New homes bonus CPRE's response to the Communities and Local ...

New homes bonus CPRE’s response to the Communities and Local Government consultation paper December 2010 Introduction 1. The Campaign to Protect Rural England (CPRE) welcomes this opportunity to comment on the Department for Communities and Local Government (CLG) consultation on the proposed New Homes Bonus. We have long experience of housing supply and planning issues. Through our network of county branches, regions and district groups, CPRE volunteers play an active role in local planning matters, scrutinise thousands of planning applications a year, and respond to consultations on local development plans. 2. We accept that we need more homes to house a growing number of households, but argue these should be provided in a way that meets needs while safeguarding the environment and qualities that make places special. We believe that the planning system is an essential component of the sustainable delivery of housing. Planning has the potential to provide not just sheer numbers of homes, but high quality, thriving neighbourhoods, while making the most efficient and effective use of land. 3. In developing this response, we have consulted our members. We have also sought an Opinion from two members of our legal panel: Our Honorary Standing Counsel, John Hobson QC, and Stephen Whale. Their Opinion is appended to this response. Overarching comments 4. CPRE is concerned that because any financial benefits derived by the New Homes Bonus would not be directly related to the use and development of land or connected to the application concerned, linking them to planning permissions would be unlawful. Further information on this is outlined in the Opinion appended below, obtained from our Honorary Standing Counsel. 5. Regardless of its lawfulness, CPRE is also extremely concerned that the New Homes Bonus will not facilitate the sustainable development of housing, that is development which delivers high quality homes that meet identified needs in terms of both affordability and design. 6. We also strongly challenge the assumption in the consultation document that a significant increase in market housing supply alone will improve affordability. We believe that much greater attention needs to be given to demand side factors, such as access to credit. The current state of the housing market demonstrates the problems of failing to give adequate consideration to demand side factors. 7. With regard to supply of new homes, CPRE also challenges the assumption that the planning system acts as a block on delivery. Our own analysis of data included in the seven biggest housebuilders’ mid-year and annual reports for 2009 shows that these businesses had at least outline planning permission on 271947 plots1, while 87360 housing starts were made 1

CPRE analysis of data in major developers’ 2009 interim or full annual reports (Barratt, Bellway, Bovis, Miller, Persimmon, Redrow, Taylor Wimpey)

by all developers for the same period2. This shows that responsibility for enabling housing supply lies as much with developers as local authorities and planners. 8. CPRE acknowledges that there is a need for some new housing development, however, and particularly affordable housing development. We believe that maintaining a responsive housing stock that caters for all needs calls for a ‘plan, monitor, manage’ approach to housing provision, that responds to identified need, not demand, in terms of both affordability and design. The plan-led system is the best means of achieving this. Development plans should allocate land for housing in line with need established by a robust and up-to-date evidence base. Further, these land allocations should follow a strict ‘brownfield first’ approach. 9. By effectively incentivising the granting of planning permission, CPRE believes there is a risk that the New Homes Bonus will undermine this plan-led system, and encourage ad hoc and unsustainable housing development. This is particularly because the Bonus does not recognise the differing capacity between local authorities to accommodate new housing. While some areas have good supplies of brownfield land suitable for residential development, others do not. The ad hoc approach to building supported by the Bonus as currently proposed would therefore not support the strategic priority, as included in Planning Policy Statement 3: Housing, for brownfield development before greenfield. 10. CPRE believes that the New Homes Bonus could work with the plan-led system, and therefore facilitate the sustainable delivery of well designed and affordable homes by being linked to development planning. We recommend that the Bonus only be awarded where homes delivered conform to an up to date local development plan. The evidence, consultation, analysis and Sustainability Appraisal necessary in the preparation of development plans would build into the New Homes Bonus a consideration of strategic spatial issues. 11. If the scheme does go ahead, then CPRE strongly supports the inclusion of an enhancement for affordable homes. We also enthusiastically welcome the proposed incentivisation of the refurbishment of empty homes. Response to the consultation questions Question 1 – Do you agree with our proposal to link the level of grant for each additional dwelling to the national average of the council tax band? 12. Given national variations in council tax, this appears to be an equitable approach. Question 2 – The Government proposes an affordable homes enhancement of £350 for each of the six years – what do you think the enhancement should be? 13. CPRE’s Vision for the Countryside envisages that by 2026 many villages will have grown as a result of provision of affordable housing for local people, recognising this as a crucial part of supporting thriving and diverse rural communities. We are pleased, therefore, that the Government has recognised the importance of increasing affordable housing delivery by building an enhancement for affordable homes into the New Homes Bonus. 14. We encourage the Department to give more thought, however, to the proposal to apply a ‘flat rate’ enhancement to all new affordable homes. We wholeheartedly support shared equity schemes as a tool for improving housing affordability, and recognise in particular the ability of such developments to deliver affordable housing with much less subsidy than social rented ones. Yet, shared equity homes remain beyond the financial means of some people in need of affordable housing and we believe that there is still an important role for social rented 2

