Could the witnesses tell us whether they think planning is an obstacle to growth? Do they agree that it is helpful to have some local authorities designated as failing in order to put another system in place to hurry things up a bit?
Gavin Smart: Planning can be an obstacle to growth, but it is not the only one. It is important not to focus on planning to the exclusion of everything else. I was listening to the previous panel talking to you about the difficulty of constructing lists. They are right, because it is hard to be clear about exactly what constitutes poor performance. I am not saying that one should not try to bear down on performance, but there is a risk of picking a single particular measure—for example, speed—and saying, “This constitutes poor performance.” Fast decisions are good, but you also want good decisions.
David Orr: I broadly agree. Planning can be a constraint and it often takes longer than it ought to, but it is not the primary constraint on growth. I think that it is more to do with investment and economics than planning. Like colleagues in the previous session and Gavin, I think there is a danger in separating the world into the good guys and the bad guys. When you do that, you end up getting lost in definitions—who constitutes the good guys and who constitutes the bad guys—rather than worrying about what is actually happening.
Is clause 1 in particular going to speed up decision making on planning? Once we have a number of authorities designated as failing—I will come back to ask you about criteria—and people who are developing major applications can go straight to the Planning Inspectorate, will that speed things up or not? How many people do you think will use that route?
Andrew Whitaker: I think you have heard a number of people suggest that this is part of a package, and that is what we would suggest to you. We have seen a lot of change in the planning regime in terms of putting the emphasis on localism. What we have said about localism is that we have no problem with it, as long as everybody embraces the idea of localism and localism not being a barrier to growth and, therefore, planning not being a barrier to growth.
Therefore, with this power under localism comes the responsibility of doing the right thing. Clause 1 is an essential part of these sticks to the carrots of localism. You can take that power on yourself as a local planning authority, but you have to make sure that you are doing the job properly and you are doing a good job. If you are not, people need to recognise that you are not doing the job properly and you are not fit to do that job, and an alternative regime is opened to you.
This is a voluntary regime. It does not change the entire planning process, as some people have suggested. It allows people who are bringing forward projects the alternative of going direct to the Secretary of State. Whether they use it or not is difficult to judge, because we do not expect a lot if local authorities are to be deemed to meet the criteria, whatever that criteria are. You should be pleased that that is going to be the case because we would not wish to see lots of local planning authorities across the country doing the wrong thing, and therefore being placed on special measures for want of a better word.
So (a), we would not expect a lot of authorities to be in that position, but (b), the development industry has an alternative. In fact, we believe that one of the outcomes of this piece of legislation—someone mentioned the word “deterrent”—is in its power of saying to local authorities, “Look, you need to do the right things and you need to make sure that you are efficient, effective and not a barrier to growth or we will implement this alternative mechanism for decision making in your areas. Therefore, you will lose the power that you have fought for under localism because you have abused that power because you have not lived up to the responsibility.” It is a very powerful clause and we are very supportive of it.
David Orr: To be honest, this is not a measure that we in the National Housing Federation have sought and it is not a measure that we have a particularly strong view about it. The issue here is about the culture of planning and local leadership. If there were a clear, coherent local plan and a sense that the job of planning is to help to deliver that local plan, you create a much better environment for the conversations about development and growth to happen. Is this is a good mechanism to ensure that that happens—a kind of stick rather than carrot approach? I am anxious that we will get into arguments about who should be in special measures and who should not, rather than focusing on the job in hand, which is getting the planning consents and getting the building done.
Gavin Smart: I adopt a similar position to David. It is not a measure that the Chartered Institute is particularly focused on, but the important point is who ends up in special measures, which takes us back to the question of how you define failure. That would be my key concern. Can we satisfactorily identify who is failing and for whom is the principle of localism removed?
Mr Whitaker, you were suggesting that you think the stick is helpful, and the stick is the list of designated authorities. How are we to judge which authority should be on that list?
