Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by the Chartered Institute of Housing (PGP 39)



  1.1  The CIH is pleased to make this submission to the Committee's Inquiry into the Planning Green Paper and, in particular, the new proposals relating to Planning Obligations. In this submission, we have concentrated on how the proposed reforms will affect the provision of affordable housing. We do, though, have views about other aspects of the proposals and this submission should be considered in conjunction with our response to the DTLR on the Planning Green Paper and consultation on Planning Obligations.


  2.1  We are starting from the premise that one of the stated objectives of moving to a new system is to "continue to support the objective of creating balanced and mixed communities to promote sustainable development and social inclusion" (para 4.21 of planning obligations paper). The Institute of Public Policy Research (IPPR) recently undertook an Inquiry into the Future of Social Housing, publishing its report Housing United in 2000. It suggested adopting a set of policy goals for a sustainable housing market. These are set out in an appendix to this paper. In making this submission, the CIH considers the concept of sustainability, as it relates to housing, to be broadly aligned to these policy goals.

  2.2  In many parts of the country, particularly London, the South East and many rural areas, achieving these objectives will require significantly higher levels of affordable housing than are currently being provided. The Government clearly recognises this problem with the setting up of the Affordable Housing Unit, and recent announcements by Lord Falconer regarding the negative effects that the lack of affordable housing has on labour markets and on communities. There is a general reluctance regarding affordable housing provision and the system needs to be strengthened to give a higher priority to meeting affordable housing needs. Our members have expressed concern that the planning system is failing communities badly in some parts of the country.


  3.1  The new system will have a number of consequences, some of which could be positive in relation to the provision of affordable housing and sustainable communities, and others that are, or could be, negative.

  3.2  Moving from a system of on-site provision to one in which a tariff charge is made could be equated to removing a ring-fence. Under the current system, contributions in-kind ensure that a specific purpose for the contribution is realised, and affordable housing is often considered to be an appropriate contribution on sites being developed for housing. Under the proposed system, the contribution is a "liquid" contribution and this gives more freedom to commit the cash generated to a wide range of areas of expenditure in a less directly accountable fashion.

  3.3  CIH has considered the benefits and dangers of moving from an in-kind contribution to a liquid cash contribution and these are set out below. Our over-riding concern is that the level of affordable housing secured from planning obligations will fall significantly if the proposals are adopted as they stand, and that new developments will be less, rather than more, integrated in relation to house types and tenures. We put forward a number of recommendations for ways in which the positive features of the proposal can be retained, while the effect of the negative ones are minimised.


Increased transparency and clarity

  4.1  One of the major advantages to the new proposals is that, if properly managed, a pre-set schedule of tariffs will bring about greater clarity, transparency and certainty to developers and local authorities. This could reduce the need for negotiation that often turns out to be lengthy and frustrating for all parties. In developing the details of the proposals, the outcomes of increased clarity, transparency and certainty should be a high priority.

Increased level of contributions

  4.2  It is proposed that the new tariff will be applied to a wider range of sites, both commercial and residential. There is, therefore, the potential for the new proposal to result in an increased overall level of contributions for developments that will benefit the wider community, including affordable housing.

Removal of thresholds

  4.3  Under the current system, affordable housing policies can, in general, only be applied to developments above the threshold levels set out Circular 6/98. Typically this means sites of at least 25 units or one hectare, except in rural areas where the higher costs of development frequently restrict affordable housing provision in any case. The short-comings of this system are that very little affordable housing can be developed on small sites through planning obligations, even where the site finances would otherwise allow this to happen. It also discourages the development of sites that are just above the threshold levels, and encourages the practice of developing larger sites in tranches.

  4.4  The new system would enable authorities to make charges on all developments, commensurate with the size or cost of the development, and allow spending on developments of any size. This could potentially benefit rural areas and other areas where small sites are more usually available, although in reality the high costs of land may dissuade authorities from developing in these areas. It would also help to remove the perverse incentives from the system.


Potential for less affordable housing to be provided

  5.1  In many areas there is a lack of political (and in some cases public) support for affordable housing. Giving councils more flexibility in how the tariff is spent will almost certainly result in less, rather than more, affordable housing being developed at the local level, unless safeguards are put in place (see recommendations).

Reduced mixing and sustainability

  5.2  One of the advantages of on-site provision of affordable housing is that a degree of mixing is automatically achieved. The CIH has in the past been opposed to the use of commuted sums, apart from in exceptional circumstances, for the reason that it provides a means of evading the requirement to include affordable housing on sites developed for market housing. Developers largely favour this option that goes against the creation of mixed developments and sustainable communities.

  5.3  As it stands, the tariff proposal will strengthen developers' negotiating position for payment of a cash sum instead of on-site provision and would certainly provide a means to reduce integration of house types and tenures on new developments.

Leakage of tariff income

  5.4  A liquid contribution is more difficult to trace and the certainty of the outcomes is reduced. It is essential that this money is understood to be additional locally derived money, and that funding for main programmes is not reduced as a result. Clearer guidance on what constitutes a "legitimate purpose" for spending the tariff locally is required, to prevent leakage into main programmes that should be financed through other funding streams.


  6.1  The CIH is disappointed that there are no plans to revise the definition of affordable housing in relation to planning obligations.