DCLG Live Table 208 May 2010

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accommodation. In recognition of the extra subsidy required to deliver affordable homes for social rent, CPRE recommends that the New Homes Bonus differentiates between shared equity and social rent properties; paying the full enhancement for the latter, and a reduced enhancement for the former. We believe that the data the department intends to use for implementation of the scheme will enable this differentiation to be easily made. Question 3 – Do you agree with the proposal to use PPS3 and also include pitches on Gypsy and Traveller sites owned and managed by local authorities or registered social landlords to define affordable homes? 15. CPRE agrees that the PPS3 definition of affordable housing provides a single and acceptable definition for the purposes of implementing the New Homes Bonus. Using the PPS3 definition will also facilitate some coordination between housing supply incentivisation and planning for affordable housing, as local authorities will be rewarded on the same criteria for which they have planned. CPRE also believes that housing provision for all should be facilitated through the plan-led system. We therefore agree that Gypsy and Traveller sites should be included in the remit of the New Homes Bonus affordable housing enhancement. Question 4 – Do you agree with the proposal to reward local authorities for bringing empty properties back into use through the New Homes Bonus? Are there any practical constraints? 16. CPRE strongly supports the inclusion of refurbishing empty homes within the New Homes Bonus. We have long campaigned for housing supply policy to prioritise the use of existing resources before supporting new build. As of April 2008, using data collected from local authorities, the Empty Homes Agency estimated that there were approximately 703,000 vacant homes in England3. The exploitation of this resource clearly has the potential to make a significant dent in England’s housing needs. 17. The scheme design should however avoid any loophole that might encourage intentional neglect. In particular, it should be clear that the Bonus cannot be redistributed to landlords. Question 5 – Outside London: Do you agree with the proposal to split the payment of the New Homes Bonus between tiers 80% to the lower tier and 20% to the upper tier, as a starting point for local negotiation? 18. We consider that an 80:20 split is a reasonable starting point for local negotiations. 19. CPRE understands that because National Park Authorities do not receive formula grant payments directly from central Government, they are not eligible to directly receive New Homes Bonus payments. These authorities are responsible for planning in their areas, however, and therefore we urge the Government to encourage district councils to negotiate with National Park Authorities a fair split of monies received from the New Homes Bonus. 20. The consultation states that the purpose of the New Homes Bonus is to enable local communities to see the benefits of development. Simultaneously, the Government is embarking on an ambitious plan of devolution that will shift power to the lowest possible level of governance. Consequently CPRE would welcome moves to encourage district and county authorities to negotiate a split of New Homes Bonus receipts with Parish and Town Councils. This extra revenue could be a crucial resource for these local councils, who are likely to become key players in the delivery of localism. They are also more likely to be able to ensure that communities that welcome development really do reap the rewards from it. 3

Housing strategy statistical appendix 2008/09 available at http://www.communities.gov.uk/housing/housingresearch/housingstatistics/housingstatisticsby/localauthorityhousi ng/dataforms/hssa0809/hssadata200809/ 08.12.2010