Andrew Whitaker: The deterrent is not the list of authorities per se; it is the idea that you, as an authority, could be put on that list. That is the powerful deterrent because, as a local member, you will not want to have to answer to your electorate about why you have been put on this naughty step, for want of a better word, and therefore you are absolutely right that the criteria or the metrics that you will use to determine that have to be the right metrics. I have heard your earlier debate, and I agree with previous speakers. We are in a development plan-led system. The question, “Do you have an up-to-date development plan?” should be part of that metric.
Obviously, I am very concerned with housing and housing delivery, so I would like to put in a bid for having an up to date and deliverable five-year housing land supply on the list, but the important thing would be then to make sure that the metrics were not such a blunt tool that because you met one or two criteria you were automatically put into special measures. I would perhaps like to see some form of audit—Ofplan or something or other—which says, “You’ve met criteria that suggest that there’s a problem. Now you’ve got the chance to explain why there is not a problem.” That would be fair.
I am also toying with the idea of having some sort of customer satisfaction measure in there as well, because if you went to my membership, as we do all the time, and asked, “Which are the poorly performing authorities in this area?”, they would have a few names for you. You would then be able to ask, “What it is about those local authorities that are poorly performing and why are they poorly performing?” I am quite attracted to the idea of a user element input.
David Orr: If I may add one comment about this, we support the logic of the NPPF that in the absence of a functional plan, there is a presumption in favour of sustainable development. It seems to me that if that is there, a decent protection already exists. It is too early to say whether the intent of the NPPF will be, or is being, delivered in reality, but that is clearly the intent behind the NPPF.
Gavin Smart: If you reduce a burden on applicants, that is welcome, provided you have sufficient information to make a proper decision. That sounds like a statement of the obvious, but you need to make sure that you have the things that you really need in there and you need to remove the extraneous information.
David Orr: It seems a reasonable measure in the description. Many committees get completely bombarded by vast amounts of information that do not help to determine whether the planning application is consistent with the plan. That seems to me to be the test: is it consistent with the plan and does it aid the committee to come to a decision? Once again, putting in definitions and having someone externally deciding what is and is not acceptable might create debate about the wrong thing. The debate might end up being, “Have we got the right information?”, rather than, “Have we got the planning consent?” I understand the thinking behind the clause and, generally, if it reduces the bureaucracy and makes it easier to come to a clear and coherent decision, we would welcome it.
Andrew Whitaker: It would be nice to think that such a clause was never necessary in legislation and that local authorities would only ever ask for things that were reasonable, relevant and material to their decision making. Unfortunately, our experience shows that is not the case and that a lot of local authorities take a belt and braces approach to information requirements with planning applications. It is true that most planning applications run to hundreds and hundreds of pages and are delivered in vans. Everyone jokes about it, but it is no joke. It costs a lot of money to make a planning application and therefore the clause is important. We need to address the issue. Primary legislation may seem a little over the top, but previous efforts to try to control the run on information requirements have not succeeded.
Do your members raise as a complaint or a concern the cost of having to gather additional information when submitting plans to local authorities? Earlier, we heard an anecdotal example about flood assessments needing to be done for an application on the top of a hill. Is that something your members come to you about?
Andrew Whitaker: It is frequently frustrating to our members to have to provide information that people do not believe is necessary to determine their application—spurious information. Generally, this is shown when people get a planning consent with a planning condition to submit evidence of things that they were asked to submit as part of the planning application. Quite clearly the local planning authority has not used that information to determine the application; they have merely looked at the principle of development, and then said, “Well, what about the actual conditions?” and, “Oh, we need further information on that.” But it was part of the original application. That is very frustrating, particularly if it imposes a repetitive cost.
For example, wildlife surveys can only be done at particular times of the year. That can delay a project by many months, as you have to wait for the next period to come around. Even though you submitted a wildlife survey with your planning application, because you have a condition on your planning consent requiring further information, you cannot submit last year’s survey, you have to do a new, up to date one. That is very frustrating. It is very wasteful of money and time and it causes delay.
