Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Memoranda

Memorandum by Professor ADH Crook[10], Ms S Monk[11] & Professor CME Whitehead[12] (HOU 19)


  Our memorandum concentrates on the planning aspects of the issues identified in the Committee's call for evidence: how planning gain helps in producing affordable housing; what are the outputs and outcomes; what are the problems experienced in negotiating contributions from developers. Our evidence covers the following:

    —  the amounts of affordable housing produced in both urban and rural areas (as well as regional variations) and the extent to which this is additional;

    —  the evidence to date as to how the costs of producing this housing are shared between landowners, developers, and purchasers of market housing and between tenants of affordable rented and low cost market housing, and taxpayers;

    —  the processes involved in negotiating contributions from developer, including the negotiation of S106 agreements; and

    —  the extent to which the government's proposed introduction of a standardised tariff system is likely increase or decrease amounts produced.


    —  HIP returns are inaccurate and may overstate total output.

    —  There is a north-south split in numbers secured and in tenure.

    —  Most s106 homes involve SHG.

    —  Developer contributions for affordable housing compete with other planning gain.

    —  Very little affordable housing is produced through RES.

    —  Negotiations are long and complex and as a result developers are often able to manipulate the system to their advantage.


  The gap between the need for new affordable dwellings and the numbers of new social rented and other low cost dwellings being produced by registered social landlords (RSLs) and by other providers has led to attempts to get the private sector to meet the gap. In effect, developers and landowners are being asked to fund at least a part of the shortfall in social housing.

  Government endorsement of this began in 1979 with the rural exceptions policy, enabling rural planning authorities to grant planning consent on sites that would not otherwise have received permission, provided that affordable housing was produced on it. The approach was more widely sanctioned in 1981 and subsequently in all Planning Policy Guidance notes on housing (PPG3) issued since then.

  Developers could meet their obligations in three ways. First, by providing affordable housing as part of sites where the private development is to take place. Second, on other sites, or third, by making a financial contribution to the planning authority (commuted payment) who will then finance the provision on another site, usually by a RSL. In 1998, the policy was slightly amended, linking it more closely with the Government's policies on social inclusion and urban renaissance. Off site provision was seen to conflict with the policy to create mixed and balanced communities and was therefore to be a last resort. At the same time preference was to be given to achieving residential developments on brown-field sites to maximise the regeneration of inner city areas. Both of these new emphases potentially ran counter to the use of planning gain to provide affordable housing since it reduced the development values available for cross subsidy.

  In the 2000 version of PPG3, the Government made it clear that developers' unwillingness to make contributions to affordable housing would be an appropriate reason, of itself, to refuse planning permission. In the 2001 Green Paper on reform of the planning system and its daughter consultation document on planning obligations, the Government proposed to replace negotiated contributions by standard authority-wide financial tariffs (including calculating these as proportions of development values). These make even more explicit than previous policy statements that the affordable housing policy is a form of betterment tax on development value to pay for community investment and services, rather than a charge to reflect the costs and benefits of planning permission.


  The Government collects information on the numbers of new affordable dwellings produced through the planning system in England by means of annual questionnaires to housing authorities as part of the Housing Investment Programme (HIP). In 1998-99, 14,000 dwellings were stated to have been "secured" by planning gain, while 15,500 were approved in 1999-2000. In addition, 93 and 95 hectares of land were transferred and £43 million and £35 million of commuted payments were made in each year respectively.

  London and the South East account for large proportions—approximately half the dwellings secured/approved and land transferred, and over 60 per cent of the commuted payments. Much smaller proportions are found in the northern regions, than their share of total households. This reflects the relative distribution of need between the "south" and the "north"; it reflects far more the more buoyant private housing market and the higher land values that prevail in the southern regions. Higher land and house prices are necessary to generate the development values required to subsidise the production of new affordable homes through planning gain. The data also show that very few homes were secured through rural exceptions schemes (RES): only 2,100 over the two years 1998-99 and 1999-2000.

  Our analysis suggests that the HIP returns are certainly inaccurate and may overstate the numbers of dwellings. When we compared the returns in each of our case study authorities with the files on S106 agreements, we found a lot of inconsistency. In particular, it seems that the returns from some local authorities include new affordable homes given planning permission and secured outside the planning gain mechanism. Equally, amounts included each year include both new approvals and completions: ie double counting.

  Our postal survey showed that on sites where affordable contributions were negotiated, an average of 17 per cent of dwellings were affordable, ranging from a high of 27 per cent in the South East to a low of 11 per cent in the North East. However, this does not give an indication of the total percentage of new dwellings being produced that are affordable as the sites in the analysis exclude those where no contribution has been negotiated and where 100 per cent of the dwellings are either open market or affordable houses. Comparable local authority-wide figures are still probably under 10 per cent in areas outside London and the South East.

  The amounts secured do not relate clearly to levels of need. A key constraint is the amount of land coming forward on which applications are submitted for private market housing. In areas of high planning constraints, including those with Green Belts, and, often, high need, the amounts are sometimes very low. Moreover what is available can be on sites below threshold where it is extremely problematic to negotiate contributions. We also found no evidence of permission be given for housing on a site where it would otherwise have been refused but for the opportunity the site gave for securing affordable housing. In urban authorities where brown-field sites were available, costs of re-mediation often limited the contributions that could be sought. In some areas local authorities do not expect to be able to achieve affordable housing on brownfield sites.