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Question 7 – Do you agree with the proposal for one annual allocation based on the previous year’s Council Tax Base form, paid the following April? Question 8 – Do you agree that allocations should be announced alongside the local government finance timetable? 21. Restricting New Homes Bonus payments to one allocation, timed to be announced alongside the local government finance timetable should facilitate local authorities’ financial planning, and therefore help to maximise their service delivery capacity. Question 9 – Do you agree with the proposal to reward local authorities for affordable homes using data reported through the official statistics on gross additional affordable supply? 22. CPRE supports awarding the incentive based on gross, rather than net, figures of both affordable and market housing completions, to enable acquisitions as well as new builds to be incentivised. Question 13 – We would welcome your wider views on the proposed New Homes Bonus, particularly where there are issues that have not been addressed in the proposed model. 23. In paragraph 6 we have expressed our concerns about the lawfulness of this scheme. If the Government is able to carry this policy forward, however, we believe that there are a number of ways in which it could be improved. 24. CPRE believes it is critical that the New Homes Bonus is only paid for occupied homes, to ensure that it does not incentivise the development of homes for which there is no need or demand, and which are likely to remain empty after completion. For this reason we support the use of council tax data for the scheme implementation. Incentivising homes at their point of occupancy, rather than completion or even receiving planning permission, we hope should also provide an incentive for local authorities to encourage developers to deliver on outstanding planning permissions, before seeking to acquire new ones. Rewarding occupation rather than granting of permission somewhat reflects this. 25. Another important priority for CPRE is to ensure that the New Homes Bonus does not act as a disincentive to brownfield redevelopment. As the Bonus will be awarded on the basis of net gains, there is a danger that the redevelopment of brownfield sites, which can involve the demolition of existing sub-standard housing, would receive comparably less reward than the development of greenfield sites. We are reassured that implementation using council tax data will prevent the scheme from acting as a disincentive to brownfield development where empty buildings must be demolished prior to development. There will still be some cases, however, where refurbishment of occupied sub-standard homes is not possible, and therefore these must be demolished before redevelopment can take place. This was the case in many of the Pathfinder Housing Market Renewal Areas established by the last Government. To ensure that local authorities are not discouraged from upgrading low quality stock, we would therefore welcome a differentiation in the Bonus between brownfield and greenfield development. An extra incentive for brownfield redevelopment would help local authorities prioritise both the continued regeneration of cities, and the protection of the countryside. 26. In some rural areas, particularly those that are popular tourism destinations, there are serious localised problems associated with high rates of second home ownership. CPRE would welcome consideration of how the New Homes Bonus could be used as a disincentive against this. As second homes are taxed differently than primary residences, they could be separated out in the council tax data proposed to be used for the implementation of the scheme. As an incentive to local authorities to charge the maximum 90% of rates on second

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homes, the percentage of Bonus paid could be matched to the percentage of rates levied by local authorities on second homes. 27. As outlined in paragraphs 9-11 above, CPRE is concerned that the New Homes Bonus will fail to deliver high quality housing development. Facing tightening budgets, there may be political pressure in particular in local authorities to grant planning permission for substandard schemes that otherwise would not be acceptable. We therefore recommend that the New Homes Bonus be linked to the delivery of the numbers and quality of housing stipulated in the Development Plan. This would help to mitigate against the unintended consequence of the incentive resulting in ad hoc development built in response to budget pressures, rather than through a sound, plan-led process that balances environmental, social and economic objectives. 28. If housing need as stipulated in the Development Plan is met, CPRE believes that the Bonus should not be awarded for further development. Where an up-to-date Development Plan is not in place, we suggest that this could be a powerful incentive for local authorities to prepare and adopt plans. As local authorities, as part of the Development Management procedure, must already assess whether an application is a departure, determining compliance with the Development Plan would not demand extra work. 29. The Minister for Housing has stated his desire to replace quality regulations with incentives; the New Homes Bonus is clearly a key opportunity to achieve this. Research carried out by the Commission for Architecture and the Build Environment (CABE), highlights the importance of taking some action to improve the quality of new housing. In its 2010 national housing audit rated the quality of 29% of all housing development in England as so poor that it should not have been given planning permission4. Awarding the New Homes Bonus only for housing schemes that meet the quality standards, outlined in the Development Plan, could be a powerful incentive for local authorities to negotiate hard with developers in order to achieve the best possible development for their communities. 30. In order to ensure the integrity of the plan-led process, CPRE recommends that, as well as being rewarded on the basis of the delivery of Development Plans, the expenditure of monies received from the New Homes Bonus should be limited to delivering other elements of the Development Plan. The stated purpose of the incentive is to enable communities to reap the benefits of growth. If the New Homes Bonus is too detached from service provision related to development in the affected area, CPRE believes that communities are unlikely to be able to perceive its benefits. 31. In the interests of prioritising affordability, while recognising the importance of a wide range of types and size of house, CPRE believes that consideration should be given to not paying the Bonus for dwellings falling in council tax bands G and H. We believe it prudent that public money is not used to incentivise the luxury market. Rather, public money should be focused on helping to deliver affordable homes that meet the needs of single, couple and family households. 32. We would be pleased to discuss these comments in further detail, in particular the implications of the attached Opinion. These comments may also be made public in the usual way. CPRE December 2010 4

