Examination of Witnesses

Levelling-up and Regeneration Bill – in a Public Bill Committee at 3:56 pm on 23rd June 2022.

Alert me about debates like this

Gavin Smart and Kate Henderson gave evidence.

Photo of Peter Bone Peter Bone Conservative, Wellingborough 4:14 pm, 23rd June 2022

I have in front of me a gentleman and a lady. Would the lady like to introduce herself for the record?

Kate Henderson:

I am Kate Henderson, chief executive of the National Housing Federation. We are the voice of housing associations in England.

Gavin Smart:

My name is Gavin Smart. I am the chief executive of the Chartered Institute of Housing, which is the professional body for people working in housing in the UK.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

Thank you. We are going to take questions from members of the Committee, starting with the shadow Minister.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

Q May I start with the infrastructure levy? We touched on it with an earlier panel, and I will ask almost the same question that I put to witnesses earlier. The potential for local authorities to set multiple levies and threshold rates—no doubt by a cumbersome examination process with some of the issues around viability that already exist—strikes me as not too dissimilar from CIL, so I am trying to get from witnesses a sense of whether you think that is fair. If that is not a fair assessment, what clear advantages, if any, do you think the levy will provide for? How do you see it operating in practice on complex brownfield sites? Finally—and particularly importantly, given the thrust of the Bill—given the ability to vary rates, will the levy do much for levelling up? Will local authorities in areas with low land value not just set low levy rates that do not lead to much in the way of public gain?

Gavin Smart:

The levy is certainly similar to CIL, but I believe it is managed in a way that CIL is not. I share some of your concerns about the impact of the levy on lower-value sites. One of our concerns is that we are currently struggling to deliver the housing that we need, particularly affordable housing and social rented housing. Whether a levy on a lower-value site will be able to deliver the resources needed to support the delivery of new homes for social rent is a significant concern.

The other issue that I would raise with respect to the levy is that we are very aware of the role that, historically, section 106 planning gain has played in the delivery of affordable housing and social rented housing. About half of affordable housing is delivered in that way. Although there are commitments from the Government that affordable housing delivery will be maintained, we are anxious to understand the detail of that, because section 106 has been such an important part of the delivery mechanism.

Kate Henderson:

Thank you for the opportunity to speak to the Committee today. We really support the Government’s ambition to address regional inequalities in our towns and cities’ economies through levelling up. It is also very good to see housing and planning as part of the Bill, but we share have concerns around the impact of planning reforms on the ability to deliver much-needed affordable housing.

When it comes to the infrastructure levy, we are really looking at four areas where we would like to have a bit more detail and some assurances. The first is the issue of protections for the delivery of affordable housing. The second is around the importance of on-site delivery of affordable housing. The third is around the risk to viability, and the fourth is that we would like to see an exemption from the levy for sites that are 100% affordable.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

We are going to carry on, but we are having a slight problem with your sound and picture, Kate. If it breaks down, we might turn the video off and just have your audio, but we will see.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

Q Kate, may I pick you up on the first point you raised: the potential impact of the levy on affordable housing supply? In responding to the publication of the Bill, the NHF stated on your website—I hope I have got this right—that it was pleased that the Government had written into the Bill a mechanism

“to ensure affordable housing levels will be maintained, with current levels as a minimum.”

Correct me if I am wrong, but I assume that you were referring to proposed new section 204G of the Planning Act 2008, which is discussed in schedule 11. I wanted to probe why you think the language in that clause, or anything else the Government have said in relation to the Bill, is anywhere near robust enough to guarantee the maintenance of current affordable housing levels. I read the language, which is

“must have regard…to the desirability of ensuring” as quite weak in terms of ensuring that we see that affordable supply of housing come forward.

