Could you begin by telling us whether you are broadly in favour of the provisions in the Bill, and whether you think that designating some local planning authorities as failing is likely to produce more growth or not?
Toby Lloyd: Broadly, I do not think Shelter would want to get too heavily involved in a lot of the planning aspects of the Bill, particularly questions about centralism versus localism, because that is an enormous debate that will run and run. We would prefer to restrict our comments and involvement to the elements relating to affordable housing, particularly around clause 5.
Ruth Reed: The RIBA is concerned about the impact on the presumption that we will have local consultation in with planning, and that there will be community buy-in and acceptance of proposals. We are a strong supporter of the NPPF, as well as of the Localism Act 2011, on the basis that it sets out to engage communities. We are concerned that non-performance may be due to obstructiveness, but it could be due to lack of resources. In fact, if you look at the underperforming authorities in the evidence from the House of Commons Library you can see that some are clearly suffering from lack of resources, rather than from a desire to be obstructive because of rejection of development within their boundaries.
As Mr Lloyd is not answering questions on this section, I will stick with you, Mrs Reed. Would you characterise clause 1 as an essentially anti-localism measure?
Ruth Reed: I have to be somewhat measured. There is concern that the provision would deny some people the opportunity to comment on an application through the democratic process. It is not clear in the Bill what the process would be for third-party representation to PINS when it was considering an application.
We heard from the Minister this morning about the criteria for authorities to be designated as failing. Do you have any comments on the sort of criteria that should be taken into consideration for such designation, or do you think it is totally unhelpful?
Ruth Reed: In arriving at any metrics for underperformance, you should also take into account the reasons for lack of performance, so you might measure timeliness of making decisions on planning applications, and you might decide whether they were making decisions against their own local plan. There are ways that you might measure it, but you could not do that without looking at why the local authority felt that it needed to underperform in that way.
That was quick. Mr Lloyd, with regard to section 106 agreements, what impact do you think clause 5 will have on the availability of affordable housing and homelessness?
Toby Lloyd: It is hard to be absolutely confident in predicting the future, inevitably, but it is worth saying that the mixed funding model for affordable housing that evolved over the last 20 or 30 years was effectively based on three pillars of funding. They were the grant subsidy system provided by what is now the Homes and Communities Agency; the borrowing capacity of housing associations based on their rental income and balance sheets; and the cross-subsidy through section 106 planning obligations. I would just ask the Committee to consider how all three of those pillars are now faring, given that the capital subsidy grant was reduced by 60% in the emergency budget, given that benefit and regulatory regime changes have at least put something of a question mark over housing associations’ long-term ability to borrow in future, and, if we now start talking about undermining the ability of section 106 to provide cross-subsidy, given what that will do to the long-term ability of the affordable housing industry to supply affordable homes. There are real questions to be answered there.
How would an organisation such as yours try to kick-start some of the affordable housing approvals we have heard about that are not being built? We are hearing anecdotal evidence that they are perhaps stalled where a re-negotiation may get them moving. You heard the previous panel say that that is perhaps not entirely accurate, but what would Shelter suggest to try to get some of them moving along in the current economic climate?
Toby Lloyd: As you have heard, there are already plenty of opportunities to re-negotiate what are, let us not forget, privately agreed contractual agreements. They are not imposed commitments, they are private agreements between a planning authority and a developer. As you have already heard, plenty of local authorities are re-opening section 106 obligations where that is deemed appropriate, so I would question whether it requires legal change from on high to achieve something.
If we are talking about trying to get things moving quickly, which, after all, is the purpose of a growth and stimulus Bill, I am afraid I am reminded of the fact that we were here about two years ago talking about similar provisions in the Localism Act that have so far yet to show any fruit on the ground. We have yet to see any increase in house building since that time, so I would question first whether legislation is the right approach at all in this case, and I would definitely question whether it is a mechanism for getting rapid change in behaviour on the ground, or whether really we should be looking elsewhere for measures to kick-start development, especially for the permissions that do exist.