David Orr: I was speaking to the chief executive of a very large housing association earlier today. He was saying that they never now put in a planning application that is not contested. The idea that the plan should create an environment where some planning applications are clearly consistent with the plan and should be approved quickly and relatively straightforwardly does not happen. It really just does not happen very often. It is when vexatious applications come in, such as post hoc applications for town or village green status, which I suspect we may discuss later. That kind of thing is really designed just to be a delaying or spoiling tactic; it is not about providing additional good-quality information. I think it is possibly that more than anything else that people find frustrating—the fact that absolutely everything is contested, regardless of whether it is consistent with a properly formulated and fully agreed local plan.
Gavin Smart: I would not disagree with that, and yes, you will always find members who are concerned that the burden of information is greater than it needs to be. The trick is to be clear about what spurious information actually is, because although it does not always appear to be necessary from the perspective of the person seeking the permission, there may be other reasons why it is required. An honest conversation about what information is really pertinent to deciding whether a development is consistent with the local plan is a good way forward.
May I take the panel to clause 5 and ask first what you think will be the consequences for affordable housing of proposed changes to the conditions on section 106?
David Orr: This is an interesting clause, because it is implicit in it that the affordable housing element of the planning obligation is primarily responsible for consented sites not being built out. That is an assertion that we have heard consistently, but we have seen little real hard and fast evidence to demonstrate it. It is clearly the case that for some consents offered in slightly different economic times it might now be difficult to deliver the whole of the conditions, but the idea that it is just the affordable housing element that should be under scrutiny seems to us to be completely wrong. If we are to have a re-evaluation of the whole planning application process and whether the planning conditions are necessary or affordable, we need to be looking at all the planning conditions as a complete package and assessing the process not purely on the financial requirements, but on the planning requirements in respect of the application.
If section 106 were to disappear altogether, our assessment was that in the existing affordable rent programme, for which the Government have provided some capital support, a maximum of 35,000 homes would be put at risk. It is unlikely that the clause as worded, if it were to be implemented, would lead to a reduction of that size, nevertheless that is the total population of homes at risk. We are in an environment where about half of all new affordable housing supply, even through the worst of the economic downturn, has been delivered as a result of section 106 considerations. If we still have a public planning and policy objective of mixed income, mixed tenure communities, undermining section 106 is potentially problematic.
I want to make one other point. Certainly from a housing association point of view, the most important thing that section 106 does is to deliver land. People often think of it as a subsidy, but it guarantees the availability of land to build new homes. Commuted sums off-site do not necessarily bring that same guarantee, and land access is a real and significant problem. There may be occasions when it is legitimate to reassess the overall planning obligation, but to limit it purely to the affordable housing element seems to us to be wrong in principle and unfounded in evidence.
Gavin Smart: I would agree with a lot of what David said. This is the part of the Bill that causes us the most serious concern. There is an assumption that the affordable housing element of section 106 is the major impediment to development, but I am not sure that is properly evidenced. I think we would all agree that development finance, mortgage finance and the wider economic context are at least as important. Like the National Housing Federation, and certainly like the Housing Policy Forum, we want to see the maximum new supply across all tenures. However, I am concerned that the measures in the Bill will simply reduce the affordable housing provision, and not lead to any net increase in the supply of homes, which we all need to be concentrating on.
David is absolutely right when he says that section 106’s key function is as much about access to sites and what that delivers in terms of mixed communities, as it is about a financial subsidy, but it has also been responsible for significant numbers of new homes. The Homes and Communities Agency’s figures for 2010-11 show that 29,000 homes were delivered through the section 106 route. It is an extremely important delivery route, and we are concerned about putting it under threat.
Andrew Whitaker: This measure is not about delivery of affordable housing. It is about being able to examine the viability of development. By far and away the largest element of cost to a residential development is the cross-subsidy of affordable housing. Everyone uses the shorthand of section 106; I think they are wrong to do so, as it is merely a mechanism by which we deliver planning obligations. Planning obligations delivered via section 106 need to follow the tests for planning obligations. They need to be necessary and related in scale and kind to the development, as is set out in the community infrastructure levy regulations. Those are high hurdles to jump. You can only ask for a planning obligation for that which is necessary to mitigate the impact of your development.