CABE (2010) Improving the quality of new housing, available at http://www.cabe.org.uk/files/improving-thequality-of-new-housing.pdf, 10.12.2010

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CONSULTATION PAPER ON THE NEW HOMES BONUS SCHEME

JOINT OPINION

1.

On 12 October 2006, the first of the undersigned produced an Opinion (“the 1st Opinion”), a copy of which is attached, which concluded that the then proposed Housing and Planning Delivery Grant (“HPDG”) stood a good chance of being quashed in a claim for judicial review on the grounds that it would introduce an unlawful element into the planning decision-making process.

2.

The Department for Communities and Local Government has issued a Consultation Paper into the proposed New Homes Bonus (“NHB”) scheme. The issue is whether the NHB scheme (or a planning decision consequent upon it) is liable to be quashed on the grounds that it too seeks to introduce an unlawful element into the planning decision-making process.

3.

In short, the proposed scheme seeks to incentivise local authorities to increase housing supply by rewarding them with a NHB grant.

This will be

determined by reference to completions and council tax bands and paid for the following six years as an un-ring-fenced grant.5 It is proposed that local authorities will be able to decide how to spend the funding in line with local community wishes.6 It can thus be seen that the proposed NHB scheme attracts much the same criticism as the formerly proposed HPDG, namely that 5 6

Consultation Paper, page 14. Consultation Paper, page 15.

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the availability of the NHB grant will be linked in part at least to the number of planning permissions granted (as opposed to the number of applications determined) and that availability will be unrelated to any particular application or proposed development. 4.

The question then is whether the law has moved on in such a way since the 1st Opinion so as to render lawful that which would otherwise be unlawful.

5.

The 1st Opinion cited Stringer v Minister of Housing and Local Government [1971] 1 All ER 65 at 77 in support of the proposition that for a consideration to be material it must be a planning consideration, which is to say one that relates to the use and development of land. It also cited R v Westminster CC, ex parte Monahan [1990] 1 QB 87 in support of the proposition that financial considerations may be material, albeit that they must “fairly and reasonably relate to the application concerned”.7 The 1st Opinion also cited Tesco Stores Ltd v SSE [1995] 1 WLR 759 in this context.

6.

Stringer, Monahan and Tesco remain good law. It is worth noting (a) that the Secretary of State cites and relies upon both Stringer and Tesco as to the meaning of material considerations in planning law in his summary grounds of defence in case CO/12056/10 R (Cala Homes (South) Ltd) v SSCLG, to be heard on 17 January 2011; and (b) that national Government policy planning continues to cite with approval both Stringer and Monahan when explaining the meaning of material considerations in planning law.8

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A proposition, relying upon Monahan, that is expressly set out in national Government planning policy (see The Planning System: General Principles, paragraph 11, accompanying PPS1). 8 The Planning System: General Principles, paragraph 11, accompanying PPS1.

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7.

