"For we are the builders"

George Osborne’s Spending Review and Autumn Statement 2015 promises to double the housing budget from 2018/19 and focuses on support for low cost home ownership for first time buyers. We go behind the headlines to see what this could mean in practice.

Recap - An "ambitious" Five Point Plan:

1. Delivering 400,000 affordable housing starts by 2020-21, focused on low cost home ownership. This will include:

1.1 200,000 Starter Homes - 20% discount to market value to young first time buyers; a £2.3 billion fund to support the delivery of up to 60,000 of these, in addition to those delivered through reform of the planning system.

1.2 135,000 Help to Buy: Shared Ownership homes - Open to all households earning less than £80,000 outside London and £90,000 in London.

1.3 10,000 homes that will allow a tenant to save for a deposit while they rent, in addition to50,000 affordable homes from existing commitments and at least 8,000 specialist homes for older people/people with disabilities.

2. Extending the Right to Buy to housing association tenants.

3. Bringing forward further reforms to the planning system:

3.1.1 Establishing a new delivery test on local authorities - Ensuring delivery against the number of homes set out in local plans within a reasonable timeframe. Local communities to allocate land for housing through neighbourhood plans, even if that land is not allocated in the local plan.

3.1.2 Quality of decision making - Supporting decision-making in line with local plans and the principles in the National Planning Policy Framework. Lowering the threshold for the quantity of all major decisions overturned on appeal to 10%. Wider circumstances, such as the status of the local plan and whether appeals relate to this, will be taken into account. 

3.1.3 Planning obligations (section 106 agreements) - A more standardised approach to viability assessments; extending the ability to appeal against unviable section 106 agreements to 2018. 

3.1.4 Planning conditions - Reviewing the operation of the deemed discharge of planning conditions in order to avoid delays to delivery. 

3.2 Supporting the availability of appropriate land for housing, including by releasing public sector land with capacity for 160,000 homes - Release of unused and previously undeveloped commercial/retail/industrial land for Starter Homes; regeneration of previously developed brownfield sites in the green belt providing it contributes to Starter Homes (subject to local consultation).

3.3 Backing SME house builders - Amending policy to support small sites, extending the £1 billion Builders’ Finance Fund to 2020-21; halving the length of the planning guarantee for minor developments to 13 weeks.

3.4 Offering £2.3 billion in loans to help regenerate large council estates and invest in infrastructure needed for major housing developments.

3.5 Investing £310 million to deliver the first new garden city in nearly 100 years, at Ebbsfleet.

4. Extending the Help to Buy: Equity Loan scheme to 2021 and creating a London Help to Buy scheme, offering a 40% equity loan in recognition of the higher housing costs in the capital. 

5. Higher rates of Stamp Duty Land Tax (3 percentage points above current SDLT rates) - Charged on purchases of additional residential properties, e.g. buy-to-let properties/second homes from 1 April 2016. The tax receipts will help towards doubling the affordable housing budget.

Analysis

The Chancellor's Spending Review contains wide-ranging initiatives to improve home ownership and housing delivery.

The Treasury has promised significant planning reforms and has marked its intention to provide substantial housing investment, including a £2.3 billion fund for private housing developers to ensure the provision of Starter Homes for people looking to buy their first property. 

Of course, the initiatives announced in the Review are perhaps unsurprising in light of the proposals contained in the Housing and Planning Bill (the Bill).

The Bill is currently at the committee stage in the Commons. The Chancellor's promise of significant investment serves to reinforce the Bill's proposed imposition of a general statutory duty on all local planning authorities to promote the supply of Starter Homes and a specific statutory duty (to be determined in later regulations) to require a certain number or proportion of Starter Homes on site. Starter Homes appear therefore to reflect a statutory standing that affordable housing has never had (traditionally the focus of national (and local) policy, rather than law).

The recent announcements are therefore widely positive for our house-builder clients. However, the full details of the initiatives are yet to be published:

Trevor Ivory, National Head of Planning at DLA Piper comments on the Spending Review

"Further clarity is needed on how Starter Homes will relate to other forms of affordable housing provision. The inclusion of a legal requirement to provide Starter Homes in the Housing and Planning Bill has created a great deal of uncertainty about what this means for other forms of affordable housing that only have policy rather than legal support. The Government needs to be much clearer about whether it wants Starter Homes provided in place of other forms of affordable housing or as an additional requirement on house builders. If it is the former then housing charities and local authorities will cry foul. If it is the latter then the initiative risks jeopardising the viability of development at a time when the market is only just recovering in many parts of the country".

Access to funding

The Review goes on to state that "the scale of this programme of house building will require all sectors to play a role in delivery. As a result, the Government will remove constraints that prevent private sector organisations from participating in delivery of these programmes, including the constraints to bidding for government funding".

This begs a number of questions for which we are yet to receive answers:

  • Who will have access to the funds?
  • Does this mean local planning authorities and housing associations (as public sector organisations) will not have access to these funds?
  • Will all private house-builders be eligible?
  • What (if any) criteria will be applied?
  • What is the process for bidding for the funds?
  • How exactly are the house-builders are to be assisted? Will the £2.3 billion be used to compensate house-builders for the 20% discount for the Starter Homes?

The Review has certainly signalled a step-change in approach which looks good for the development industry, but without details, house-builders, developers and planners alike remain keen to fully understand the full scope of George Osborne's crusade to transform 'Generation Rent' into 'Generation Buy'.