All this is changing under community infrastructure levy. The one thing that is not changing is cross-subsidy of affordable housing. That is outside community infrastructure levy and it is also unique in the fact that it is not specifically about mitigation of impact. We do not generate a need for affordable housing by building houses; in fact, it is probably the opposite of that. It is this element that is policy-driven and therefore open to negotiation. This is a negotiated benefit of development. Therefore, the clause allows developers to go back and renegotiate that benefit based on the viability of their development in the current economic times. Mr Smart is absolutely right to draw attention to all the other impacts on the viability of development, because they are all very important. However, we need to be able to reassess viability at the time of the implementation of the consent, because that is when you make the decision to go forward or not. As someone once said—I think it was even a Secretary of State—50% of nothing is nothing. If we are talking about delivery, delivering development with an element of affordable housing is better than not delivering any housing with any cross-subsidy for affordable housing. I think we are focusing on the wrong thing. We should not be focusing on how much affordable housing you are losing; it is how much affordable housing you are actually getting by enabling developments to go forward in a viable way.
Can I unpack that a little more? Why do you think the Bill concentrates on the element of section 106 on affordable housing and not, as I think Mr Smart alluded to, the whole of section 106? Why is it concentrating only on affordable housing?
Andrew Whitaker: The whole planning obligations package should be related to the development, and they should be necessary to enable the development to go ahead. In effect you are saying, “Actually, we negotiated for benefits that were not necessary for the development to go ahead. They were just nice things to have.” That is an abuse of the planning obligations legislation and the CIL regulations, which limit what you are actually allowed to require as planning obligations. If we say, “We should go back and renegotiate all those things, because we actually asked for a whole load of packages of goodies that we shouldn’t have been asking for”, I am all in favour of doing that, because I know that it happens, but it is almost an admission that that has happened, whereas affordable housing sits outside the mitigation regime, and therefore it is the only thing left to make development viable.
David Orr: Yes. The truth is that the planning obligation arises as a result of the increase in the value of land that comes along with a planning consent for residential development. The job of the planning authority is to determine what is consistent with planning policy and consistent with the local plan and how best to deliver it. I accept that there will be some occasions when a planning consent has been given with a connected series of obligations, and that series of obligations is unaffordable in the current economic environment. To have the opportunity to reassess that seems to us to be a reasonable thing, but the whole package of obligations should be explored, not purely the affordable housing element.
On the separation that says affordable housing is only policy, I would say the separation is that the affordable housing element is policy—it is an integral part of planning policy in almost every local authority in the country, and it is not at all unreasonable that local planning authorities should seek to deliver affordable housing through that planning regime.
Are you saying that if you take out that major obligation from a section 106 agreement the consequences, particularly in the current economic climate, could be that it pushes land values up?
David Orr: Why would it not do that? What is the mitigant that absolutely guarantees that it will not have an adverse impact on land? There are all kinds of things that stop consented sites being built out. The most obvious is that developers are not absolutely confident that the product they build can be sold, not because of lack of demand, but because of a perceived lack of mortgage finance and the inability of banks and other lenders to provide that mortgage finance.
The planning obligations are part of the overall package. I absolutely agree with Andrew’s view: I would rather have 30% of something than 40% of nothing. It is proper that where there is evidence that it is genuinely unaffordable, the whole thing should be re-examined, but the point is that it is the whole thing should be re-examined, not merely the affordable housing component.
This is all predicated on economic viability. If removing affordable housing from a particular development can make it more economically viable, the consequence could be to make the land value higher to make it more economically unviable either for that particular site or for other sites in the locality. Is that essentially what you are saying?
Gavin Smart: I agree. You might also ask a question about how that increase in land value would be expressed if it were simply expressed in increased property prices. That is not helpful either.
I suppose one of the unsung benefits of section 106 is that, to a degree, it gives developers certainty because it is the proportion of the site that you know you will be able to sell to somebody. It is not all a downside. The Local Government Association figures show that 80% of local authorities are already voluntarily entering into negotiations to revisit section 106, for exactly the reasons that David set out. We all know that agreements were entered into at the top of the market that are not viable now. My other concern is that there are already mechanisms that can be used to enter into these kind of discussions.