In HSE v Wolverhampton CC [2010] EWCA Civ 892, the material issue was whether the local planning authority was entitled properly to have regard to its liability to pay compensation when deciding whether it was expedient to make a revocation order under section 97 of the Town and Country Planning Act 1990 (“the 1990 Act”). It was common ground that a financial benefit or disbenefit to a local planning authority as a result of a grant or refusal of planning permission, devoid of any land use consequences of the decision, is not a material consideration for the purposes of section 70(2) of the 1990 Act.9 Approaching the issue on the basis that “material considerations” has a consistent meaning in the 1990 Act, the court concluded (by a majority) that a local planning authority may properly have regard to its liability to pay compensation when deciding whether it is expedient to make a revocation order. In so doing, the court concluded that Alnwick DC v SSETR (2000) 79 P&CR 130 (which concerned the materiality of the amount of compensation when making a section 97 revocation order) was wrongly decided. The court in HSE also drew on R (Usk Valley Conservation Group) v Brecon Beacons NPA [2010] EWHC 71 (Admin), which concluded that local planning authorities are entitled to take into account the adverse financial consequences when deciding whether or not a section 102 discontinuance order is expedient. It can thus be seen that HSE, Alnwick and Usk were all concerned with direct adverse financial consequences of planning decisions, whereas the NHB scheme is more a case of indirect positive financial consequences (although of course those indirect positive financial consequences will not flow if planning permission is refused, which could be described as a direct or indirect adverse

9

See paragraph 47.

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financial consequence). Be that as it may, the tenor of HSE is if anything to broaden slightly the category of material considerations falling within that definition even if the definition itself remains unchanged. 8.

However, two points in particular about the NHB scheme need very much to be borne in mind. First, receipt of the NHB grant is only indirectly the consequence of a planning decision in that it is to be paid not upon a grant of planning permission but upon a change in the number of dwellings on council tax valuation lists. Second, the precise amount of NHB grant to be paid will be a function of a number of factors unrelated to any particular application (or development). These factors include the number of council tax discounts and exemptions in the authority’s area, the total tax base and council tax requirement for England, the number of empty properties brought back into use and the number of demolitions.

9.

These two points give rise to a good argument for saying that, whilst financial considerations may, in principle, amount to a material consideration, the NHB scheme and the grants made under it will not be a land use consequence of any planning decision or else they will not fairly and reasonably relate to any particular application (or development). As such, the NHB scheme (which is clearly designed to influence planning decision-making by encouraging more approvals than would otherwise be the case) will taint the planning decisionmaking process.

10.

As well as the pending Cala hearing (which will consider the meaning of material considerations), it should be noted that the HSE case will move on appeal to the Supreme Court in 2011. The law on material considerations is

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thus in something of a state of flux at the moment. This Joint Opinion needs to be read in that context. Conclusion 11.

As things stand, it is our opinion that the proposed NHB scheme would introduce an unlawful element into the planning decision-making process. Any planning permission granted on the basis that the NHB scheme or a grant under it is a material consideration stands a good chance of being quashed in a claim for judicial review.

JOHN HOBSON Q.C. STEPHEN WHALE 4-5 GRAY’S INN SQUARE 13 DECEMBER 2010

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CONSULTATION PAPER ON HOUSING AND PLANNING DELIVERY GRANT

_________ OPINION _________

1.

The Department of Communities and Local Government have issued a Consultation Paper in respect of a proposal to reform the Planning Delivery Grant system and replace the existing grant with a new Housing and Planning Delivery Grant.

2.

The proposal has emerged as part of the response to the Barker Review of Housing Supply and the need, which that Review identified, to secure the provision of substantially greater numbers of housing. In order to achieve this, the Consultation Paper explains that it is considered local authorities should be given a financial incentive based on the increase in housing in their areas.

3.

The new Grant will therefore not, as in the case of the existing Grant, be linked to performance in the sense of the number of applications determined within a given period. Instead it is proposed to reward authorities with Grant funding only if the decisions result in increased housing provision. Thus in future the grant will be linked to approvals only.

4.

