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The known unknowns and unknown unknowns of the Housing and Planning Bill

The assent of 145 clauses and 11 schedules that make up the Government’s new Housing and Planning Bill is expected in early summer this year. Whilst hundreds of column inches have been devoted to it in the press, the uncertainty around the precise contents is directly affecting those of us trying to actually meet the housebuilding targets that the Bill is designed to support.

One of the main issues is the assessment of the S106 contribution and how the quantity of affordable housing will be determined.

Traditionally we have had the three categories of homes aimed at helping people onto the housing ladder that form part of the S106 contributions for the housebuilder: social housing, part ownership and starter homes.

The new Bill has a whole chapter dedicated to qualifying what constitutes a ‘starter home’, with the proposed definition to be a newly built property, sold to a first time buyer under 40 years of age, at a maximum of 80 per cent of the market value; all of which sounds very similar to the definition of part ownership. So will starter homes replace part ownership? Or is this something new to be added into the mix?

This is more than simply an issue of semantics; the classification of a starter home could result in there being more value in affordable housing on a site, affecting the starting price set and the price paid. As such, it is very problematic to assess the S106 contribution of the land in order to market it to housebuilders when the value may change according to a clause laid out in a Bill that won’t be announced until the summer.

At Richborough, we are adding overage clauses into contracts to allow for flexibility and price adjustment when the detail is known, but there are still a lot of question marks around valuations, making it challenging both for builders with budgets to balance and sellers with thresholds to meet.

And there are other issues, too, with the uncertainty on affordable homes also impacting planning. The S106 agreement may change on sites which have already been granted outline planning permission. If the all important ‘assent’ comes between outline and detailed planning permissions, then built-in flexibility is again required to allow for amendments to the quantities of affordable homes.

Essentially, clauses are having to be built in for any eventuality which directly affects the business case for developers, house builders, strategic land providers and landowners to name but a few in the chain.

On a more fundamental level is the issue that a centrally prescribed target for starter homes seems to somewhat fly in the face of the local ‘evidence based’ approach of the National Planning Policy Framework that, up until now, has allowed local authorities to assess the requirements and location for affordable housing provision. New proposals are for the secretary of state to have the power to order them at a defined level and thereby enforce starter homes policy over and above the local development plan.

What this does show is that the government is following through on their promise to increase home ownership as laid out in their election bid, albeit by prioritising starter homes at a discounted rate. Whether the ramifications on housing need assessments according to local markets and the inevitable effects on property valuations in those markets have been thought through will remain to be seen. As with all things in the property sector, we can be sure that one size never fits all.

29 March 2016