Turning to the issues of 106 obligations and so on, I want to run a view past you that several people would impart, which is that one of the problems with 106 obligations is that they propose a percentage of the dwellings to be built, but there is often silence on the quality, the number of bedrooms and the mix—family housing and such like as opposed to smaller social and affordable housing. Is it the quantity that matters to your organisation, the quality, or the mix?
Toby Lloyd: It is absolutely both, and I completely reject the suggestion that there is an absolute trade-off between quantity and quality. In fact, I am afraid we have often seen that the consequence of ramming through low-quality development is that not only do you end up having to pay the cost of knocking it down before very long, you build up local resentment towards low-quality development, and ultimately you do not even get quantity in the long run because you put people off development. So no, I do not see that there is a trade-off at all; you need both quality and quantity, and, in fact, you cannot have quantity without quality.
Some developers might say, for example, that they can build better quality social or affordable housing if the percentage is reduced from, say, 50% affordable housing on the site to 30% or 25%, or even 20%. Therefore you get better quality housing for sale and better quality affordable housing. Do you think that is fair?
Toby Lloyd: The reason section 106 agreements are on a case-by-case basis is precisely that every single application will vary, depending on the point of time and that particular site; so yes, I am sure there are absolutely cases like that out there, but whether it is appropriate for primary legislation to be imposing those sort of responses, from Parliament down to every local authority, I would definitely question. I think those are matters to be renegotiated on a case-by-case basis.
Toby Lloyd: There is always a problem with targets: too crude a measure can have perverse consequences, and that is true in every field. Certainly, having just a percentage of units is not a particularly sophisticated target. All the best planning authorities do not just demand a percentage of units, because obviously that incentivises smaller units, and so forth. Equally, bedrooms are not a particularly good measure, because unfortunately that just means we produce smaller housing with larger numbers of smaller bedrooms. There is clearly an issue about the metrics to be used, but again, I do not think that is something that is best dealt with here.
Toby Lloyd: There are two separate questions here. One is about the metrics that are used and the nature of section 106 agreements. There are good ones and bad ones and a well-negotiated one is a well-negotiated one, regardless of whether we are talking about five years ago or today. Some of those issues will perennially be with us and it is up to both sides of a negotiation to make sure that they are good agreements that make sense and deliver what they are meant to deliver.
There is then a secondary question about whether agreements agreed voluntarily at a certain point are no longer deemed to be viable. That is a much more questionable metric, because it is not always entirely clear what constitutes viability. I would certainly demand that, at the least, transparency is required here, because there seems to be a suspicion that viability is in the eye of the developer and is not often open to serious scrutiny, at least not in a transparent or public manner. If there is an argument that something has changed along the way that means that the agreement negotiated and entered into five years ago is no longer viable, it is the duty of the developer to demonstrate that and also, as was raised in the previous session, to ensure that adequate public compensation is received for that renegotiation.
Ruth Reed: We are concerned about the impact that it will have on the provision of affordable homes and we are also concerned that the root causes to do with the issue of affordable homes and private tenure, which are to do with size and general quality of design, will not be addressed by this; it will merely allow a renegotiation of percentage numbers of housing in any development. It is not addressing the root causes, which we believe are to do with the finance of development and not necessarily to do with planning. As a crude measure, it does not give the local authority or the inspectorate, even, the opportunity to require quality of development of the type, size capacity and design that is necessary.
Would you like to see measures included, either within the final legislation or regulations, subsequently, to require standards of quality? Is that your evidence to us?
Ruth Reed: Outside this Bill there are moves to look at the standards to do with housing, which could be an effective tool in ensuring that we deliver good housing across the country that meets the requirements of the private, mixed and the lease sector. It is not something that can be driven through 106 agreements, but it could be linked to quality standards elsewhere.
One problem that has been presented elsewhere—to the CLG Select Committee, for example—is that planning applications and consents granted in the past were for particular sizes of dwellings, for example, for two-bedroom properties, and there is a bigger requirement for family housing of three or four-bedroom houses now. Do you think that is a reason for renegotiating these 106 agreements?
Ruth Reed: Section 106 is linked to the percentage usually of the affordable homes on the development. It does not go so far as to dictate the dwelling size and type of all the developments. It is not strong enough usually to be able to go in and renegotiate the entire design, because then you would not have the same approval. You would have to reapply for the basic planning approval that you have got.