Kate Henderson:

My starting point is that we really welcome the Government’s commitment to ensuring that as much affordable housing will be delivered. As Gavin Smart mentioned, at the moment section 106 planning obligations deliver around 50% of all affordable housing in England. It is vital that what replaces it delivers, ideally more, but at least as much. We are pleased that there is that reference in schedule 11, in proposed new section 204G, around having a mechanism to ensure that affordable housing levels will be maintained at current levels, but what we would like is a greater commitment and assurances from the Committee and ideally in the legislation about what we mean by current levels of affordable housing delivery.

There is a risk that in some areas minimum affordable housing requirements, which should be based on objectively assessed need, are actually being delivered by what is coming through the planning system now, and that is not enough in some areas and we do not want that under-delivery to be baked in. We would really like clarity from Ministers that, to protect affordable housing delivery, current levels will be based on current targets for affordable housing, which should be based on objectively assessed need.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

Q That is really helpful, thank you. It seems—how do I phrase this?—that it is not entirely explicit on the face of the Bill, but we have got a sense from what Ministers have said on this on previous occasions and what they are saying generally that they see a continued use for section 106 on certain sites. Do you think the Bill is an opportunity to reform and strengthen the operation of section 106 agreements? If so, how might the legislation be amended to that end?

Kate Henderson:

I think the Bill suggests that section 106 agreements will be retained for larger sites. I do not think we have necessarily determined the size of those sites yet and potentially that will come through in secondary legislation.

What we are learning from section 106 is that there are some really important considerations. We have been having positive conversations with the Government about this, particularly around the delivery of on-site affordable housing. The Government are bringing forward a new infrastructure levy. That levy has got to ensure that we get inclusive, mixed communities—that we get the integration of different housing types and different tenures, and that they are built to good, high standards. We know that mixed communities are far more successful than exclusively, for example, poor ones. We want to have the affordable housing integrated in.

That is one of the really important lessons from section 106—when it works well, you get an integration of your housing all on site and you get other good on-site infrastructure delivered at the right time as well. That helps with public acceptance of development, particularly at scale.

I think we would want to see in the design of the new levy that early engagement with housing associations is there absolutely at the outset and that on-site delivery is considered the default position when it comes to significant sites. We would really like to ensure that local authority use of contributions for purposes other than affordable housing would have to come after the agreed level of delivery of affordable housing on site.

Gavin Smart:

I strongly agree with Kate, particularly around needing to be sure that we are not baking in low levels of performance on the delivery of affordable housing. We need to be sure that the expectation of the continuation of delivery of affordable housing is at a sensible level, supported by some sort of assessment of need. Like Kate and anybody involved in the delivery of affordable and social housing, we are acutely aware that the key benefit of section 106 has been the delivery of on-site in-kind provision that delivers the mixed communities that we all know work. It actually helps a scheme’s viability, because it means that developers know a proportion of the scheme they are developing will be sold immediately on completion to a landlord who will immediately fill it with tenants. That helps with speed of completion at the site.

The most important point is that levies do many things, but what they do not do is give you actual physical buildings; they give you an amount of money. If you are struggling to find a site to deploy that money, they do not perform in the same way as section 106 reforms. So we have concerns about the levy and that is why we welcome the fact that, although what we mean by larger sites is not yet defined, the Government are signalling that they want to retain section 106 for larger sites. That is important. I think it will help delivery and help to build mixed communities.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

Q Final question. Assuming the Government do not fall in the coming months, and the Bill becomes law and is implemented, you know that the infrastructure levy will be rolled out—the Minister has made much of this—on a test and learn basis. What is your understanding of how that will work and progress? Do you foresee any challenges once the Bill has come into force, where that infrastructure levy is not operating around how the new provisions in the Bill interact with the existing system as we transition towards the levy?

Gavin Smart:

First of all, there is more flexibility in setting the levy than we previously expected. That is welcome because we want local authorities to be able to respond to the facts on the ground. However, like many public policy problems this is a matter of trade-offs. You do not want such complexity in the system that we are down to negotiating levies on individual sites, so it is about getting the balance right.

