This briefing updates members on the progress of the Housing and Planning Bill, which is due its second reading in the House of Lords this week (Tuesday 26 January). London Councils has been actively seeking to influence the shape of the legislation throughout the passage of the bill in the Commons, and this briefing provides an update on the written evidence and amendments we have supported in the interests of London’s housing.
The housing crisis is Londoners’ number one issue. As found in London Councils’ commissioned survey by Ipsos Mori last year 88 per cent of those polled agreed that the capital has a housing crisis. By contrast, this is only the sixth most pressing issue in the rest of the UK.
London Councils fully recognises the government’s ambition in this bill to increase home ownership. However, London Councils has concerns that aspects of the Housing and Planning Bill may limit boroughs’ ability to deliver the homes that the capital needs. London’s boroughs have a commitment to build the homes that Londoners need and it is critical that the bill delivers:
- An increase in housing supply
- A net increase in affordable housing
- A preservation of London’s social mix
- Funds raised in London reinvested in London.
It is within this context that we are keen to ensure that London issues are fully appreciated and receive due scrutiny when the bill is in the House of Lords. We have raised our concerns with government at various stages of the bill including submitting written evidence to Committee in November, as well as briefing London MPs at both Committee and Report stages.
We comment below on five sections and recent activity on these sections which we believe are of paramount importance for London; starter homes, high value stock sales and right to buy, pay to stay and planning in London.
This new asset class has been introduced by the government in the bill and is intended to boost homeownership by offering a 20% discount of the market value for first time buyers under 40. Local authorities have been given a new duty in the bill to promote starter homes through their planning functions. Starter home developments will also be exempt from S106 and Community Infrastructure Levy.
London’s boroughs are keen to promote home ownership in the capital. However, there are concerns that the starter homes policy does not take account of London’s distinct housing market and the need for a wide array of housing tenures to meet the range of housing needs. While this new asset class will help some into home ownership, the product will not be affordable for the majority of those looking to live in the capital. At prices of up to £450,000 (inclusive of 20 per cent discount), starter homes are only likely to be affordable to those on significant household incomes. For those who are unable to access starter homes it will be critical that boroughs can still ensure the right range of affordable products outlined in their local plan. The government’s own consultation document acknowledges that there could be a loss of up to 71 traditional types of affordable housing products for every 100 starter homes built.
There are also issues around the extent of partnership working between boroughs and the Secretary of State. The bill currently makes it possible for the Secretary of State to override local development policies if they are incompatible with starter home delivery, but it is important that any decisions to amend local plans take into account local housing need.
London Councils briefed London MPs ahead of Report Stage about the potential negative effects of the policy in the capital, and supported amendments that recognise the need for London’s boroughs to be able to ensure that varied forms of housing tenures can be delivered alongside starter homes.
We also worked with MPs during Committee Stage emphasising concerns in relation to starter homes and their impact on London. London Councils supported amendments that would help safeguard local planning authorities’ flexibility to develop plans to meet the housing needs of different people in their area, and require the Secretary of State to take account of any local housing and planning strategies. These amendments ensured more detailed scrutiny and debate during Committee stage.
High Value Council Stock Sales and Right to Buy
The government has proposed the sale of high value vacant council homes to help subsidise right to buy discounts for housing associations. The extension of the right to buy scheme was a key commitment in the Conservatives election manifesto. The bill currently proposes that payment from local authorities to the government be calculated by assessing market value on properties as they become vacant.
The government intends the sale of high value council stock to fund the costs of the discounts of the housing association homes sold through right to buy. London Councils believes that this policy could have real unintended negative consequences on the overall supply of genuinely affordable housing in the capital and London’s social mix. Modelling estimates that up to 4,500 council homes a year could be sold off in London as a result. Councils will be required to make regular payments to the government from an assessment of high value council homes forecast to be sold, rather than retaining the full value of their assets to invest in new homes for London.
While London Councils fully supports an increase in home ownership in London, our main concern over right to buy is that if housing associations are given the freedom to replace homes sold in London in other parts of the country, and are given freedom over the tenure of replacements, there is a strong chance that the supply of affordable rented homes in London will decrease. If this happens it is likely to put more pressure on temporary accommodation. To put this into perspective London already houses 75 per cent of the country’s temporary accommodation (TA), with over 50,000 London households in TA.