Mr Lloyd, you used the phrase “best planning authorities” in answer to Mr Blackman’s question, and Mrs Reed, you talked about the difficulties of looking at a list of the so-called performance of planning authorities. In clause 1, there is an attempt to say that there will be a definition of failing planning authorities. Is that a sensible thing to be trying to do?
It is not about that. It is about whether we can say that that is a good planning authority and that is a failing planning authority, and whether there are criteria that can be used to measure that.
Ruth Reed: Within my own professional life, I am aware that some local authorities perform better than others, but that will also depend on the issues at the time. It would have to be some kind of consistent measure over time. What concerns me is that this is to be brought in very rapidly, with a “at a particular point” definition of performing or not performing.
The issue that worries me most of all as a practitioner, outside of my role at the RIBA, is that at its best, the planning process is a consultative and iterative process in which, at pre-application stage and even during the application, you are in negotiation with the local authority about the issues that matter to them and make your scheme viable on behalf of your clients, the developer.
Anything that removes that process and takes a single application as it stands to PINS is denying that process to take part. I imagine that you would not pay for pre-application advice with the local authority if you were going to fast track your scheme to PINS.
May I ask both of you in turn what you feel are the attributes of a really good housing development? Secondly, what are the elements in this Bill that may contribute either positively or negatively in delivering that?
Ruth Reed: We have done some research through the Future Homes Commission, which has looked at what people want from development and, starting from what people want from their homes is a good basis on which to begin. Clearly, space and light are very important. Beyond that, community and the sense of place is highly important. Anything that moves from mixed tenure communities to mono-tenure is going to remove an element of community and possibly, in the rented sector, in the end lead to the history of which we are aware—estates with problems because of their mono-tenure. My colleagues asked whether there would be a problem with the private sector, and I said that you would just die of boredom. I am sure that I am not supposed to make jokes.
The other aspects of good design are to do with community buy-in and an appreciation that the development is part of or an addition to a thriving community. Those are important things to retain in the system.
Toby Lloyd: I would add that, obviously, as you would expect, for Shelter a good housing development must include a decent amount of affordable housing, whether for purchase or for rent, that is truly affordable to local people. As elected Members, you will know that is often what it takes in order to sell a planning application to your local communities in the first place. If we start stripping those out you start to undermine what are often already quite difficult levels of local support for new house building in the first place.
I completely endorse everything that Ruth said about the need for quality in house building, but speed is also required. One problem at the moment is that we build out so slowly. I was interested to hear Andrew in the last session say that if you gave him a 2,000-home permission tomorrow and renegotiated section 106, they still would not build it out for 20 years. I suggest that that might be a more fruitful avenue for investigating why is it that our development industry and the way our sector is set up deliver so slowly, even when planning obstacles have been overcome. We need to answer some of those questions before we can really say what makes a successful housing development.
The first criterion of success is that it has to be built. An unsuccessful place is one that remains half-built for decades to come because, bluntly, it is being built on the presumption that you can sell only one home every week and, therefore, you never build more than 50 in a year. On which model, by the way, large proportions of affordable housing are advantageous, because they are outwith that sales calculation which is the ultimate brake on private development.
I have one question for Mr Lloyd. The package of measures in the Bill was announced on the same day as a further £300 million subsidy for more affordable housing. You in your business have the luxury of picking out proposals that you like and perhaps not talking about the ones you do not like, or vice versa. In Government, of course, you are sometimes presented with packages of measures and you can take all of them or none. Faced with the choice of either a further £300 million in subsidy and the measures in the Bill, or having neither, I am interested to know which you would choose.
Toby Lloyd: In all honesty, I would have to choose neither, simply because the value of section 106 in terms of providing affordable housing over the decades is far greater than that £300 million. Of course, we did welcome the additional subsidy for affordable housing, as you would expect us to do. However, I worry that there are measures here that are presented as a short-term solution but will have lasting implications for decades.
