Reforming the plan

Our post-war planning system is a framework for ensuring that development meets the needs of local communities, for brokering and mitigating the gap between individual private interests and collective community needs and for redistribution. Local plans safeguard land for particular purposes including housing, employment, education, and community uses. Our heritage protection regime and national parks protect the buildings and spaces which communities value. Planning policies seek to ensure that affordable housing is delivered, and that across many dimensions of design, from building height to energy performance standards, new buildings take due account of their surrounding community and wider environment. And our planning system aims to ensure that developers contribute to meeting the needs in the community that will be generated as a consequence of their activity, for example by funding new schools, GP surgeries and public spaces.

Every community is affected by planning and planning issues often give rise to the strongest feelings and most vociferous campaigns at local level. And planning-related issues, particularly the housing crisis and climate change, are among the most important issues facing the country.

Yet our current planning system, deregulated and manipulated by the Tories, too often fails to deliver against either the promises it makes, or the real and pressing needs of local communities. In a wider political environment characterised by a lack of trust in politics, our planning system is part of the problem. Every time a new housing scheme is delivered in which even the ‘affordable’ homes are far out of reach of local people in housing need; every time a new building starts to look shabby after just a few years; every time planning permission is granted, but nothing happens on the site for years, trust is eroded a little bit more.

It is time to restore a vision of planning as the key to delivering the needs of local communities, while also safeguarding their interests for future generations. And it is time for planning to step up and play its full part in helping to restore trust in democratic processes.

We need an agenda for reform, at the heart of which must be reform of the rules around land values and viability. How can communities be expected to trust a system which so often prioritises the ‘hope value’ of a private landowner over the pressing need of a local community for more genuinely affordable homes? And we need a much more robust set of policy standards, from space and accessibility standards, to fire safety to thermal efficiency. Planning must deliver new development of genuine long-term benefit both to individuals and communities.

The housing crisis is the single biggest practical issue facing communities across the whole country. The critical challenge for our planning system is to deliver the genuinely affordable social homes which are urgently needed in communities across the country, but there are some major problems at present which limit the effectiveness of our planning system and work in favour of landowners against the interests of communities.

Today, I will present a new bill in parliament which seeks to reform our planning system to deliver the fair outcomes communities desperately need to see, and to accelerate the delivery of genuinely affordable social housing. The Planning (Affordable Homes and Land Compensation) Bill does this by closing some important loopholes, and by providing greater clarity and transparency both to landowners and communities.

Too many of the current mechanisms designed to deliver fair outcomes from the planning and development process essentially amount to shutting the door after the horse has bolted. In particular, asking local authorities to negotiate affordable housing contributions with a definition of ‘affordable’ which has no relationship to income; and allowing the price of land to be hugely inflated by landowner expectations of a right to ‘hope value’ – future speculative value based on planning permissions which the landowner does not own, has not realised, and which are not confirmed in law.

My bill, which is supported by Shelter and the Town and Country Planning Association (TCPA), seeks to ensure that our planning system is capable of delivering the outcomes communities urgently need, especially genuinely affordable social housing.

The government’s definition of ‘affordable’ housing includes homes to buy at up to £450,000, and homes to rent at up to 80 per cent of market rent. While market rents vary across the country, Westminster council warned in 2013 that 80 per cent of market rent would require a household income of more than £100,000 to sustain a tenancy on a three-bedroom home, while a two-bedroom home in Southwark would require £44,000, more than double average income in the borough. The situation has been made even worse by the introduction of the local housing allowance cap, which means that government support to pay the rent across many parts of London and other cities with high rental levels, does not cover the cost of homes within the government’s definition of ‘affordable’.

The role of affordable housing has always been to meet the needs of those who can’t afford to rent or buy housing in the private market. Yet the current definition has completely broken the ability of the planning system to deliver sufficiently for those in the greatest housing need. My bill re-establishes the link between the definition of ‘affordable’ and income, replacing the current definition of ’80 per cent of market price’ with a definition of ‘no more than 35 per cent of net household income for lowest quartile income groups in each local authority area’.

The government introduced some reforms to viability assessments in 2017, in particular clarifying that an assessment of affordable housing policy obligations should form part of site valuation and cannot be used later as a reason to justify not complying with policy; and establishing ‘no scheme world’ as the basis for compulsory purchase valuations. However, there remain significant loopholes. The ‘no scheme world’ rules do not remove all future speculation from valuations. Our planning system still affords landowners the right to the future value of development rights (or planning permission) which are granted and owned by the public sector. This so-called ‘hope value’ dramatically inflates the cost of land.

Inflated land prices make it much more difficult for councils to buy land to deliver social housing; and easier for developers to argue under the viability rules that they cannot afford to deliver the affordable housing required by planning policy. In a recent example in south London, a site with an existing use value of £5m was put on the market at £25m on the assumption that it could be developed for housing and later withdrawn from the market on the expectation that the value would rise even further – setting back the delivery of any housing at all on that site by years and making it almost impossible to deliver affordable housing even at the current broken definition.

This inflation of value places sites far beyond the reach of councils and housing associations; or requires a very significant quantum of private homes to be built to cover the costs, homes which either push up density to levels which are not palatable to the surrounding community or are built at the expense of truly affordable homes.

The current viability rules were developed to encourage and stimulate building in a recession, but they have evolved to become something quite different – a quasi-scientific basis for negotiation between developers and councils, with the overt objective on the part of developers of reducing their obligation to build affordable housing. The current system enables this to happen, as viability arguments can justify an appeal against refusal, and cash-strapped councils are reluctant to risk having to pay the applicant’s appeal costs if they lose. These negotiations are often not between equals as councils struggle to resource the expertise they need to interrogate developers’ figures; and they slow down planning, often taking years to resolve, creating great uncertainty and frustration.

It is vital that our planning system provides certainty and transparency and puts an end to speculation on land values which prevents land from being used to deliver new homes. While landowners should receive fair compensation, coded in law, they shouldn’t be entitled to speculative value which does not arise from actions for which they are not responsible. My bill creates a new requirement in planning law that local planning authorities have a duty to include policy in their local plans to capture betterment values where they arise, formally establishing a legal duty of the planning system to capture land value to be used for the benefit of communities, and creating a strong justification for councils to argue for the resources they need to engage in viability discussions on equal terms with applicants.

Finally, my bill seeks to specify in law the key factors used for viability testing in relation to planning decisions, including placing explicit limitations on the expectations of developer profit (up to 15 per cent, rather than the currently accepted 20 per cent), and land values (existing use value plus 15 per cent rather than unlimited future speculative value as at present), providing greater certainty and transparency for both landowners and communities.

In the context of a national housing crisis, our planning system must be able to deliver the genuinely affordable homes communities need. More than this, communities must be able to trust that it will do so, and that the promises made both in local plans and planning applications will not be watered down later on grounds of viability. My bill will reform our planning system to place community need at the heart of it and increase the speed and quantum of affordable housing delivery to address the housing crisis.