  6.2  Many of our members are frustrated that they are unable to specify the type of affordable housing to be included on a site. The problem with the current definition is that market housing sold at lower than market costs cannot be differentiated from housing for rent or shared ownership, even though these fulfil different purposes in the housing market, and the former is not available to meet needs in perpetuity. Developers' preference is to provide this low-cost market housing as their on-site contribution, but this means it is not available to meet needs in the long term.

  6.3  As part of the process of developing their Local Housing Strategies, housing authorities are being required to undertake sophisticated analyses of the local housing markets operating in their areas, covering all tenures and the interactions between tenures. There are different types of affordable housing, including housing to rent, a variety of types of shared ownership and full ownership at low or discounted prices. Some housing associations are even experimenting with flexible tenure, in which the tenant can purchase their property by degrees, and can sell equity back to the association if they fall on hard times.

  6.4  The current definition of affordable housing for planning purposes does not allow specification of the different types of affordable housing. This means that there is no mechanism for translating increasingly sophisticated analyses of housing need into desired outcomes through planning obligations.


  7.1  The paper makes the suggestion to allow authorities to allocate sites specifically for affordable housing. Feedback from members suggests that the ability to allocate land solely for affordable housing where there is a demonstrated need would be a significant step to addressing the problem in high demand areas, especially in rural areas where the number of exceptions sites coming forward is diminishing. A mechanism for bringing forward such sites as and when the housing is required is also needed. We suggest that there could be a limit on the size of such sites to, say, 15 units.


  8.1  We have set out what we believe to be the implications associated with adopting the new proposals for planning obligations as well as the danger of neglecting the need to revise the definition of affordable housing. We believe that specific measures are needed to avoid those dangers, while retaining the advantages gained. These are set out below.

Presumption towards on-site provision

  8.2  The Government has undertaken to "...continue to encourage local authorities to seek on-site provision as a first choice" (para 4.21). CIH agrees with this, but believes that firmer arrangements are needed to ensure that higher levels of affordable housing and integrated housing developments are actually achieved as a result of the proposals.

  8.3  We suggest that where sites are being developed for housing, or for mixed use that includes housing, there should be a presumption that affordable housing will be provided on-site. Where local authorities can demonstrate either that better mixing would be achieved by providing the affordable housing elsewhere or that there are other specific community needs that are greater than the need for affordable housing, a cash contribution could be sought instead. These needs must be articulated in the Local Development Framework of a Local Action Plan.

  8.4  We accept that there are areas where there is a lower demand for affordable housing and a bigger need for other infrastructure and community benefits. Our suggestion would retain the flexibility to seek a cash contribution where greater needs can be demonstrated. Contributions of land would also be acceptable in certain circumstances.

  8.5  Coupled with this expectation, local authorities also need to have the power to require on-site provision of affordable housing as the developers' contribution. Leaving the matter to negotiation will certainly perpetuate the current scenario where negotiations are often protracted, that the proposals are intended to overcome.

  8.6  Where on-site provision is requested, the level of affordable housing and cost to the developer would be determined by equivalence with the pre-set tariff levels, so the benefits of greater financial certainty and transparency of the proposed new system would not be lost.

Realistic targets for affordable housing

  8.7  The paper suggests that the income generated through the tariff should be spent to support local objectives and priorities. This makes a lot of sense. It does, though, raise the question as to how these priorities will be decided and the mechanism for linking the spending of the tariff to them.

  8.8  Local authorities have been set a number of targets in recent years, in relation to Best Value, and through the national PSA targets. Spending in these areas is likely to take precedent when it comes to decisions over how the tariff is spent. It is, therefore, essential that realistic targets for affordable housing are set locally (in the LDF), based on regional and local assessments of housing need, as well as deliverability criteria such as funding and land capacity. The impact of generating inward employment and other economic strategies on housing requirements must be recognised. Unless targets are set, the need for affordable housing will be played down in areas where there is a lack of political support for affordable housing, to the detriment of the whole community.

Test for the Local Development Framework

  8.9  The Planning Green Paper sets out proposals to better engage communities in the planning process. Specifically it suggests that local authorities should be required to demonstrate that they have involved communities in drawing up the Local Development Framework. It is important that the effective involvement of people who are in housing need is embraced as arrangements develop.

  8.10  We agree that the Local Development Framework needs to be tested to ensure that it is fit for the purpose it is intended to meet. One of these tests should be whether the LDF and relevant Action Plans are together delivering the right amount of housing in the right place to meet needs, including for affordable housing.

Spending the tarfiff

  8.11  It is important that restrictions are put in place to prevent the tariff income being spent on revenue items and capital items that do not directly contribute to community sustainability. CIH suggests that guidance is required on the kind of purpose that would be considered to be "legitimate" for spending the tariff.


  8.12  Currently, monitoring of contributions made through planning obligations is quite patchy and not very accurate. Monitoring to establish spending patterns is essential if the right outcomes are to be achieved.

Affordable housing definition

  8.13  We suggest that authorities need to be able to specify types and ownership of housing on particular sites, where it supports mixed and balanced communities, and this should be addressed in the Local Action Plans. Our proposed definition for affordable housing is:

    —  homes for either rent or shared ownership at below market levels, provided by local authorities and registered social landlords; or

    —  homes for either rent or sale at discount compared to open market value where a planning agreement ensures that this discount remains available in perpetuity to people identified as being in housing need.

  8.14  Local authorities need to be able to apply this definition in such a way that they can meet the specific needs determined in local housing market appraisals and needs assessments, to achieve the right balance between the different types of affordable housing.

Merron Simpson

Policy Officer

March 2002

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