David Orr: This is a relatively small problem that does not require a solution of this scale and impact. It does not require new primary legislation to enable it to happen. I would put it even stronger than Gavin’s comments. There are a number of occasions when new sites are started because of a section 106 obligation because there is a guaranteed purchaser for that product.
Can I say to the Committee and the witnesses that we are now over halfway through the session. Three Members have asked questions, and there are at least four who want to ask questions, so if we are to get through everybody who wants to ask a question, and there may well be more, we may need snappier questions and snappier answers.
I have two quick questions to direct towards Mr Orr. Do you have any reason to believe that the Planning Inspectorate, in assessing the viability of the site and therefore what proportion of an affordable housing commitment would need to be reduced in order to make the site viable, is somehow going to be less fair or less reflecting of true economic circumstances than one of the many local authorities that actively negotiates? That will be welcome, and what we are trying to do is to replicate it.
David Orr: I have no concern about the arbiter being the Planning Inspectorate. If we get to the point where arbitration is needed, the Planning Inspectorate is as sensible and rational a place to go as anywhere. It partly depends on the question that you are asking the Planning Inspectorate. If the question you are asking is, “How much can you reduce the affordable housing obligation?”, you will get one answer. If you are asking them how can you recast the entire obligation, you may well get a different answer. That seems to be the most critical thing.
One other question, if I may. On 6 September, when we announced this proposal, we also announced a further £300 million in subsidy for affordable housing. You said that if all affordable housing commitments in 106 agreements were cancelled completely, it would, in theory, lead to a loss of 30,000 or possibly 35,000 homes. You yourself said you did not think that that was going to happen, and I assure you now that it will not happen because the Planning Inspectorate would never agree to it. If you then add the further affordable houses that will be built as a result of the further £300 million of subsidy that is being provided by the Government in the same announcement, is that not more likely to produce a net increase in the level of affordable housing?
David Orr: The 35,000 homes are and were the total number of homes in the present affordable rent programme that were dependent on delivery through section 106. If the entire obligation had gone, that was the total population of homes at risk. The Government’s announcement on 6 September did not—as some had suggested it might—say “We will get rid of the obligation for three years”, but instead, “We will create a mechanism by which this can be re-examined.” At that point, the 35,000 became a redundant figure because they were not going to get rid of the whole section 106 obligation. That was very welcome, and I was glad that some of the conversations we had with officials and others had, I felt, been listened to. That was very welcome.
As for the £300 million, I am always thrilled when the Government see fit to provide additional capital investment in the supply of new affordable homes. Indeed, the proposal about a guarantee scheme also creates the potential to build new homes. My ambition is to see that those figures—those initiatives—will create more new homes, rather than only replacing ones that we would have been able to build anyway. In an environment where the economy is managing to churn out 110,000 new homes but to create 390,000 new households, surely the ambition has to be the greatest possible volume of new supply.
Andrew Whitaker: Absolutely nothing. Where local authorities are taking a pragmatic approach, that is exactly what we are doing. Do not forget that in order to get development, you need a willing developer, and in order for a developer to be a willing developer of a particular development, the development has to be viable in the developer’s mind, not in an arbitrary assessment of the viability of that particular development. If the developer does not believe that the development is viable, it will not go forward. Therefore, it is important to recognise that just saying that something will happen does not make it so. Where local authorities recognise that viability is an issue, and where agreements were agreed some time ago in a different economic climate, or with a different funding regime or a different funding package, those agreements ought to be open to renegotiation, and we ought to be able to renegotiate them quickly, efficiently and effectively.
You know that it contains a quite large number of regeneration development sites, such as Woolwich Arsenal, Greenwich Peninsula, Heart of East Greenwich, Lovell’s Wharf—I could go on naming them. Can you name a single one where the stall that occurred during the recession has continued because of reluctance to reach agreement on a modified section 106?
There are none. Can you understand the concern of some of us who have spent a lot of time working to ensure mixed tenure developments, where you get people of different incomes living side by side, that the effect of this particular clause could well be to create a rush of mono-tenure developments without any affordable housing?