May I probe a little on that? Do you understand that all that is proposed is that the Planning Inspectorate, in extreme cases where the local authority is not willing to renegotiate, will be able to conduct a negotiation in which it will have very strict tests of viability? Do you have reason to believe that the Planning Inspectorate will be less exacting on viability than any individual authority might be that was willing to renegotiate?
Toby Lloyd: My concern about the practicality in which this is worked out is that statute law is an extremely powerful thing in planning negotiation, most of which does not have the force of statute behind it. Most of it is guidance, case law and practice. This is a very powerful extra tool in the box for those who will want to negotiate down section 106 agreements.
I would put one hypothetical situation to you. If it is the case that a development is currently, as we heard before, “under water” in financial terms, yet the developer who owns that permission is not choosing to sell it and get out, that is presumably because they believe it will be profitable over a longer time period, say five, 10, 20 years. It does have long-term viability so it is a short-term problem. If you renegotiate that section 106 agreement such that the short-term viability is better, is it not still the case that the incentive will be the same to wait for another five, 10, 20 years, when the profit will be correspondingly higher?
I was interested to hear the Home Builders Federation rejecting any commitment that they must build out as a price of reducing their obligations. Unless there are very strict conditions on developers to ensure that they do build out, there is a real danger that even something that is only an in extremis power can be used significantly to reduce the long-term supply of affordable housing.
I would like to follow up on that point. In the previous sitting, it was stated that a condition could be applied that would run out perhaps in a year, so that development would have to be brought forward within a year or the whole thing would have to go back to the inspector again. I am asking you whether you think it would be useful to have the renegotiation time limited, and in fact the site would have to be brought forward for development or the whole thing would have to start again.
Toby Lloyd: It would be an absolute minimum requirement. However, in practice, remember that planning permissions, as they stand, in theory last only three years before they expire but we are talking here—by definition, almost—about agreements that were signed before the credit crunch, so I would question how much the expiration really works in practice. It is very easy to start a development and ensure that it will not actually be built out for another 20 years. There are practical problems about that, which is why you would need stronger teeth, ideally, to say not just that you must start but that you must actually deliver to an agreed schedule.
I would also suggest that if we do go down this route, it is reasonable to say that if obligations are reduced on the grounds that this is what is necessary for short-term viability—and if over the five years it takes you to build out, the market has turned and you end up making vast amounts of profit on the site—it is not unreasonable for there to be a clawback provision that says that in those circumstances, a commuted sum is paid to compensate the local authority for the lack of affordable housing, which was not provided in the first place. That requires honesty and transparency on the part of developers so that we know what the viability really looks like over the whole life of the scheme, not just at the moment when they are presenting saying, “I need to reduce my planning obligations.”
That is very helpful. We heard from the Minister this morning that once failing authorities have been put on this list, there will be a process of negotiation that could result in their being taken off it. I think that one measure that was going to be considered was local planning performance agreements, which might extend the time, but I am not completely sure. Is there anything that you would put into a list of things that authorities might like to use, for example if they are in a heritage area and they need to consult on whether they should have an archaeological dig or they need to get some additional information? That is just an example, and I wonder whether you have anything up your sleeve that you think should be thrown into the pot.
Can I put it to you, Ms Reed, that architects, including some in my constituency, are going mad because councils are rejecting things because they do not like the design of them even though planning officers had given indications about that? Housing associations sometimes reject houses that have been built because they are not quite on spec, and then they are re-presented to the private market. Is there not a case that sometimes local issues really do get in the way of houses and commercial buildings being built?
Ruth Reed: Local issues get in the way of development in all sectors, because the process is essentially a local political process. Local views will, therefore, always be heard more dominantly than perhaps those of the wider area or even national requirements. That process is always hindered by nimbyism, if you would call it that, but things might be uncovered during the consultation process that are worth considering. We have to be even-handed with the idea.
However, the major problems for us as a profession are in getting applications validated in the first place, disproportionate requirements for the information supporting applications, and often late requests for that information during the process of an application going through to committee. As I said earlier, I welcome the idea that there should be some review of what needs to support an application to make that a smoother process, but there are indeed frequent obstructions as people exert their democratic right to put in any objections made as they are asked and consulted on.