In explaining the potential elements of the proposed new Grant the Consultation Paper states as follows:

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“19. … The Government accepts the basic premise of Kate Barker’s proposal, that the fairest and most transparent way to incentivise housing delivery is to pay an incentive proportionately based on the increase in housing in the locality. This approach aims to encourage local authorities to be proactive in unlocking blockages throughout the delivery chain. 20. The Government believes that a discretionary incentive scheme, such as is proposed, should be targeted at those areas that are responding to high levels of housing demand. Local authorities that fail to adequately meet the demand for new housing identified should not be rewarded with grant funding. 21. For this reason the Government is minded to introduce a floor level that needs to be reached before any incentive will be granted. This aims to concentrate funding where there is a need to deliver new housing. 22. Introducing a floor could have a number of advantages, it accords with the principle of rewarding local authorities that deliver higher levels of housing. … 34. A floor (as described in paragraph 21 above) would be set at a point below each authority’s RSS or local plan figure. Grant would be paid for delivery above the floor. … 42. Beyond 2007/2008 subject to the outcome of the Spending Review, we intend to focus awards on the outcomes that are delivered through effective planning services.” 5.

The operative part of the process of securing housing completions, so far as local authorities are concerned, is the decision to grant or withhold consent on planning applications for new housing proposals. The “outcomes delivered through effective planning services”, referred to in paragraph 42 of the Consultation Paper will, if the incentive scheme operates the way it is intended, be the grant of more planning permissions for housing. Thus the availability of Grant will be clearly linked to the

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number of planning permissions granted, and not simply determined on a timely and efficient basis. 6.

I am concerned that if a scheme of this nature is promulgated and implemented it will have the effect of introducing an illegitimate consideration into the process of determining planning applications.

7.

Section 70(2) of the Town and Country Planning Act 1990 states that, in dealing with a planning application, the authority “shall have regard to the provisions of the development plan, so far as material to the application, and to any other material considerations”.

8.

For a consideration to be material it must be a planning consideration, that is one which relates to the use and development of land, see Stringer v Minister of Housing and Local Government [1971] 1 All ER 65 at 77; and also Great Portland Estates plc v Westminster City Council [1985] AC 661, in which the House of Lords approved that general principle, and also extended it to consideration of personal circumstances where appropriate.

9.

Financial considerations have been held to be material in certain circumstances, for instance where enabling development is involved, see R Westminster City Council ex p Monahan [1989] 1 PLR 36. It is clear however that all such considerations must relate to the proposed development. In the leading case on developers’ contributions in the form of planning obligations, Tesco Stores Ltd v Secretary of State for the Environment [1995] 2 All ER 636, Lord Keith said: “An offered planning obligation which has nothing to do with the proposed development, apart from the fact that it is offered by the developer, will plainly not be a material consideration and could be regarded only as an attempt to buy planning permission” 15

Although, of course the proposed grant will not be offered by the developer, the principle enunciated by Lord Keith is applicable. The materiality of the Grant in a planning decision depends upon whether or not it relates to the application for development which is being determined. In my opinion there can be no doubt that the availability of the proposed grant would be a consideration wholly unrelated to any proposal for development. It is not a factor which relates to the use and development of land. 10.

It is however the Government’s clear intention that this factor should be taken into account in the making of planning decisions. That is the express purpose underlying the scheme: to provide an incentive for authorities to grant more planning permissions for housing and thus increase the amount of Grant to which they become entitled.

11.

If implemented this scheme would, in my view, taint the planning process. Although the Consultation Paper refers to payments based on increased delivery, i.e. completions, this can only occur if more planning permissions are granted. The system will thus inevitably influence planning decision making; indeed that appears to be its manifest purpose. Planning decisions should be made on their merits in the light of legitimate planning considerations. Authorities should focus on these. However if the Grant’s availability is dependant on approvals only, which will be its effect, it is likely that authorities will be prompted to discount other relevant factors through fear of losing their funding. Planning decisions should not be driven by extraneous financial benefits.

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12.

In conclusion therefore, it is my opinion that, the proposed new Grant system would introduce an unlawful element into the planning decision making process. If it is promulgated along the lines adumbrated in the Consultation Paper an application for judicial review to quash it as ultra vires would stand a good chance of success.

JOHN HOBSON QC 4-5 Gray’s Inn Square Gray’s Inn London WC1R 5AH 12th October 2006

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