Will Re-based Housing Targets Deliver on the Growth Agenda?

The current Government – all three Prime Ministers and all three Secretaries of State for Levelling Up, Housing and Communities – has been resolutely committed to growth.

But to varying degrees, those responsible for housing delivery have edged away from the 2019 manifesto pledge to deliver 300,000 homes per annum. At the height of the opposition was Liz Truss’ commitment to remove ‘Stalinist’ housing targets; more recently Michael Gove, as the re-appointed Secretary of State, has been more acquiescent, suggesting that that the target remained but the calculation and implementation would be ‘rebased’.

Peter Canavan is a Partner in Carter Jonas’ Oxford office and specialises in strategic planning and policy, having worked in local authorities for ten years and now representing a range of clients throughout the Local Plan process. Planning and Development InSite spoke to Peter about whether the Government’s aspiration for housing growth could be achieved with a reformed approach to housing targets.

Housing targets: Carrot or stick approach?

Gove’s solution to the problem is yet to be announced, but the previous Secretary of State proposed a system whereby local people are incentivised to welcome development rather than ‘forced to swallow’ Whitehall targets. Is it a realistic solution and one which he might adopt?

“Incentivising development – using ‘carrot’ rather than ‘stick’ to get homes built - isn’t new,” says Peter. “When CIL was launched, the fact that 15% of payments must be spent in the local area (a proportion increases to 25% where there is a Neighbourhood Plan in place), was lauded as something to encourage local residents to be more accepting of development, and in the case of Neighbourhood Plans, proactive in bringing it about. Similarly, the New Homes Bonus, a grant paid by central Government to local authorities, was intended to incentivise housing growth in their area.

“But these initiatives haven’t really succeeded in incentivising growth. Neighbourhood Planning, in some cases, has been used to the opposite effect – to resist development. And although a small proportion of the Community Infrastructure Levy (CIL) is allocated for specific areas, local residents would be very hard-pressed to find out where it goes. CIL has often befallen the same fate as S106: it is too opaque, because it is agreed behind closed doors and often not fully determined until after planning permission has been granted. The use of the New Homes Bonus has also lacked transparency and is seldom linked directly to development locations.”

“At the root of the problem is the ‘chicken & egg’ phenomenon: community infrastructure, healthcare, education and other incentives can’t be used as a tool to encourage support because the benefit cannot be perceived prior to planning consent being granted. In fact it’s not even possible to determine a specific sum, or a proportion of development profits that will be spent locally because so many variables exist, not least the rise and fall of the property market and the cost of materials.

“Almost without exception, local residents misunderstand development profits – which are increasingly compromised through biodiversity net gain and other ‘taxes’. In reality, if a developer was required to provide further incentives to local communities such as community centres, green spaces and play areas, fewer homes would be delivered – partly because many schemes would become unviable.

“Furthermore, planning consent made on the basis of discernible inducements would tend to favour large greenfield sites over smaller pockets of brownfield land where, not only is remediation a considerable cost, but benefits would be less incentivising because of the smaller scale of the development. This doesn’t sit easily with the Government’s stated policy priority of prioritising brownfield over greenfield, or its less overtly stated but perhaps higher political priority of appeasing the Tory voters in the shires.”

The impact of the possible removal housing targets has already been felt. “We’re already seeing Local Plans slow down as a result,” says Peter. “Without ‘top-down’ housing targets to inform Local Plans, it will be much harder for local authorities to aspire to or defend housing growth. Politically, as well as at a community level, ‘carrot and stick’ comes into play. Without the ‘stick’ of penalties if housing targets are not met, only the ‘carrot’ of planning gain remains, which may be enough to incentivise development in some areas, but not those which put up the most resistance to new homes. In carrying out public consultations – on Local Plan allocations or planning applications – we always face questions about whether new housing is necessary. Currently, mandated targets provide the answer; in the absence of a target it will be harder to demonstrate housing need, in particular concealed housing need which is one of the greatest societal problems linked to under-supply.”

In October the Home Builders Federation wrote to the Office for Budget Responsibility expressing concern that abolishing targets would lead to 100,000 fewer new homes each year, a £17 billion reduction in economic activity and a fall in the funding available for affordable housing of £2.8 billion. Its research demonstrates that, whether the replacement for the standard method is a ‘soft’ target, or simply ceases to exist, the number of new homes delivered would be the lowest since the years following the global financial crisis. 

Are Regionally determined housing targets the solution?

So, if our current system of top-down housing targets is to be removed, but an incentive-led approach is insufficient to meet requirements, is there an alternative? 

Peter, along with many planning and development professionals, favours regional allocations. Regional housing targets determined through Regional Spatial Strategies (RSSs), were successful in driving growth free of local politics. Regionally determined targets offer a streamlined approach to strategic planning which sits well with the cost-cutting agenda and could take a similarly efficient approach to meeting net zero commitments. The biggest issue that RSSs faced was their perceived lack of accountability, but with improved means of consultation today, accountability could be achieved. This additional layer of strategic planning would also mean that Local Plans could be streamlined, in line with the commitment in the Levelling Up and Regeneration Bill. “We could go back to where we were with the first NPPF,” he adds. “Strategic housing market assessments, calculated across a market area, were an effective way of assessing housing need and formed the evidence base for Local Plans. However, the methodology and outputs were subject to intense debate among professionals, politicians and communities and seldom drew efficient conclusions.” 

So, while the total removal of housing targets would be counter to growth, and an incentive-led is unlikely to compensate, there is a solution which could deliver on the levelling up, efficiency and sustainability agendas, without compromising the commitment to growth.