I do not know whether the figures that the Minister has include the numbers withdrawn by developers. Do you have any feeling from your members about how often that happens—essentially, how often they end up withdrawing rather than necessarily going through all the legal stages?
Ruth Reed: It would be possible to find that out, and I do not have the figure, but the biggest unquantified metric that you would want is how long it takes to get applications validated. That process is very difficult to appeal. You would have to be able to demonstrate at appeal that you had a valid application, and that the local authority failed to validate it and proceed in a timely manner. Without the benefit of a proper negotiation and discussion with the local authority, that puts you at a disadvantage. Very few developers would ever want to proceed with that.
The problems around non-validation that we hope to collect from our members are the one thing that they bring to us constantly: “We cannot get this application off the ground in terms of the planning process because the local authority hasn’t even put it into the system.” You cannot find out how many are obstructed in that way.
That is very interesting.
Mr Lloyd, I have two questions. I was shocked earlier in the year to find that one of my local housing associations had more than 100 empty homes, and was still trying to see what it could do to get more new build. What advice do you have on how we can factor that in?
On the other matter, there was an old hospital in my local area that was due to be converted into apartments—I was opposed to it at the time—and a deal was done whereby, effectively, there would be no affordable housing but a substantial amount of the money would go to providing a brand new, bigger health centre. That was a good deal for local residents.
Toby Lloyd: I am absolutely not going to comment on individual planning applications, because every case is different. I get journalists phoning me up all the time saying, “Will you express outrage at this application or that permission?” The truth of the matter is that they are always individual cases. Unless I know the detail, I could not possibly say whether that was a good deal or not, or whether it would have been better to insist on affordable housing. I honestly do not know.
Toby Lloyd: By dint of what I said—it is always case by case—it must follow that there are some cases in which that is true. In general, we always encourage more affordable housing, but I accept that, yes.
In terms of empty homes, of course. No one wants homes left empty, and we always support any measure that will help bring them back into use, but I am afraid that any amount of effort put into bringing empty homes back into use will not change the fundamental, urgent need to build far more new homes in this country. There are simply not enough empty homes out there to make a significant difference in the massive undersupply that we have seen for decades in this country of homes in all tenures and at all price points. Now is a critical moment for the Government not only to deliver economic growth but to start fixing some of the long-term, fundamental problems in our housing supply system. For decades we have been leaving hundreds of thousands of households behind in terms of the number of homes that we deliver.
I do not have anything more to add to Mr Lloyd. Coming back to Ms Reed, are your members finding more problems with housing projects or with commercial projects? Do you have a feel for that?
I have a question on a point of detail, prompted by Toby’s comment on the entirely sensible approach that, in some cases where viability may be in doubt, there could be a case for renegotiating, with perhaps less affordable housing at the start and then a profit share or overage agreement to provide more affordable housing later as the scheme becomes more viable. Again, as I read it, that suggestion would fall foul of the provision in clause 5(6)(c), and that probably ought to be looked at because one does not want to prevent artificially a sensible agreement that could have an element of providing more affordable housing over a longer period and, therefore, address the viability issue. However, as it is currently drafted, clause (5)(6)(c) would put a block on that.
Toby Lloyd: When I read this Bill, it raises the question, “Is this an attempt to fix a short-term economic conditions problem”—in which case it might be a bit of a sledgehammer to crack a nut—“or is it actually an attempt to ratchet down permanently the amount of affordable housing that is provided through section 106?” That is a genuine open question but I absolutely hope for reassurance that the latter is not the case, and we absolutely expect to hold the Government to their commitment that this Bill will produce more affordable housing and not less.
I wanted to go to the quality and quantity question, but I thought that I would put two points of evidence to Mr Lloyd before I did that. First, I think you suggested that it was the availability of social housing that made development attractive to local communities. I wish we lived in such an ideal world, but I have to report that with a large scheme in Stockport the petitions are coming in to say that people would give their consent provided there was no rented housing in the development. One needs to be careful about what evidence one calls into play.
The second thing that I wanted to say is that, bearing in mind that bringing empty homes back into use last year supplied about 20% of the new homes that were occupied, one should not mark down empty homes as an important factor in the housing stock.