  As well as "north-south" split in the numbers secured there is a similar regional split in tenure. Both the HIP data, the data from our postal questionnaire, and from our case study authorities and sites show that social rented dwellings dominate what has been secured in London, the South East and South West. Shared ownership is significant in the Midlands and northern regions. Discounted market units have been secured in the regions with low house prices. In other regions average house prices are in general too high for a discount to bring them within reach of those in need of affordable homes.

  Many sites included more than one affordable "tenure". We found variations in the way that the market and affordable homes are mixed on sites, with "pepper-potting" more common in northern than in southern regions. On 26 of the 32 completed sites we were able to examine in detail, the affordable and market housing was separated. Separation was thought to make the provision of communal areas and the setting of service charges easier and also to ease building, marketing and management. Developers argued that on site provision of affordable homes impacted on the prices of market houses. Hence, as well as having to fund the affordable homes, they also lost profits on the market houses.


  The affordable homes secured through the planning gain system will only be additional to the extent that less social housing grant (SHG) is needed. In other words developers' contributions offset the need for SHG in whole or in part, including cases of expensive schemes where these contributions bring schemes within acceptable cost limits and where the scheme is justified, despite its cost, as it achieves other objectives.

  Most s106 homes involve SHG. The HIP data show that 72 per cent of homes were funded with SHG or local authority SHG (LASHG). There was also a regional pattern: 43 per cent in the North was without SHG, compared with 26 per cent in the Midlands and 21 per cent in the South.

  The fact that SHG is apparently so widespread in its application to S106 sites means that its availability is crucial to the success of the policy, as it is currently operated. We found a number of instances where progress had been stalled because of a lack of SHG, often in the case of RES sites. By contrast we also found other examples where funding is available, but there were insufficient sites.

  The apparent widespread use of SHG revealed in our case studies of 40 planning authorities suggests that using planning gain to secure affordable housing is not adding significantly to the total supply of affordable homes, although it may be changing its location and also creating more sites with a mixture of affordable and market housing. Its effect on total supply overall is probably negative because of negotiations costs etc. But in some areas the potential to achieve affordable housing may make it easier to obtain planning permission. The more detailed examination of 64 sites where S106 agreements had been signed confirmed this general conclusion. Of the 43 sites where there was evidence about the availability of SHG, 33 had secured SHG. Where SHG was not used, the majority of the dwellings on sites with social rented homes were in shared ownership. There was also a clear "north-south" split in the use of SHG. Most of the sites in the south have SHG, compared with only a minority in the north.


  Our postal questionnaire revealed that a large majority (84 per cent) of planning authorities has planning policies for affordable housing in place. Those that do not tend to be older mining and manufacturing areas in northern regions where the need for new affordable homes is low. Almost all (97 per cent) seek to negotiate affordable homes on 'windfall' sites. The vast majority (98 per cent) of rural authorities have RES policies. So too do many urban authorities, especially those with significant rural fringes.

  Most authorities justify their policies through specially commissioned housing needs studies, and most of our 40 case study authorities had done so between 1996 and 1998. These surveys are often updated using local authority housing waiting lists. There was however little consistency in planning authorities' needs definitions nor in how defined need was measured. There was also a wide variation in what would be acceptable as affordable housing: some will only accept social rented housing (especially in the "south"), others will accept a much wider range, especially in the "north" and on regeneration sites.

  Our evidence from the 64 sites where agreements had been signed suggests that targets tended to be achieved. Where not, this was because of the costs associated with redevelopment, the fact that some agreements predated current policy, and the competition from other planning obligations, such as contributions to additional school places (see below). The highest percentage contributions are associated with availability of SHG.

  Most authorities accept the site thresholds set out in the 1998 DTLR circular (exceptions being rural authorities and those relying on brown-field sites where small sites tend to predominate). Targets on these sites tends to vary according to the intensity of local need and range from as low as 10 per cent right up to 40 per cent, with 30 per cent being the modal proportion. Few authorities had site specific targets; most specify a target for all sites.

  Local councillors are in general supportive of using the planning system to secure affordable housing. However we did find instances where land was not allocated nor given permission despite the existence of demonstrated need, hence limiting what could be negotiated.

  Planning authorities face a wide range of problems when negotiating contributions. On the basis of the postal survey the key problems are:

lack of clarity in policy framework set by central government
resistance by developers to creating mixed communities on single sites
difficulty of judging what developers can afford to contribute
problems of defining what is "affordable"
lack of land coming forward
inadequate amounts of SHG coming forward

  Rural authorities are more concerned about SHG availability, whilst urban ones about the problems of securing tenure mix on sites. Planning authorities in pressure areas gave a higher rating to the insufficiency of land coming forward on which contributions could be negotiated.