Andrew Whitaker: We are not against the provision of affordable housing in pursuit of mixed and balanced developments. This is solely a clause about the viability of development and the availability of grant funding; either the money is not coming in from that affordable housing element, or the economics of the development of the site have changed for other reasons, and therefore the site is not coming forward for development. While they are not in your constituency, I can take you to a number of sites that are not coming forward because of development viability, and the largest part of that viability calculation is the amount of money that needs to be made to cross-subsidise affordable housing.
You were not here this morning, but we heard from representatives of local government, who were expressing concern that already, in anticipation of this clause, some developers were taking a view that they would be able to appeal and get rid of obligations to produce affordable housing. Can you see that potential problem as a result?
Andrew Whitaker: That is not what the clause suggests. The clause suggests that you will have to show evidence of the impact on the viability of your site and that that site will not come forward. If your site remains viable, the inspectorate will say, “No, your site is still viable; you can still bring that site forward. I am not going to change this agreement.” I think that is perfectly right. I do not think that it will be open to everyone to lodge an appeal on the basis of viability and to say, “Actually, my site is viable, but I’d rather like to make some more profit, please.” I do not think that that is what the clause is trying to do.
But you understand that the representatives of local government who were here this morning felt that it was actually having a negative effect on development, because it was deterring schemes that might otherwise proceed.
David Orr: Yes; I think that whatever the outcome of this, whether it produces more or less homes in the long run, in the short run there will be delay, because it creates another mechanism for reassessment. I am anxious about creating sledgehammer legislation to crack a present-day nut. I think we are in danger of doing that. There are mechanisms by which these obligations can be renegotiated.
Nevertheless, I accept that if we can create a mechanism that allows that to happen quickly and easily, and the Planning Inspectorate does not get swamped, and is able to make assessments quickly and easily and, as a result, impose a new obligation on the developer, that says, “We’ve changed the obligation; now you must accept an obligation to get building—you can’t just go back and sit on it for another three years,” the potential is that the outcome might be more new homes being built slightly more quickly than would otherwise have been the case.
I say again that the only way that is going to work is if the entire obligation is looked at, rather than just the affordable housing part.
Fifty per cent of nothing is nothing, and there is a very difficult balance to be struck. I would be interested in the panel’s views about this. Other things being equal, clearly it is better for the developer to pay for affordable housing than the taxpayer, therefore section 106 has a lot of value. We have 400,000 permissions that have not taken place. What confidence would Mr Whitaker have that if the agreements could be renegotiated it would mean that we would get more houses built, rather than an addition to the stock of 400,000 that are not being built?
Andrew Whitaker: First, let me address your issue of 400,000 outstanding planning consents. I have no reason to doubt that figure. In fact, it seems very low, because if we require a five-year housing land supply and we want to build 200,000 houses a year, one would suspect that in the pipeline 1 million houses might come forward; so 400,000 seems to be less than two years’ housing provision.
However, even that is misrepresenting the situation, because all those 400,000 permissions are on particular sites, and all those sites have particular issues associated with them. If I grant you a consent for 2,000 houses, you are not going to go out and build them tomorrow. There will be a trajectory over time of how they will come forward on a development. For all sorts of reasons, even in the best possible market, those houses would not all turn up overnight. They would come on line over a 10, 15 or even 20-year development process. To round them all up and say “We’ve got 400,000; why don’t you go out and build them tomorrow?” is the wrong approach to that figure.
Then we come to look at each of the individual sites and their trajectory, and saying which of those sites are the ones that are “underwater”—the technical term that the industry uses. It does not mean they are subject to flooding; it means they are unviable. It is up to the local authority to go out and talk to the developer and say, “We gave you permission a year ago, and you don’t seem to be on site yet. What’s the problem with your site?”
