For councils and developers wishing to bring forward brownfield land for housing outside of London, the prospectus setting out the process to obtain Government support has now been published. By submitting a bid, councils and developers could also benefit from a share of £5m under the new scheme launched by the Department for Communities and Local Government on 13 August (endnote 1).
The Housing Zone Prospectus (the Prospectus) sets out how to bid for the creation of up to 30 Housing Zones outside of London, and the allocation of up to £200 million to unlock housing development on brownfield sites.
Expressions of interest have been invited from local authorities partnering with private sector developers, and must be sent to the Homes and Communities Agency (HCA) by noon on 3 October 2014.
The following benefits are intended to be provided by Housing Zone designations:
- access to Housing Loan Investment Funding;
- priority access to ATLAS support and advice;
- priority for Local Development Order Incentive Fund bids;
- central Government dedicated brokerage support; and
- access for local authorities to borrow at the Public Works Loan Board's project rate.
The announcement follows the recent issue of a prospectus for London which proposes the creation of up to 20 housing zones, backed by £400 million of funding, across London (endnote 2). Bids for the London Housing Zones are due in by 30 September 2014.
The Housing Zone initiatives
The Housing Zone initiatives build on the Government's drive to unlock housing development on brownfield sites across the country. The Government estimates that brownfield sites could help deliver up to 200,000 new homes, but that this is being held back by the need for upfront capital investment.
The Prospectus invites bids from local authorities partnering with the private sector, where the local authority identifies the housing zone (which can include more than one site) and the bid for funding is made by a private developer(s). Local authorities can bid for housing zones alone, but will need to demonstrate that designation of a housing zone will lead to accelerated housing development without investment funding.
Joint bids from two local authorities for cross boundary housing zones will be considered, but should identify the lead local authority. Local authorities can put forward multiple bids with the same or different private sector partners, and the private sector can partner more than one bid (with the same or different authorities).
Investment funding is to be made by way of an interest bearing loan (which meets State Aid requirements) over a three year term, although the Prospectus does not rule out other forms of investment, including equity, providing it is State Aid compliant. Interest will be calculated with reference to the European Commission Reference rate plus a margin for creditworthiness and collateralisation. Scope is also reserved to retain some of the investment funding for allocation at a future date. Where appropriate and relevant, bids are also encouraged to apply to the:
- £5m Local Development Order Incentive Fund;
- Custom Build Serviced Plots Loan Fund; and
- Housing Revenue Account Borrowing Programme.
Investment funding can be used for delivery of infrastructure and site preparation works, including demolition and land remediation work. Funding to be used for schools, community facilities and energy infrastructure will also be considered where it is needed to directly unlock house building.
For more information on the Eligibility criteria, scheme prioritisation and assessment process, please see the details on the following page.
Confirmation that the Government would be bringing forward this scheme was provided by Chancellor George Osborne in his 2014 Mansion House Speech back on 12 June. It included a statement that Councils would be "required" to put LDOs on over 90% of brownfield sites that are considered suitable for housing. . This was later followed by a written statement in the House of Commons by Eric Pickles, which set out further the Government’s plans to increase housebuilding on brownfield land and stated that councils would play a critical role in bringing forward the necessary LDOs.
Eric Pickles also promised that the Government would be providing a set of LDO “templates” for smaller brownfield sites. This together with consultation on other measures to underpin the programme is anticipated later in the year.
The LDO mechanism allows a local authority to grant planning permission for particular developments, or particular classes of development (endnote 3). Other types of development orders are Neighbourhood Development Orders (NDOs) and Community Right to Build Orders (CRBOs).
DCLG has stressed that key safeguards will remain. The procedure for making an LDO includes consultation with statutory consultees and anyone whom the LPA would have been required to consult on an application for planning permission for the development proposed by the order. Proposed development must be screened to identify its likely environmental effects. Where likely significant effects are identified the development can still be permitted by LDO, but an environmental statement will need first to be produced. Housing falls within the category of 'Urban Development Project'. Government guidance suggests that environmental impact assessment will usually become necessary for housing schemes in the region of 1,000 dwellings or more. Therefore, the minimum of 750 houses may not require EIA. However, as bids are expected to be between 750 and 2,000 houses (with no upper limit), some proposals are likely to require EIA.
Key for brownfield development will be that investment funding can be used for delivery of infrastructure and site preparation works, particularly demolition and (often costly) land remediation work. Important to the delivery of sites will also be the necessary infrastructure. The Prospectus makes it clear that bids for funding to be used for schools, community facilities and energy infrastructure will be considered where it is needed to directly unlock house building. Where the principal reason for lack of progress is funding, this Government scheme may provide an opportunity for developers to progress proposals with greater speed and certainty.
LDOs have been used in a variety of contexts, including the Government's successful Enterprise Zones initiative. Schemes to which the LDO process may be most suited are those which are relatively well advanced and aligned with local housing priorities (as these are also likely to be prioritised in the bid process), and economic growth, but which have stalled for funding reasons.
The LDO process could present a number of particular challenges for less well advanced schemes, e.g. which include a number of stakeholders with competing objectives, particularly as bids are required to demonstrate local support (i.e. through local plan / neighbourhood/ plan allocations).
Developers will also need to be satisfied that the proposed LDO provides them with sufficient flexibility to cover the details of their proposed development, and that they will be able to comply with any conditions attached to the LDO. The local authority may also wish to include a grampian style condition in a LDO to secure, for example, affordable housing or other infrastructure. Also, where in force and ordinarily chargeable for such development, the community infrastructure levy (CIL) will remain payable.
The fund is expecting to meet up to 100 bids with each benefiting from up to £50,000 over this and next year.