Housing delivery faces a period of significant change, challenge and opportunity. Here Anita Rivera, a Senior Associate at SNR Denton, considers the implications for London of proposed reforms and recommends a range of practical steps that London practitioners should consider in order to facilitate the successful delivery of housing in the new policy landscape.
The Coalition government's settlement for housing in the comprehensive spending review will require local planning authorities, house builders, affordable housing providers and any other party interested in delivering housing, and in particular affordable housing, to exploit partnership working, to think creatively and use the opportunities offered by the forthcoming Decentralisation and Localism Bill.
Partnership is a recurring theme of the Coalition government. We see this in the foundations of Local Enterprise Partnerships. This will be underpinned by the 'duty to co-operate' to be contained in the Localism Bill. Partnership working will be key for the successful delivery of a number of government proposals including housing trusts, free schools, and neighbourhood and local plans. If growth and housing delivery is to happen it will require a consensus of focused desire and determination. This Policy in Focus paper addresses how that might be achieved and the tools that may be used for the delivery of housing.
The Housing Settlement and Government Incentives
The government has committed to investing £6.5 billion in housing over the Spending Review period. The budget for affordable housing has almost been halved from £8.4 billion to £4.5 billion. Given that £2.3 billion of the affordable housing amount is already committed, there will no doubt be a scrum for the remaining £2.2 billion. The Mayor of London's housing advisor, Richard Blakeway, has already started lobbying in a bid to secure half the unallocated amount for London given its housing need and that "nearly three-quarters of English households in temporary accommodation are in London."
To soften the blow of the reduction in funding, central government have set out measures to help stimulate housing delivery and development by:
- creating the New Homes Bonus, for which £900 million has been set aside to match fund council tax for a six year period on every new home built. The Department for Communities and Local Government stated that councils that "take action now to give planning consent and support the construction of new homes where they are needed and wanted will receive a direct and substantial benefit for their actions".
- introducing housing tenure reform and the ability for housing associations to set rents, in certain circumstances, to 80% of market rent.
- providing additional funding for the Regional Growth Fund which will ring fence £580 million for capital projects over a 3 year period. Accessible by way of bids to both the private and public sector, this could be used to support housing growth and market renewal.
- developing a 'Right to Move' scheme. This will investigate the possibility of mobility within the social housing sector to match jobs with housing.
- introducing 'deemed planning consent' in the Localism Bill for applications promoted by Housing Trusts that satisfy certain criteria. The Bill will also include a presumption in favour of sustainable development which will require local planning authorities to grant planning consent for development where there is sufficient local support and where it complies with the national policy framework.
Although useful, these measures are unlikely, by themselves, to be enough to be sufficient in the short term to make the housing market meet the full level of underlying demand.
The devolution of the HCA functions and budget for London to the GLA will increase the Mayor's power and ability to deliver his housing policies. But devolution will not necessarily stop at the Mayor's door. Through 'A Framework for Devolved Delivery' and by signing up to a voluntary 'Devolved Delivery Agreement', London boroughs will benefit from greater fiscal autonomy. This will increase the responsibilities of London boroughs for delivering the specific housing needs and objectives of their local communities, so long as they are not contrary to the delivery of the Mayor's London Housing Strategy. Greater control over their housing budgets will enable boroughs to respond to their local circumstances in prioritising schemes and negotiating with developers. But again, this is unlikely by itself to be enough to meet all underlying demand. Boroughs will need to think creatively and challenge the status quo. They will need to use all the tools available to help maximise the delivery of new homes and affordable homes.
A recent example of a pro-active approach taken by a London Borough is Southwark's decision to protect the HCA's kick start funding to help deliver the Aylesbury Estate redevelopment by walking away from working with the HCA's Developer Panel due to "commercial, legal and procurement risks". Instead they have decided to look at a land transfer model to deliver the regeneration which is underpinned by robust planning policy. This will save them time and money (although they will no doubt seek to safeguard their interests though a combination of various mechanisms) and enables them unrestricted access to develop relationships with a number of different RSLs and the private sector to help deliver their regeneration objectives.
Each borough has its own set of priorities and circumstances and each will need to consider what will work best for them. There are some areas which, collectively, boroughs should seek to collaborate on to instigate change and there are others which will be bespoke to their circumstances. Possibilities include:
- helping to unlock RSL potential through partnership working with one party delivering the land (or securing low land value) and the other delivering the housing. For example, local planning authorities with strong affordable housing policies can work with RSLs to deliver affordable housing without financial subsidy by creating surplus value in land, in return for agreement on delivering and protecting affordability and recycling of any planning gain. This can build on the recent partnership experience with asset-backed vehicles;
- engage with housing associations in anticipation of their negotiations with the HCA and the TSA/regulator to help influence and secure investment packages that reflect London borough priorities. The new investment framework relating to the delivery of some of the housing reform measures announced as part of the CSR is still under review. It is anticipated that flexibility to the social housing market in terms of more flexible tenures, increased rents and asset management will require sign-off by the HCA following collaboration with the TSA/regulator and local authorities. The same process is likely to apply regarding applications for HCA funding packages;
- making the best use of private finance. This can be done by investigating ways to get best value out of public sector assets, potentially by investing property assets into a fund to attract private investment;
- developing strategies and incentives between local authorities, the private sector and RSLs to convert vacant homes and voids into other tenures to release equity that can be recycled to provide additional affordable housing units;
- collaboration between neighbouring boroughs to develop schemes for relocating affordable housing tenants around and between boroughs;
- disposing of void properties and using the capital receipt as investment in housing schemes likely to be delivered;
- investing council land assets in co-operative housing models such as Mutual Home Ownership and Community Land Trusts;
- in partnership with the private sector, lobbying the Treasury and the Chartered Institute of Public Finance and Accountancy to allow local authorities to use the asset value of council housing or future rental stream (which is particularly relevant given the intention to increase the level of housing association rents) to secure prudential borrowing;
- investigate methods of investment and/or collaboration in the RSL bond market. Recently some RSLs have benefited from high credit ratings and have been able to attract a significant amount of funding as they are seen as a safe investment with a low risk of failure. Funding affordable housing through the bond market is attractive in the current economy as the maturity for traditional bank lending has decreased while the model used by many operators is substantially longer. Using bonds decreases refinancing risk;
- using existing compulsory purchase powers to unlock stagnant development potential or to acquire empty homes;
- arguing that the duty to co-operate should also apply to RSLs so that there is a statutory requirement for them to work alongside local authorities;
- developing tools so that local communities can easily set up trusts able to take advantage of the planning regime to deliver new affordable housing.
It is always worth remembering the original definition of "partnership". It is about people having a business in common with a view to profit. Public policy requires the components of partnership to be treated flexibly but there always needs to be a business, or clear activity, in which people are participating. It needs to be in common – understandably the objectives must be shared. There must be profit – even if different parties treat different outputs as their profit. Although innovation is needed, and the new Bill will help frame new partnerships, there will be a need for each borough to think carefully about how the new tools and new means of working can be used to develop long term sustainable partnerships.