England planning shake-up provides few affordable housing guarantees

In early August, Boris Johnson unveiled a “once in a generation” shake-up of England’s planning system. But the radical reforms have been criticised for failing to tackle the greatest housing challenge facing the younger generation: a lack of affordable homes.

“Thanks to our planning system, we have nowhere near enough homes in the right places,” said the prime minister. The proposed reforms would see more homes built, according to ministers, allowing supply to catch up with demand and making property more affordable to those most in need. 

But a range of housing experts, developers and campaigners disagree.

“Broadly, building more homes is going to be good, but it won’t change overall affordability,” said Neal Hudson, an independent housing analyst. “The government won’t actually want to deliver so many houses that prices were to fall — that would be political suicide,” he added. 

Low interest rates and easy access to mortgages have helped push up prices, while wages have grown at a slower rate. That — rather than undersupply — has made home ownership unaffordable for many, argues Ian Mulheirn, chair of housing campaign group Generation Rent and an executive director at the Tony Blair Institute. 

“The right has tended to take the view that getting supply up is the route to making housing cheaper. The problem is that’s not really true. A lack of supply is not the cause of high house prices; and increasing supply will not solve it,” he said.

While the number of new homes delivered each year has risen over the past decade, so too have prices in England. This trend was brought into sharp focus by Nationwide Building Society data this week that showed prices reached an all-time high in August against a backdrop of the deepest recession on record — in part due to the government introducing a stamp duty holiday.

Line chart of Net additional homes in England showing Supply has increased dramatically

Critics say that the government’s proposed planning shake-ups strip away the existing mechanism for supplying affordable housing without putting forward a clear alternative.

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Roughly half of all “affordable housing” — defined as homes sold or rented at a discount to local market rates — is currently funded by developers, who agree a contribution with local authorities before they can start building. 

But ministers have proposed scrapping those requirements, known as Section 106 agreements, which last year contributed £4.7bn towards affordable housing, and replacing them with a new “infrastructure levy”. 

The levy will contribute as much if not more affordable housing, according to the government. But the proposals were“very light” on detail and were set out to please all parties — developers, councils and homebuyers — said Judith Salomon, strategic planning director at Pocket Living, a small builder. 

Sadiq Khan, the London mayor, has requested an urgent meeting with Robert Jenrick, the housing secretary, to discuss what the scrapping of Section 106 would mean for affordable housing, according to a senior official in the mayor’s office.

“These proposals could have a drastic impact on the number of affordable homes built in the future . . . What this looks like is a centralised power grab for planning control,” the official said.

House prices rose strongly until 2016

The government’s paper is littered with references to affordability, and describes planning as “a question of social justice”. To help answer that question — and in order to revive the country’s stuttering economy — Mr Johnson has pledged a building spree.

That involves doing away with the existing planning framework, which allows local people to air their opposition to new development at various points in the process, and replacing it with a US-style “zoning” system. 

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Under the proposals, binding housing targets would be set nationally and handed down to local planning authorities, which would then be asked to carve their districts into distinct zones. Some zones would be protected from any construction, while in others developers would receive something close to an automatic green light.

The proposals showed “the right ambition”, said Rhys Moore, an executive director at the National Housing Federation, which represents housing associations.

But he warned that “simply building more homes would not help the 8.4m people currently hit by the housing crisis in this country . . . Instead, we desperately need more social housing that people on lower incomes can afford — and there are many unanswered questions about what effect the proposed reforms will have here”.

The planning paper makes no mention of social housing, which is rented out by local councils or housing associations to those on low incomes. Once a significant component of housing supply, the construction of new social housing has slowed over the last 50 years.

Between 1980 and 1984 local authorities built 220,000 new homes, a quarter of the total built. In the last five years they have contributed just 10,000 — roughly 1 per cent of total new supply. The number of homes built by housing associations has increased but not enough to fill the gap left by councils.

A government scheme offering to subsidise first-time buyers was welcome but risked prioritising one group of buyers at the expense of others, Ms Salomon warned. The “First Homes” scheme would give those buying their first property a 30 to 50 per cent discount on a new home. That would be locked in, with the property sold on to another first-time buyer at the same discount. 

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In order to make schemes viable, developers typically insist on selling the majority of homes at market rate. By forcing developers to sell a portion of each scheme at a chunky discount to first-time buyers, it “will inevitably cannibalise the delivery of other affordable housing. All socially rented housing could be wiped out to give amazingly discounted homes for first-time buyers”, said Ms Salomon.

England has become reliant on private delveopers

And while a higher supply of homes might gradually flatten house price growth, tearing up the planning system would not immediately result in a construction spike, said Ms Salomon.

A lengthy legislative process, resistance from the opposition Labour party as well as some Tory councils, and the complication of devising new local plans based on the zonal system meant the reforms might not be in place by the next parliament in 2025. 

“The risk with all planning reform is you create chaos in the interim while it’s all being put together,” she said.


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