make viability assessments simpler, quicker and more transparent. The real target for increasing transparency, it transpires, is section 106 agreements and the Government proposes that local authorities should set out in their plans how they will monitor, report on and publicise funding secured through section 106 agreements and how it is spent.

The mantra of ‘just rewards’ is tentatively endorsed in the consultation in the context of local authorities meeting their housing need requirements. Local authorities are described as ‘the engine room for providing new homes and economic growth in their local area’, subtly prefaced by ‘at their best’.

The consultation refers to the  Housing White Paper’s proposal to increase nationally set planning fees by 20% for those local authorities (all of which have) committed to invest the additional fee income in improving the productivity of their planning departments. However, the Housing White Paper also suggested an increase of a further 20% for authorities meeting housing targets and the consultation seeks views on the most appropriate criteria to enable this additional fee increase to be applied. The vision is one of incentivised local authorities, striving to meet local housing targets with the prospect of ‘just rewards’ for doing so. Struggling, under-resourced, local authorities arguably may need more than this if they are to be ‘at their best’.

The consultation provides useful additional detail on the Government’s proposals set out in the Housing White Paper.

Some have criticised the proposed standard method for failing to identify real-world constraints to delivery (such as infrastructure or the green belt). However, Sajid Javid has clarified that the proposed standard methodology provides a ‘starting point’ and ‘should not be mistaken for a hard and fast target’ in light of the potential interference of local constraints. On balance, while a standard methodology should speed up the planning process, it remains to be seen whether it is an accurate predictor of housing need.

There have to be some doubts as to whether the preparation of a ‘statement of common ground’ will be sufficient to lubricate cross-boundary co-operation between local authorities and whether neighbourhood planning groups will welcome ‘top-down’ intervention in an overtly and intrinsically ‘bottom-up’ process. That said, the prevalence of neighbourhood plans perhaps triggers the need for a more ‘planned’ relationship between such plans and overarching local plans and, after all, the proposals are designed to ‘assist’ neighbourhood planning groups.

It is to be expected that the Government should seek to exercise greater control over the viability assessment process in light of concerns raised by local authorities and communities.  It is also understandably an obvious focus for attention in light of the Government’s drive to boost the provision of affordable housing but greater direction through the local plan is likely to assist in achieving more certainty and transparency.

As for fees, most developers would likely welcome the opportunity to pay an additional 20% on the condition that this results in a generally more satisfactory planning experience. Incentivising local authorities with a further 20% fee rise may also prove fruitful.
The consultation is open until 11.45pm on 9 November 2017.