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What is the Government planning for planning?

Theresa May hasn’t been in charge for long, but we still know a lot about what her government will attempt to achieve for the remainder of the Parliament. Putting Brexit to one side, so far it’s all about opportunity, meritocracy and that most elusive of phrases, ‘getting on’. However, what does this mean for the planning and housebuilding sector and what should the industry be watching out for?

It’s true to say that the Prime Minister has been a little vague about the new direction of policy in this area. However, the broad approach is unsurprising. In a speech delivered just before she was announced as PM, Mrs May said; “Unless we deal with the housing deficit, we will see house prices keep on rising. Young people will find it even harder to afford their own home. The divide between those who inherit wealth and those who don’t will become more pronounced.” Fine words, but what do they mean in practice?

We know that, as a Conservative MP in the south east, the Green Belt will be just as politically controversial an issue for her as her predecessors. However, moving against her past colleagues, the previous administration’s flagship Starter Home policy seems less secure with Philip Hammond also recently announcing the end of the Help to Buy mortgage guarantee scheme.

This is likely to pile more uncertainty on the industry, despite the Chancellor’s assurances that enough lenders are now offering 95% loans outside of the scheme to warrant the end of this aspect of Help to Buy. Access to government-backed 95% loans will end in December 2016 as originally planned – despite many expecting its extension – whilst Help to Buy equity loans will remain in place until 2020 (these offer loans up to 20% of the total value of the home) along with the Help to Buy ISA. So far 65,920 mortgage guarantee loans have been approved, alongside 62,569 equity loans - with the mortgage guarantee scheme running for around 6 months longer.

There has also been some discussion about the Private Rented Sector (PRS), with new Housing and Planning Minister, Gavin Barwell, throwing some weight behind the idea. At the recent RESI 2016 Conference Barwell declared his interest in the notion, arguing that PRS should make up part of the solution. This was an approach given some support under the previous Government, underlined by the availability of £1bn of funding (Build to Rent Fund and Private Rented Sector Guarantees Scheme) for any developer wishing to build property for market rent.

However, Barwell went on to say that the Government would not be focussing on one specific type of tenure, stating “The way you make housing in this country more affordable to rent and buy is you build more homes. There is still a role for the Government doing specific things to help people on the first rung but this can’t be at the exclusion of all else. We need to build more homes of every single type and not focus on one single tenure.”

In line with this, even more money will be made available to house builders. In his recent Conference speech the Chancellor, Philip Hammond, stated that he will prioritise spending on new homes and transport rather than deficit reduction. This has been supported by the announcement of a £2bn ‘Accelerated Construction’ scheme – designed to promote publically-owned brownfield sites – as well as a £3bn Home Building Fund to provide loans to stimulate individual projects.

So, more money to support projects of all types, with PRS increasing in popularity at the expense of Help to Buy. Overall, the focus seems to be turning toward delivery rather than attempting to manage the mix of housing coming forward through financial incentive and reward. This is supported by the appointment of the new Secretary of State for the Department of Communities and Local Government, Sajid Javid.

As well as his Cabinet responsibilities, Javid is also the Member of Parliament for Bromsgrove – the local authority with the largest proportion of its land designated as Green Belt in the country (91%). It came as no surprise then, when Javid described the Green Belt as ‘absolutely sacrosanct.’

However, the appointment of Javid generally signals continuity for the broad direction of planning policy. The Secretary of State has already been involved in a number of major planning policy decisions, co-signing the Government’s Productivity Plan with the then Chancellor George Osborne – an agenda centred on speeding up both planning and building.

The Treasury’s decision to end mortgage guarantee loans through Help to Buy will perhaps have the biggest effect on housebuilding, depending on how independent lenders react. The provision of more funding for development is welcome but is so far lacking detail, and we look forward to seeing if a new focus on delivery will result in more permissions and increase build rates. The previous administration saw the planning system as central to economic growth, it is not yet clear whether May’s Government sees planning in the same terms but her administration clearly recognises the need for more new homes.

At Richborough we think that the areas to potentially watch is direct procurement of new houses by the Government through the HCA and Local Authorities.  And a real focus on SME developers playing a full role in tackling the housing shortage alongside new entrants into the PRS market – so far this has all been supported by government policy.  

30 September 2016