The Housing and Planning Act 2016 (HPA) was introduced on 12 May. As the title would suggest, it introduces a range of housing and planning related reforms. Much of the HPA simply provides framework powers, and a lot of detail is therefore yet to come out. This note focuses primarily on the implications for the social housing sector, and affordable housing providers.
These are new dwellings which are only available for purchase by qualifying first time buyers (those aged between 23 to 39 years old). They must be offered at a price which is at least 20% less than the open market value. Starter homes will be promoted through:
A general duty imposed on local planning authorities (LPAs) by the HPA to promote the supply of starter homes (for example through local and neighbourhood plans, and the determination of planning applications).
Planning control; certain residential developments will only be granted planning permission if specific requirements relating to starter homes are met. Those requirements are not set out in the HPA but will be the subject of subsequent regulations. They are likely to include matters such as a requirement for a minimum proportion of starter homes to be provided on the site, or the payment of a financial contribution towards the offsite provision of starter homes. Planning authorities will be given the power to waive the starter homes requirement in relation to rural exemption sites.
The Government hopes these measures will deliver around 200,000 starter homes by 2020.
Self-build and Custom Housebuilding
By way of background, the Self-build and Custom Housebuilding Act 2015 requires LPAs to compile a register of people looking to acquire land on which to build or commission their own home. The LPA must have regard to that register when exercising their planning, housing, disposal and regeneration functions. Under the HPA, LPAs are required to ensure that there are sufficient serviced plots which are given planning permission to meet local demand. It is hoped that this will diversify housing supply and assist smaller builders who have struggled to recover following the financial crisis.
Financing the right to buy extension
First of all, where are we currently with the extension of right to buy to housing association tenants?
Following opposition to the Conservative Party’s plan to extend the right to buy, in October 2015 the Government announced a voluntary agreement with housing associations and the NHF to give housing association tenants the right to buy at the right to buy level discount. Housing associations will retain a discretion not to sell a particular property in certain circumstances, but if so the tenant is to be given the opportunity to use the discount to buy another property from the housing association’s (or another housing association’s) stock.
In February 2016 the House of Commons Communities and Local Government Committee published a report into the viability and sustainability of housing associations if the right to buy is extended.
The Local Government Association has published figures indicating that extending the right to buy could cost £6 billion by 2020.
A further enquiry was carried out by the House of Commons Committee of Public Accounts in April 2016. The enquiry raised various concerns, and recommended that a full funding analysis should be published by the time of the 2016 Autumn Statement.
The HPA now lays out a framework for financing the extension of the right to buy. The Secretary of State and the GLA (in London) can make grants to RPs to fund right to buy discounts on terms and conditions that they consider to be appropriate. The Secretary of State may do this by directing the HCA to use its powers to make grants under section 47 of the Housing and Regeneration Act 2008.
Sale of vacant higher value local authority housing
The HPA introduces controversial provisions which are intended to encourage local housing authorities (LHAs) to use their housing stock more efficiently, by selling higher value properties to support an increase in home ownership and housing supply. This is achieved through the following measures:
LHAs are now under a duty to consider selling their interest in any higher value housing that has become vacant.
The Secretary of State may require an LHA to make a payment equal to the estimated market value of the LHA’s interest in any higher value housing that is likely to become vacant during the year (after deduction of certain costs such as estate agents' fees). The LHA and the Secretary of State may agree to reduce the payment subject to:
a) where the LHA is outside Greater London, at least one new affordable home being provided for each old dwelling;
b) where the LHA is within Greater London, at least two new affordable homes being provided for each old dwelling.
“Higher value” is not defined in the HPA and it is expected that this will be set out in future regulations. It is likely that higher value will be defined in different ways for different kinds of housing, different housing authorities and different areas.
Rent regulations: High income social tenants
The HPA gives the Secretary of State powers to make regulations about the levels of rent that LHAs must charge to high income tenants of social housing. The rent regulations may:
- require the rent to be equal to the market rate, to be a proportion of the market rate, or to be determined by reference to other factors;
- provide for the rent to be different for people with different incomes or for social housing in different areas;
- create exceptions for high income tenants of social housing of a particular kind;
- give LHAs the power to change the existing rent payable to ensure compliance with the rent regulations, with a right of appeal;
- require LHAs to make a payment to the Secretary of State for any estimated increase in rental income as a result of the rent regulations;
Again, high income is not defined in the Act and will be defined in the rent regulations.
Reducing social housing regulation
There are provisions in the HPA intended to reduce social housing regulation:
- by providing that the Secretary of State can introduce regulations to reduce regulatory control over RPs by local authorities;
- by removing disposal consent requirements in relation to a number of pieces of existing legislation (for example housing obtained subject to the preserved right to buy);
- by removing consent requirements in the case of the restructuring or dissolution of non-profit registered providers; and
- by the abolition of the disposal proceeds fund for the purposes of the Housing and Regeneration Act 2008.
Insolvency of registered providers
The HPA introduces a special administration regime for RPs at risk of insolvency proceedings. A new housing administration order may be obtained which places a RP’s affairs under the management of a housing administrator appointed by the court. A housing administrator has two objectives:
The following planning matters will be of interest to developers:
The HPA contains framework powers for the creation of a new form of “Permission in Principle” (PiP) for housing led developments. PiPs will be granted by a general LPA development order or in some cases on application to the LPA. They will establish the principle for development of a specific site. A subsequent application for “technical details consent” would be needed for each individual development. The PiP will expire after five or three years, depending on whether it is granted by development order or by the LPA. Further regulations will follow setting out the detail of how PiPs will work.
The Act also contains framework powers for a dispute resolution process in relation to section 106 agreements, aimed at reducing delays. The applicant or the LPA would be able to apply to the Secretary of State to appoint an independent person to determine appropriate terms for the section 106 agreement. The appointed person has power to make a binding recommendation on the appropriate form of agreement. Provided the applicant then enters into the agreement on these terms, the LPA would not be able to refuse the application on the grounds of inadequate planning obligations.
- Gavin Barwell MP has been appointed as Housing and Planning Minister with the additional brief of Minister for London. Gavin Barwell has been MP for Croydon Central since 2010 and was PPS to Gregg Clark as Minister for Decentralisation and Planning Policy.
- In her first speech as new Prime Minister, Theresa May referred to the “injustice” experienced by young people who are finding it harder than ever before to own their own homes.
Analysis and reaction
In commenting on the legislation, the CIH reported that its own research showed:
(a) overall, taking right to buy sales, higher value sales, and the conversion to affordable rent into account, we are likely to have 370,000 less homes for social rent by 2020, compared to 2012 levels;
(b) the revenue from sales of higher value council properties is unlikely to be sufficient to compensate housing associations for the cost of right to buy discounts, and to fund replacements. If additional funding is not provided, up to 7000 council homes per year could be lost.
The House of Lords Economic Affairs Committee has just released a report resulting from its enquiry into the economics of the UK housing market. The report stresses that the Government has been too narrowly focused on encouraging home ownership, while neglecting the private rented sector and failing to substantially boost supply. The Lords call on the Government to set an increased target of 300,000 new homes per year. To achieve this target, the Government must recognise the inability of the private sector, as currently incentivised, to build the number of homes needed. Accordingly local authorities and housing associations must be incentivised and enabled to make a much greater contribution to the overall supply of new housing.
Clearly there is much for the new Minister to ponder on.