If the developer says, “Oh, well, the funding for the affordable housing that was going to kick-start this development—we’ve lost it,” the local authority can do something about it. It can find funding from alternative sources. It can renegotiate the section 106 to phase the affordable housing later. It can change the conditions on the planning permission. It can do all sorts of positive things, to make sure that that development comes forward. There are local authorities that sit on their hands and say, “There is nothing we can do,” and moan that there are 400,000 planning consents out there: “Why don’t these nasty developers do anything?” What they need to do is work with the developer to ensure that those sites are brought forward and to try to find practical solutions.
That does not mean giving up all the planning obligations. Sometimes it merely means rephasing those obligations. A lot of obligations are put on as what we call pre-commencement conditions—things that need to happen before you are allowed even to build the first house. That has a very negative impact on cash flow for the developer. It means that the developer cannot take that risk, because they do not have the cash flow—the cash up front—because of problems, as Mr Smart says, with borrowing a lot of money up front on projected sales rate. All those things can help a developer make a site more viable. My suggestion to all the people who are telling you that there are 400,000 permissions out there is to go out and talk to their developers on a site-by-site basis so that they can come up with tailor-made solutions for each of those sites. I believe that will bear fruit.
Andrew Whitaker: I do, because it says to developers, “If you encounter a local authority that does not want to listen to your story and does not want to discuss the specific issues of your site, particularly relating to the affordable housing provision element, which is very expensive and frequently an up-front requirement of cost, here is an alternative route for you to take.” Where the local authority does not want to listen, it gives the developer an alternative route. Where the local authority believes that the developer will take that alternative route, it will become keener to talk to the developer.
Your assumption is about who the buyer and seller is. Is it in fact the case that developers are very eager to develop but are frustrated, or are they rather relaxed, because they do not have a stream of finance to support the development in the first place?
Andrew Whitaker: Developers and house builders, as their names suggest, develop and build houses. That is their core business, not land speculation. We make money out of building and selling houses, and that is what we are keen to do. We do not get planning consents just for the fun of it; they are very expensive, very time-consuming and a lot of hard work. When we get a planning permission, we are very keen to implement it, so we are very frustrated by a number of the barriers that we are facing.
I take the point about its not being about land values, but what would your view be on this being a temporary requirement predicated on changing land values? Would your view be that we should make a step down to reflect the poor market conditions and a step up when the market conditions get better, or do you want to cash the benefit?
Andrew Whitaker: In truth, the clause is of its time. There are many other ways that you might do it, but this is the proposal in front of us and it is effective and will bear the fruit that we want. Whether it will be time limited is to be decided. Being able to appeal elements of a section 106 agreement, particularly on affordable housing, is the right thing at any time. After all, if you have a condition on your planning consent, you are allowed to have it reassessed and to take that to the Secretary of State for consideration at any time after you have received that planning permission. The fact that section 106 is merely a legal agreement and therefore subject to different rules is an anomaly in the system that we should be sorting out.
What evidence have you got that section 106 agreements, apart from the affordable housing requirements, are actually leading to housing developments being stalled?
What about section 106 obligations, which are clearly to do with transport, education and a whole variety of other things, that have not been spent by local authorities within the time frame that they should have been spent and your members have just said, “Forget about them”? How much money is knocking around on that side?
David Orr: We do not collect that information. We hear about commuted sums in respect of affordable housing, and that the systems for ensuring that those commuted sums are spent for the purpose for which the sum was commuted are not robust. There is a case to be made for exploring that in more detail, but we do not have the mechanism to collect such detailed information.
Gavin Smart: Similarly, we do not have that evidence. As David says, part of the problem with this whole discussion is that it is actually hard to find the hard evidence that says, “This is the scale of the problem and this is why you need to address it.” You can hear quite a lot of assertion, but you will also hear other developers say, “Actually, section 106 is not the major problem for us at the moment. It is development finance, mortgage finance, the overall market conditions.”
Gavin Smart: It could be an indicator, but I think I said earlier that the Local Government Association suggests that 80% of local authorities are currently involved in proactively negotiating section 106s where they accept that they need to be adjusted. How much of a problem that actually is, I am not sure. It also strikes me that one could think about whether the clause needs to change to allow local authorities to say to a developer, “Come on, let’s get back to the table and work this out.” You would want a practical local authority to be able to say to a developer, “Let’s try and sort this out.”