Due to the fact that the right to buy extension is a voluntary deal struck between housing associations and the government, it has been subject to little parliamentary scrutiny. London Councils briefed London MPs planning to speak during the Report stage of the bill. We also briefed Committee member MPs on clauses concerning the voluntary right to buy and high value council sales, raising issues relating to: the impact on housing stock and temporary accommodation costs in London; the need to ensure homes sold in London are replaced in London; and the impact right to buy sales and increased leaseholders on estates could have on the viability of regeneration schemes.
London Councils supported a number of amendments to ameliorate the negative impacts in London, with a particular focus on replacement viability and the potential long term loss of affordable housing, as well as new challenges and costs for boroughs – particularly around temporary accommodation.
A new government amendment to the bill has proposed that local authorities in London will be obliged to deliver two replacements for every affordable council home sold, with a reduction in cases where GLA has agreed to ensure that a number of the new affordable homes are provided. We are seeking clarification from the government on the details of the additional funds that will be made available to local authorities to deliver this. It will become critical that boroughs can ensure these replacements are in the right tenures for local markets.
Pay to Stay
This policy proposes that new and existing council housing tenants in London will be required to “pay to stay” in their home by paying a market (or near-market) rent for their accommodation. Boroughs will be required to return the income generated from this policy to the Treasury.
While London Councils supports the principle of allowing more flexibility in rent settling, an imposed mandatory scheme which has been set out in the bill, resulting in higher rents for council tenants deemed to be high earners, carries a series of risks which need to be addressed. In the capital those with household incomes in excess of £40,000 will see a rise in rents. It is expected that this measure will affect over 28,000 households in London. To safeguard London’s social mix boroughs are keen to ensure flexibility in implementing this scheme, including sufficient local discretion to ensure a proportional increase.
Pay to stay is due to be implemented by April 2017 and as such huge administrative burdens are likely to be placed onto boroughs in managing a far more complex rent system. Funding for such a task therefore needs to form a key consideration when implementing this policy.
London Councils briefed Committee member MPs on the impact that higher rents for higher earners could have on London, and supported amendments on a number of issues. We argued that the rental uplift generated from this policy should be retained by London boroughs rather than being paid to the Treasury; supported the use of a taper or stepped threshold to ensure that rent increases are proportionate; and made the case that the administrative burden arising from pay to stay should be fully funded by government.
London Councils also responded to the government’s recent pay to stay consultation and raised questions over the impact on affordability, mixed communities and work incentives, as well as the administrative complexities for boroughs of managing the new system.
Through changes to the planning system in the bill the government aims to deliver an efficient planning system by giving the Mayor increased powers, including intervention in local plans and call in more decisions. This could mean local decisions are overruled.
London Councils is concerned about the new default powers introduced in the bill, which will allow the Mayor powers to intervene in local plans. It is regarded within the boroughs that proposals for new legislative powers do not address the underlying challenge facing London planning departments to ensure an efficient planning service. Instead these powers may encroach on boroughs’ planning and place-making capabilities. It is important that the focus is on resourcing London planning departments to address a lack of resources. Better funded planning departments would help in creating a more effective, swifter and consistent planning service.
London Councils has been lobbying government for the localisation of planning fees to allow boroughs to charge fees on a full-cost recovery basis. We supported amendments to the bill to this effect, and made the case for creating a borough-led better-resourced and more efficient planning system.
London Councils argued that government must ensure that any additional call in powers for the Mayor must not encroach on borough decision-making. We urged the government to publish more details on how the Mayor’s new intervention powers may be exercised in practice, and allow for active consultation with the boroughs about this.
Policies outlined in the bill in its current form will only go so far in delivering the housing that the capital needs and in many ways constrain boroughs’ activities as landlords and place-shapers. There are aspects of the bill, particularly the sale of high value council homes and starter homes, which London Councils is concerned will further limit local authorities’ ability to deliver housing supply and ensure the right mix of tenures.
As the bill moves into the Lords, London Councils will continue to take forward engagement with parliamentarians to ensure the implications of the bill for housing in London are fully understood and receive due scrutiny.