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.

Comment

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.