Government's new homes policy is flawed

Government’s planning system is underperforming

The National Audit Office’s (NAO) new report says that the government’s planning system is underperforming and cannot demonstrate that it is meeting housing demand effectively.

The Ministry of Housing, Communities & Local Government (MHCLG) aims to support the delivery of 300,000 new homes per year from the mid-2020s.

To increase supply, it has implemented reforms to the planning system to help local authorities in England determine how many, where and what type of new homes should be built.

The government targets are often referenced by Central Bedfordshire Council as the driving force behind its Local Plan.

Amyas Morse, the head of the NAO, said:

“For many years, the supply of new homes has failed to meet demand. From the flawed method for assessing the number of homes required, to the failure to ensure developers contribute fairly for infrastructure, it is clear the planning system is not working well.

“The government needs to take this much more seriously and ensure its new planning policies bring about the change that is needed.”

A 69% increase is needed to meet target

Between 2005-06 and 2017-18, 177,000 new homes per year have been built on average. The number never exceeded 224,000. To meet its ambition, the MHCLG will need to oversee a 69% increase in the average number of new homes built since 2005-06.

In 2017, the Department developed a standard method for local authorities to assess the number of new homes needed in their area.

The NAO report says that this method has weaknesses.

Compared with the need assessed previously by local authorities, the standard method reduces the need for new homes in five out of nine regions.

Housing plan has weaknesses

A Local Plan is necessary to prevent ill-suited developments

As of December 2018, only 44% of local authorities had an up-to-date local plan setting out their strategies for meeting the need for new homes, despite it being a legislative requirement.

If a local authority can’t show it has a five-year supply of land for housing, developers have greater freedoms to build where they want, risking ill-suited developments.

To create new homes and places for people to live, infrastructure such as transport, healthcare, schools and utilities must be in place.

The report said that this is difficult as government departments are not required to tie their investment strategies with local authorities’ infrastructure plans, creating uncertainty about how some infrastructure will be funded.

The MHCLG has only done a rough estimate of the infrastructure funding required for new homes, so future costs are uncertain.

The systems to get developers to contribute to infrastructure costs are not working effectively. Developers often successfully renegotiating initially agreed contributions on the basis they will be unable to maintain profit margins.

The NAO said that contributions agreed with developers slightly decreased between 2011-12 and 2016-17. This is despite house prices in England increasing by 31% and profit margins of top developers increasing.