On Tuesday 13 October 2015, the Government published the long awaited Housing and Planning Bill that contains several of the Conservative Party’s manifesto commitments. These commitments include a pledge to extend the right to buy to housing associations with right to buy discounts and replacement properties being funded from the sale of high value vacant properties in stock holding local authority areas.
Other pledges enacted as part of the Bill include the pay to stay measures, reforms to the planning system to give more power to local people; to legislate for the creation of starter homes and for the creation of brownfield registers of land to develop with ‘permission in principle’.
The Northern Housing Consortium (NHC) have selected key parts of the Bill that affect local authorities and other issues we feel will be of interest to our members and these are summarised below.
Voluntary Right to Buy
The extension of the voluntary Right to Buy is underpinned by legislation but nothing in Bill commits the Government to compensate housing associations to full market value, which was expected to be a key plank of National Housing Federation deal. Instead, the Bill mandates that housing associations will instead receive grants with “any terms and conditions” designated by the Secretary of State as right to buy discounts.
The explanatory notes state that Clause 56 of the Bill enables the Secretary of State to “pay grant to private registered providers to cover the cost of a discount awarded to the tenant of a provider when buying their home from that provider.” Registered providers will receive a grant for the discount awarded to a tenant of theirs but any subsequent finance to replace the home must come from the sale of high value social homes.
Local Authority Sales
Local authorities will be required to make a payment to the Secretary of State each financial year which will reflect an estimate of how much would be raised through the sale of high value vacant properties in the local authority area. DCLG will be writing to all councils in the coming weeks asking them to give valuations of their stock and estimates of annual vacancy rates in an effort to understand how much would be raised by council sales.
The explanatory notes to the Bill state that “the payment must be calculated by reference to the market value of the high value housing the local authority owns and which is expected to become vacant during a financial year, less any costs or other deductions that are set out in the determination. An example of a deduction could be the transaction costs involved in selling housing such as estate agency fees.”
The revenue from the sales of high value vacant properties will pay for discounts given by housing associations to tenants utilising the right to buy and to compensate registered providers to build new homes to replace those social homes lost.
The explanatory notes to the Bill note that “the method for calculating the payment and some or all of the calculation may be based on a formula”. The Bill also notes that Secretary of State must consult before making a determination. The details of this formula are yet to be published but already there are doubts about its effectiveness as detailed by NHC Chief Executive Jo Boaden in her Inside Housing blog. The effect of this measure will rest on whether or not the formula is applied on a local, regional or national level. Any formula based on a local or regional basis has the potential to exacerbate already skewed and unequal regional housing markets and the effect it may have will depend at what level the money is pooled. There also exists within the legislation the ability to set a lower threshold of high value.
For example, a regional formula (for instance, in London and the South East) would see those regions with a significant fund to compensate registered providers for right to buy discounts and to build homes to replace those lost through sales because of high demand and high property costs ensuring higher revenues. It is believed that London and the South East are already lobbying for a ring fence whereby money raised in those regions will only be spend in those regions. In somewhere like the North East or the North West, where property values and demand are lower, the pooled proceeds from the sale of high value stock would be significantly lower. Thus, the three constituent regions of the north are far more likely to lose out if a regional formula is used.
The explanatory notes to the Bill state “housing “becomes vacant” for these purposes when a tenancy comes to an end and is not renewed either expressly by the local authority or by operation of law. The definition would not, therefore, capture situations where, for example, a local authority renews a fixed term tenancy to the same tenant(s), where a tenancy is assigned or where someone succeeds to (i.e. inherits) a tenancy.”
Clause 67 of the Housing Bill is an important caveat to local authority sales. This clause provides the Secretary of State with the power to make an agreement with a local authority which reduces the amount the local authority is required to pay under the determination. The agreement will contain terms and conditions specifying what the local authority must do with the retained money. The agreement the agreement will require the provision of housing or things that facilitate housing. This could include the provision of infrastructure or land remediation.
A general concern among Northern local authorities is the impact of this policy on their budgets particularly around whether or not they will receive compensation for the homes they are obliged to sell. Northern local authorities have felt the impact of cuts far deeper than other local authorities in other parts of the UK as a result of local government settlement equalisation undertaken in the last Parliament and this Parliament. This strain on budgets will only be exacerbated by many of the policies contained within the Bill which will see local authorities shouldering a lot more costs and losing money through sales.