More important, something that I think is a bugbear of every attempt at planning reform is that, although we all believe that no planning system is perfect so it is always worth looking at how you can improve it, the other issue with planning policies is whether they are properly resourced enough to enable the local authorities that are operating them from London. Certainly, we have a concern that it might prove challenging for local authorities to be able to manage the complexity of negotiating a large number of different levies in different places. We know that elsewhere in the planning system local authorities can be outgunned by the development industry in terms of capacity. That remains a concern, because we think that overall capacity in local authority planning is stretched.

Kate Henderson:

We think the test and learn approach is really to be welcomed. Alongside that, obviously we would want to see a transitional approach. Test and learn is particularly important when we are looking at viability and the delivery of much-needed affordable housing. It is really important, given that development and land values vary greatly from site to site and place to place, that we get the levy set at the right level to ensure viability, to ensure delivery, and to ensure we are creating great communities that include much-needed affordable housing. We have advocated a test and learn approach and it is really positive that the Government are looking at that. We would want to be a part of that approach to make sure we are able to get affordable housing, and that we have the good working relationships between local authorities, developers and housing associations on-site working with the community—

Photo of Peter Bone Peter Bone Conservative, Wellingborough

We are having slight problems with the sound. We will just give it a second. Do you want to carry on?

Kate Henderson:

I was just saying that we are very, very keen that, as test and learn is rolled out, housing associations, working with councils and developers, are part of that programme, so we ensure we set the levies at a level that enables the delivery of great places with high-quality affordable housing on site in mixed communities. Doing that in a phased way to make sure it is working, while retaining parts of the old system as this is transitioned out, sounds like a sensible, pragmatic way forward.

Photo of Stuart Andrew Stuart Andrew Assistant Whip, Minister of State (Minister for Housing)

Q I thank you both for your time this afternoon. We know that protracted section 106 negotiations can sometimes result in a reduction in the amount of affordable housing from what was originally intended to be delivered. We are introducing the right to require, so we can get as much, if not almost all, of our ambition to achieve that. Are there any specific points you would like us to look at as we develop that side of the policy? More broadly, how do you see the proposals on access to information on land helping housing associations to look at opportunities to deliver more affordable housing?

Kate Henderson:

Taking the second part first, transparency on land ownership is hugely welcome, as are the clauses in part 7 on compulsory purchase. I know this is not the same thing, but they are interlinked. Being able to access land at the right price to capture that land value is a really important mechanism for ensuring that we are able to deliver affordable housing. The best section 106 agreements do that because they understand the infrastructure need in a local area and those policies are in the local plan, so that when you go in for your planning application it is all costed in. I think the main principle of the infrastructure levy is that the cost of the levy is costed in so it can be factored into the price, which factors into what you are willing to pay for the land.

Land transparency is welcome, as is part 7 on compulsory purchase, regeneration and the enhanced role of Homes England, not just as a housing agency but as an agency involved in regeneration and place making.

Gavin Smart:

I support much of what Kate says. I do not want to repeat her, but I have a couple of observations. Some of this is about the creation of a new planning system and some of it is about the resourcing of local authorities. Some of what characterises good section 106 negotiations is the ability to negotiate effectively. It is quite hard to design either a section 106 or a levy system in which developers may not come back, either legitimately or less legitimately, to argue that the situation has changed and needs to be looked at again. We have to accept that as a fact of life in these negotiations. It is not done until it is done.

I agree with Kate that land transparency is very helpful. Considering whether compensation needs to be paid in quite the same way as it has until now, and addressing hope value, is a very sensible proposition that we would support.

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Digital, Culture, Media and Sport)

Q In areas of high land value, how do we bring forward sites that are not built just for investment—Airbnb, asset homes and second homes—but are built to meet local need? What measures would you add to the Bill?