  Affordable housing is not by any means the sole contribution planning authorities attempt to negotiate with developers. Other matters include transport infrastructure, open space, community facilities, and additional school places. On residential sites, however, affordable housing appears to be the most important obligation required.

  Our evidence suggests that negotiations are slow and cumbersome and can involve many 'actors' within planning authorities as well as outside. We have found three models. In the first the planning departments handles almost all, involving the housing department only in the mechanics of provision rather than amounts. In the second, most common approach, both departments are involved, with one in the lead. The third approach involves a negotiating team comprising all relevant departments, including legal sections.

  Planning authorities also vary in how flexible they are. The degree of flexibility depends on the tested robustness of policies (as revealed by appeals in the past) and on market conditions. We found three approaches here. In the first approach, typically of high need authorities, targets are set and authorities are intransigent, being prepared to refuse permission. The second is the most common with authorities starting negotiating on their target but usually ending up with somewhat less. Third, in low demand areas, planning authorities ask for little or nothing and will not negotiate hard to achieve a contribution as they are usually more concerned to ensure that some form of development occurs and so are willing to accept this may come at a price of having no affordable housing. Our evidence suggests that most authorities find that developers are no longer as hostile to the principle of contributions as thy once were, but are keen to negotiate hard on the detail.

  However negotiations are too long and complex. The main problems include:

    —  tensions within local authorities, especially between planning and housing departments over the amounts of affordable housing to be secured;

    —  insufficient expertise to conduct negotiations with private developers about what level of contributions can be afforded on specific sites;

    —  conflicts within authorities (and between district and county authorities) about the balance between affordable housing and other types of contribution;

    —  developers' exploiting inconsistencies between neighbouring authorities with very different policies; a gap in sub-regional strategies was evident;

    —  RES negotiations tend to be very protracted; funding is not the main problem, but the time taken to locate and process appropriate sites tends to be lengthy, including getting local residents to back schemes.


  RES policies are fairly similar throughout England. They tend to specify small-scale development within or on the edge of settlements. Occupancy restrictions are standard. Rural authorities are more concerned by a lack of SHG. Rural councillors were particularly keen to see evidence of need arising within the parishes where sites had been identified.


  The Government has recently proposed replacing obligations with standardised tariffs. It hopes this will bring greater certainty. At the moment policy success depends upon planning authorities and developers negotiating contributions in relation to the circumstances of individual sites, but within an overall policy framework that sets out needs and the overall targets required. The proposed policy shifts the emphasis from site specific negotiations to the setting of standard tariffs for each local authority, with departures permitted depending on individual site circumstances. The tariff "income" can then be used for a wide variety of purposes within the local authority (of which affordable housing will be only one), including the potential to "export" it to another authority so that the need may met in an alternative location.

  Some of the proposals are to be welcomed, including the proposal to include small sites and non-residential sites within the scope of policy. There are however, some difficulties that can be anticipated:

    —  a standard tariff ignores the big variations between sites in what can be achieved; this might mean that fewer affordable homes will be secured;

    —  the certainty may prove to be illusory; it is likely that site specific negotiations will continue on many sites, especially if provision is to be on-site; and

    —  negotiations within the authority about the proportion of the tariff income that will go to affordable housing;


  The policy was last changed in 1996. There is some evidence hat it is now "bedding" down. Our evidence shows that planning authorities do tend to achieve their targets on sites where planning gain has been negotiated. And RES sites do succeed after lengthy negotiations although not in producing large amounts of housing.

  This however does not mean that there is no case for some reform. This is because:

    —  the amounts produced are small in relation to need—and by no means all are additional;

    —  the limited supply of land for market housing of above threshold sizes in the high pressure areas is a key factor inhibiting more success; and

    —  the time consuming and difficult nature of negotiations also inhibits success; there are problems of consistency within authorities and between neighbouring authorities with the same market conditions.

  Introducing standardised tariffs will not address these issues, except at the margin, especially as negotiations are likely to be crucial under a tariff as well as improved existing approach.


  Our evidence is largely drawn from a major research study of the impact of the planning system on the production of affordable housing. This is being undertaken by a joint team at the Universities of Cambridge and Sheffield and we gratefully acknowledge the contribution to the research of our colleagues (and former colleagues) Mr. Alastair Jackson, Ms Jenny Curry, Dr Steven Rowley, and Ms Kerry Smith. The project is co-funded by the Joseph Rowntree Foundation, The Housing Corporation, the Countryside Agency, the RTPI, and the RICS. The evidence comes from a postal survey of a representative sample of English planning authorities, case studies of policy and practice in 40 authorities, detailed site-specific information on 64 representative sites with S106 agreements in 17 of these that had been signed between 1998 and 2000, and focus groups with key "players" at the regional level of both government and private sector organisations.

10   Professor Tony Crook is Pro-Vice Chancellor & Professor of Town & Regional Planning at The University of Sheffield. Back

11   Ms Sarah Monk is Deputy Director of the Centre for Housing & Planning Research (CHPR), Department of Land Economy, at The University of Cambridge. Back

12   Professor Christine Whitehead is Professor of Housing, Department of Economics at the London School of Economics and also Director of the CHPR, University of Cambridge. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 22 October 2002