High Income Social Tenants
The Bill legislates to allow Her Majesty’s Revenue and Customs (HMRC) to share tenant’s income details with housing associations. An initial concern about this measure was around data protection but within the Bill there are protections around the use and disclosure of the data to non-authorised persons or bodies under section 19 of the Commissioners for Revenue and Customs Act 2005 (wrongful disclosure).
Legislation and explanatory notes are uncertain and only refer to a “single body” to act as a “gatekeeper”. The explanatory notes state “the power in this clause allows data to be shared between HMRC and landlords for the purposes of verification – either directly from HMRC to landlords, or via the Secretary of State or a single body nominated by the Secretary of State to act as the ‘gatekeeper’ for this purpose. The Secretary of State must obtain the consent of HMRC before making arrangements with a private body to fulfil this function, or making regulations which give a public body this function.”
Because of the nature of this Bill, the detail of this policy is yet to be announced as, at present, there is no indication of who will meet the costs of this information sharing. If the costs of this are met by housing associations there exists a danger that the costs of implementing such a measure will outweigh the benefits as any receipts from higher rents paid by HISTs will be lost or significantly lessened as a result of costs incurred sharing income data.
Equally, if the costs are met by stock holding local authorities – who do not keep the receipts of higher rents paid by HISTs – it will represent another area of local authority budgets facing pressure from measures within the Bill.
The definition of what constitutes “high income” has already been indicated by the Government (£40,000 household income in London, £30,000 household income outside of London). The ability to make provision about how a person’s income is to be calculated in effect of the Bill will be a matter for secondary legislation after the pay to stay consultation ends in November. Again, the detail of these measures will be expanded on at a later date.
It remains to be seen how the HIST policy will affect lettings. There is growing concern among the sector that lettings will now have to be advertised at each level of rent applicable to a property which, in turn, may affect a prospective HIST’s willingness to take on a property.
There is also scope within the Bill for further “power to vary thresholds as may be considered necessary in the future”. At present, as indicated in the Budget, the household income thresholds will be set at £30,000 outside of London. But the legislation is “worded flexibly” according to the explanatory notes which may see lower thresholds than the £30,000 HIST mark coming into play in the future.
It remains to be seen how this policy will impact on the North more generally. The North East, North West and the Yorkshire and Humber regions all have below median gross annual earnings compared to the UK average of £27,500. Rough calculations suggest that a household of two people, each working a 37.5 hour week on £7.20 an hour would, between them, earn £28,080 a year.
Under the current voluntary HIST policy, social security payments such as child tax credit and working tax credit are tax-exempt, and would, in theory, be excluded from any determination of income. A rough calculation shows that a household comprising of two adults both working 37.5 hours per week on £7.20 an hour would earn £29,204 per year thus making them – just – exempt from the proposed threshold.
The NHC will be seeking clarity on how HMRC will work out a person’s income whether based on gross income or net income.
New Role for the Homes and Communities Agency (HCA)
There will be an obligation for the HCA to collect and monitor compliance with home ownership criteria which is defined in the Bill as information relating “to the sale of dwellings by private registered providers to tenants”.
The explanatory notes to the Bill state: “it is envisaged that the criteria will initially be set with reference to the voluntary right to buy deal that has been agreed between the Secretary of State and the private registered providers sector. Compliance with this deal is expected to be sufficient to meet the expected level of compliance with the home ownership criteria. It would be open to private registered providers to meet the criteria in ways other than compliance with the voluntary deal, but these ways will expected to be of an equal, or greater, level of support to tenants to help them into home ownership to that afforded through the deal”.
The legislation also gives the ability for the Secretary of State to effectively name and shame those private registered providers who are not meeting home ownership criteria noting that “the Secretary of State may publish information about private registered provider that has not met the home ownership criteria”.
The Homes and Communities Agency gets a new regulatory role to issue penalties to registered providers who do not pay the increased income from HISTs to the Secretary of State.
Local Planning & Permission in Principle
The Bill contains provisions for the Secretary of State to direct a local authority to amend their local development scheme (which sets out the development plan documents that an authority intends to produce and their timetable). There are also measures to require local planning authorities to submit development plan documents to the Secretary of State for independent examination as well as measures to allow an appointed person to suspend the independent examination to hear from specified people. Clause 100 of the Bill allows for the Secretary of State to recover the costs of the independent examination from the relevant planning authority.