David Orr: It would be ironic if it got as far as the Planning Inspectorate and it said, “You can manage a bit more affordable housing here.” Economic circumstances are going to change, are they not? It seems to me that the description that Andrew gave a short while ago of an ideal scenario in which the local planning authority is working with developers of whatever kind to try to achieve the ambition of getting the stuff built is the ideal outcome. That is absolutely the ideal outcome. Most of the mechanisms are in place to allow that to happen. If that completely stalls because of the intransigence of the local planning authority, the idea of there being the potential for an appeal to the Planning Inspectorate is a sensible proposition provided it is the whole package.
Andrew Whitaker: Your idea is an interesting one, but I think it is tied up in a much wider delivery issue, so one would like to measure whether the authority is delivering against its development plan, and whether it is meeting its housing requirement. How it does that might be through the renegotiating of section 106.
We have six minutes left with these witnesses. I have at least two, possibly three other Members who want to ask questions. I am hoping that we may be able to squeeze in one quick question from each, but it will require brief answers.
This is a technical question on David Orr’s point about what would happen if the Planning Inspectorate decided that more affordable housing might be justified. The Bill as drafted does not allow that. It says you cannot modify the obligation to make it more onerous. I have a concern about this, because I can see circumstances where, as part of a renegotiation, there would be an agreement to change the phasing. Different discounted cash flows would suggest that that might be more or less onerous, and there might not be clarity about something that everybody could agree: a rephasing of the obligation to make it more viable falling foul of this provision. Have you given any thought to that?
May I come back to clause 1? The question is largely prompted by Mr Whitaker’s conjuring up this vision of Ofplan going round auditing local authorities. Just to get clarity, do we think it is possible to develop objective criteria to judge whether or not a planning department is failing?
Andrew Whitaker: Were you delivering against your development plan, and were you doing it in a timely fashion? I think you have to have timeliness in there, but it is outcomes that we want to measure. We want local authorities to deliver what they say they are going to deliver, when they are going to deliver it.
Mr Whitaker, I am terribly taken by your description of developers really desperate to develop, but being held back by 106 agreements. If the 106 agreements are renegotiated directly with the inspector, would you think it reasonable that a condition is then applied, so that the housing development has to come forward within a reasonable period, say two years of that decision?
Andrew Whitaker: If you allowed that to happen, I do not think you would get many applications. You would get some, and some developers would say, “Yes, we can commit to that delivery regime,” but as you have heard from so many people, there are lots of things that happen along the way. Therefore to say, “I will commit to building this number of houses in this time period,” would, I think, cause some concern in the industry.
But would you accept that if the renegotiation is taking place because of unviability in a certain set of economic circumstances, and that the development does not come forward within that same set of economic circumstances, it was simply not reasonable to go through the test of viability in the first place?
Andrew Whitaker: I accept that. I think you are correct. It is how you go about doing it that causes problems. If I am getting you correctly, the idea would not be that you would merely put a one-year time limit on implementing that consent, but that you would try to seek control output on that site as well. I think that would cause the industry considerable concern. Not the first one. I think putting a short time limit on it and saying, “You either implement this consent within the next year or you have come back and renegotiate again,” is perfectly acceptable.
Yes you did. I will be quick. Obviously, the Bill is all about promoting growth and unlocking potential for development. Is there anything else that should be considered as part of the Bill that you, as representatives of the industry, would like to see included, but is not in it?
David Orr: My big plea is to go ahead absolutely as written here with the clause in relation to town and village greens. We have a recent example of a housing association that built 10 new homes, which were completed in March. All 10 of them were occupied in March and an application for village green status was launched in April. That is completely absurd. Vexatious claims like that, which are just designed to stop things happening, cause problems.
Andrew Whitaker: That is on information requirements. We would like to expand that somewhat to address the problems we have with the ever-expanding list of conditions that local authorities put on planning consents when they have already considered those elements as part of the planning application.
Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions of these three witnesses. On behalf of the Committee, I thank you all for coming along. We will now hear evidence from the Royal Institute of British Architects and Shelter.