However, if we talk about quality and quantity, I think that you both shied away from a realisation that if you have higher quality it will cost more and, therefore, for a given sum of money you will have fewer homes. I just wondered if you would like to tell us how you think that plays in section 106. Would you want the renegotiations that take place to say, “We’ll accept 40 houses rather than 50, but we want them to be of a higher standard”, or would you suggest that we should be looking to the Planning Inspectorate to say, “We want 60 homes rather than 50 and we’ll have them to a lower standard”?
Ruth Reed: I think it is a very simplistic view of the issue when the problem of the economics of housing is to do with the availability of private finance, because the provision of affordable homes is linked to the ability of the market to buy homes. I think it would be wrong to cast the idea that it would come down to a strict quality and quantity measure. I feel that any negotiation of numbers—either up or down—should require the properties to be of a good standard, if not an excellent standard, and that should be inherent in any planning negotiation for any tenure.
We have real issues with the quality of the homes that we build in this country and I think it is important that every opportunity is taken—including this ability to renegotiate section 106 agreements—to drive quality. The issue of the developer’s ability to fund the building of affordable homes within the mix should be addressed across the board for delivering quality across the board, so that if high quality is required for affordable it is also there in the private sector as well. Quality should not be on the negotiating table; it should be a given.
Toby Lloyd: I would absolutely agree with that. One consequence, economically, of its being a given is that it should be written into the land value and therefore should not be part of that viability calculation in the first place, because it should be priced in when the land is paid for.
On the points that you raised specifically about rented housing, I would say that affordable housing is often part of the appeal for local people. Unfortunately, large amounts of private housing are now bought by investors for private renting, so your local residents concerned about rented housing will not get what they want by losing affordable housing commitments—quite the opposite. They will see exactly the sort of short-term, high-churn rental accommodation that they are concerned about if you water down the affordable housing proportions. At least social housing and affordable housing for purchase are there for the long haul, unlike the private rented sector.
I would not, of course, want to disparage any attempts to bring empty homes back into use. We need all the housing that we can get from every source. However, I am afraid that if we are effectively getting 20% of our new homes from bringing empties back into use, that is testament to the woeful number of new homes we are building. It does not suggest to me that we can solve the housing problem by bringing empty houses back into use; it suggests only that we are nowhere near building enough new homes.
Can I take you a little further on the point about quality and quantity? We are talking in clause 1, and indeed in the whole Bill, about the contribution that the private construction sector can make to social and affordable housing, so it will inevitably be built off the profit margins that exist. There is a separate argument about subsidy, as you say, and about the work of housing associations. When we are talking about how best to use the surplus that exists in private sector development, we are talking about a fixed sum. Indeed, the starting point of this debate is that it is a shrinking sum; it has shrunk over the last three years. Whether we sustain the numbers or sustain the quality is not a trivial question, and I am interested in knowing where you think the balance should be struck.
Toby Lloyd: I absolutely accept that it is not a trivial point, and I am not trying to wriggle out of it in any way, but I really think that there is a serious question here about whether there is such a fixed sum. Development is not a zero sum game; it is a positive sum game. After all, developers engage in it because they quite rationally and reasonably seek to make a profit on their activities, so the question is the process by which they calculate the profit that they can make, and that is done through the residual land valuation method. That means that the costs that they expect to bear through development, including the cost of planning obligations, building regulations and everything else, are factored into the price that they pay for the land. If you lower those obligations, in the very short term you may improve the current viability of some sites, but in the medium term all you do is increase the land value for the benefit of existing landholders, who can increase the amount that they charge the developers. You do not get any more quality as a result; you simply lower the quality and increase the return to the landholder.
Toby Lloyd: My answer is to reject the suggestion that there is a fixed sum that has to be divided between quality and quantity, because unfortunately as soon as you get into that game, you end up with neither. You have to insist on both across the board, as Ruth said. Section 106 agreements do not say anything about quality; they are about the quantum of affordable housing. The quality arguments come elsewhere in the planning system and in the building regulation system, which, as Ruth said, are currently being reviewed. We welcome that process because while we are always in favour of strong support for quality across the board, I think there probably is work to be done to clarify and simplify some of the growing number of standards around building quality.