Gavin Smart:

I do not know about adding measures to the Bill, but it is about the quality of local plans and the quality of local decision making. Going back to Kate’s point, it is about making sure we are operating on an objective assessment of need. We need to be sure that in our plans we are delivering the housing that is required for the whole community, rather than simply housing that can make the best return. In that sense, the planning system is something of an intervention to prevent what one might describe as a kind of market failure, which is that the housing market will not deliver the housing we need without being provided with a degree of direction. It is as much about what happens in implementation as what is actually in the Bill and the quality and strength of local plan-making behaviour.

Kate Henderson:

There are already tools in the planning toolbox that enable local authorities to deliver different types of development that are right for their area. One example is rural exemption sites. I know your constituency is in York, so you are not necessarily rural, but our rural areas often have high land values and pressing affordability issues. The rural exemption policy enables affordable housing to be developed in perpetuity. A local landowner might be more likely to put forward a piece of land for affordable housing if they know it is going to stay in the community, for the community, so there are policies such as those that can be used. I agree with Gavin: it is really important that the local authority has a good evidence base of what is actually needed, so that when it is making decisions on schemes coming forward, there is an opportunity to argue for the social mix that it wants to see, including affordable housing.

I also think there is a role for different actors in the housing market: who is actually coming forward with proposals? What is the role of Homes England in terms of its land assembly role and its partnership role with local authorities, and how do we get HE more in the mix in its place-making role, as well?

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Digital, Culture, Media and Sport)

Q How do we ensure the viability of a site for development? Are measures just too short term, and should we be looking longer term? Is there anything we can put in the Bill to ensure we do that, to get the right kind of housing into the future? I am particularly cognisant of the comment made about maintaining the target of housing developed, as opposed to looking at what is actually needed within a particular community, the type of affordability or social housing.

Kate Henderson:

That is a great point: the point about how we define current levels is vitally important. The commitment to deliver and protect housing delivery at current levels should reflect objectively assessed housing need for affordable housing, so having that in the Bill would be hugely welcome, ensuring that we enshrine that protection for the delivery of affordable housing.

On the practicalities of viability, this is not about legislation; there is a really important resource point. Local authorities need to have the skills around the table that put them on an equal footing with the private sector when they come in and negotiate on viability, which has been a real challenge for overstretched, under-resourced local authorities in some parts of the country. They have not been able to have an equal footing in those negotiations on viability. That is not about the legislation piece, but about how we upskill and empower local government to make sure they are getting the best possible deal for the community.

Gavin Smart:

Without wishing to repeat myself, I support what Kate said. When working up an objective assessment, need is a very important place to start from, because it gives robustness to local planning. I have made the point about local authority capacity already, but Kate is right that they need to be able to compete on an equal footing with the developers they are negotiating with. That is where the really hard discussions about scheme viability take place, and you want local authorities to be approaching that with the same skillset, the same ability and the same resource, because if they are not, it is not an even playing field. Many developers are very socially responsible, but those who choose not to be can use the viability assessment process to drive affordable housing out of new housing schemes, which is not something that we would want to see.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

Q Witnesses, you have been very good and very kind and answered all the questions; now it is your chance, just before we finish. The Members around this table will deal with line-by-line consideration of the Bill next week, which will in due course become an Act of Parliament. I will start with you, Kate: what is the one thing they should do, and what is the one thing they should not do?

Kate Henderson:

The thing that would be fantastic would be to have real protection for affordable housing delivery on the face of the Bill, defining what current levels are. If I am allowed, rather than saying something that they should not do, I am going to ask for a second, which would be exemption from the levy for 100% affordable housing schemes.

Gavin Smart:

I am going to copy Kate: it would be invaluable if we very specifically defined the affordable housing levels that we expected to see. At the moment, we do not have a definition of what we mean by affordable housing, so it would be extremely helpful to have that in the Bill. I would back Kate on exempting affordable housing from the levy, because that would enable us to deliver more of it. That would be useful, because we are running well short of the levels of social and affordable housing that we currently need. In fact, we are losing homes at a rate.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

Thank you very much. You have been excellent witnesses. We will move on to our eighth panel, who will appear not on screen but in front of us.