The Bill also contains legislation to allow for permission in principle, initially on land allocated in the Brownfield Register, Development Plan Documents and Neighbourhood plans. The explanatory notes state that “the Government’s current intention is that this will initially be limited to sites suitable for housing (use), location and amount of development”
The definition of permission in principle is given as being reliant both on the land’s qualifying status (e.g. sites suitable for housing initially) and technical details consent to be determined in accordance with permission in principle. The result would be the granting of full planning permission. Local planning authorities will have to hold and maintain a register of all permissions in principle for land in their area whether they are generated automatically by a development order or granted on application.
Clause 102 of the Bill relating to permission in principle will change how local planning authorities deal with receiving a direct application for permission in principle giving them the ability to either grant or refuse. The explanatory notes state: “it is to be noted that the local planning authority may not grant permission in principle subject to any conditions. It is the Government’s view that conditions are not appropriate at the ‘in principle’ stage and should be reserved for the technical details consent stage.”
Clause 103 of the Bill sets out the basis for a brownfield register mandating local planning authorities in England to compile and maintain a register of particular kinds of land either wholly or partly in an authority’s area. The explanatory notes state that “the Secretary of State intends to use the power to require local planning authorities which are responsible for deciding applications for housing development, usually the district council, to each compile a register of previously developed land in their area, commonly known as “brownfield land”, which is suitable for housing development”
Given that, according to CLG household projections and estimated housing capacity on brownfield sites, the Northern regions could support 282,173 new homes on brownfield sites; this is something to be welcomed as this accounts for a quarter of the estimated housing capacity on brownfield land across England. However, the make-up – i.e. the type and tenure of these properties – must be reflective of local needs and encourage a range of developments.
Local planning authorities will also be permitted to include land in the register that would not otherwise be included. An example given in the explanatory notes is that “a local planning authority could enter land in the register where it considered it was suitable for housing development but it was only capable of supporting four dwellings or fewer.”
This exemption is to be welcomed, particularly for rural and smaller, specialised social landlords, because it will allow these organisations with a more modest turnover or a shortage of larger plots to build new homes. It also represents a significant bonus for those social landlords serving the large rural areas that make up the northern regions.
Part 1 of the Bill concerning Starter Homes sets out a general duty to promote the supply of starter homes when planning functions are being carried out and “a specific duty in relation to decisions on planning applications”. The legislation mandates that a starter home is a new dwelling which is only available for purchase by qualifying first time buyers at a price that is at least 20% less than the market value. A maximum price cap of £250,000 will apply to qualifying homes outside of London. There exists scope within the legislation for the Secretary of State to place restrictions on the sale and letting of these properties to deter those looking to buy Starter Homes for rental investment or short-term speculation.
The impact of such a policy in the North can only be guessed at but because of the North’s unique housing market, where there remains a high demand for social housing, any potential changes to section 106 that potentially reduce the amount of social housing will be of concern to social landlords across the North. Indeed, the watering down of section 106 to include Starter Homes could see a situation where new developments have no new social housing plots on them as developers favour the quicker returns of Starter Homes.
The legislation – specifically Clause 3 – also contains a new duty on planning authorities in England to promote the supply of starter homes when carrying out their planning functions. It is the intention of the legislation, according to the explanatory notes, “that starter homes become a common feature of new residential developments across England”.
Clause 4 details many of the stipulations about starter homes, particularly that planning authorities “will only be able to grant planning permission for certain residential developments if specified requirements relating to starter homes are met”. There is also enabling legislation to ensure that sites of a certain size must contain a certain proportion of starter homes on the site under section 106 agreements.
Clause 6 of the Bill allows for compliance directions to be issued to local authorities that are failing to comply with it starter homes duties or has a policy within its local development documents that is incompatible with its duties on starter homes.
- The NHC will be consulting with local authority members in the north to understand the potential effect of the sales of high value vacant properties
- We will be seeking clarification on pay to stay measures via a member-wide submission to the pay to stay consultation (which you can read more about here) and consulting all members generally for their thoughts about the initiative
- We will be seeking clarification about the formula that will be used from the Government and enquiring at what level revenues from the sales of high value vacant properties will be pooled
- More generally, we will be seeking assurances and clarifications on many of the issues raised in the course of this briefing
- We will be hosting a meeting of the APPG Housing in the North on Tuesday 1 December 2015 in Westminster to discuss the Housing and Planning Bill 2015 with MPs, Peers and other interested parties
- We will monitor the progress of the Housing and Planning Bill through each stage of its passage through the House of Commons and the House of Lords and provide in-depth briefings on these stages to members.
For further information about this Bill, please contact firstname.lastname@example.org