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How local authorities are helping to fix our broken housing market

07 April 2017 Author: Janice Morphet

Social -Housing

While the provision of new housing dominates much of planning activity – whether through plans, appeals or removal of planning controls, there has been less attention paid to some new housing providers in the market: local authorities.

While local authorities have a long legacy of providing social housing, many are now establishing housing companies to build housing for all tenure types including market rent and for sale, in addition to that for social and affordable rents.

This growth in provision has been gradual since the 2011 Localism Act, which gave local authorities powers to act as companies. This has been accompanied by changes in the local authority accounting code which has now transferred to the International Financial Reporting Standard (IFRS). This puts local authority accounts on the same basis as private sector companies. Some local authorities are now reconsidering their approach to their assets, changing into patient investors in commercial property and increasingly into housing.

What is motivating local authorities to move in this direction and will these activities ever make a major contribution to meeting local housing targets? And how are planners engaged in these new activities?

A research project, funded by the National Planning Forum and the RTPI, has been established to find out. Me and Dr Ben Clifford at UCL are conducting a year-long project to research which local authorities in England are active in providing new housing through housing companies, as registered providers (housing associations), and through more traditional means using local authority housing revenue accounts and in public private partnerships. The research will also be examining the motivations of local authorities to engage in housing in this way and to examine the methods being used. Finally, there is a consideration of volumes of dwellings being provided in this way and their tenure. The role of planners is particularly important, not only in the planning application process but also in site assessment and making planning applications for the council’s housing company.

The recent Housing White Paper has included local authorities as potential providers of homes. Is this the kind of activity for only a few or could it be taken up by most local authorities?

The research is being conducted in three phases. The first is through a series of roundtables and discussions across some of the RTPI regions in order to scope the issues and find any existing practice that can inform the second stage, which is the survey. Undertaking a survey will be difficult, not least to ensure that it reaches the right people and that there is a willingness to complete the return. In addition to the survey, the research will also be investigating other forms of information derived from local authority company and registered provider returns.

Following this there will be six case studies which will investigate some of these issues in more detail. At this stage, there will be further RTPI regional workshops and roundtables. The study will conclude with a report of the findings of the research, some recommendations and a one-off data base that will be open to all.

The research is being supported by a stakeholder group of planners, members of the RIBA, RICS and other local authority associations as well as both housing and legal practitioners. This group is chaired by Mike Hayes CBE, a past president of the RTPI and Secretary of the National Planning Forum, and supported by Dr Michael Harris, Deputy Head of Policy and Research at the RTPI. The details of the forthcoming roundtables and events that contribute to the research are listed below, and you can also read more about the project elsewhere on the RTPI website.

Although it is early on in the project, what is emerging so far? Firstly, local authorities are engaging in the provision of housing for a variety of reasons. These include the priority to improve standards of design in the new housing sector in their areas.

Secondly, some are engaging in housing provision to generate local authority income for the period after 2020 when the basis of local authority financing changes. Some have wanted to use housing to meet the needs of homelessness or for wider placemaking to improve community and investor confidence. Others have become frustrated at the number of unimplemented consents in their area and have decided to engage directly. Some have existing land holdings that can contribute to income but also through housing development can support wider social objectives as well as place making. A number of local authorities are investing using right to buy receipts although these are often difficult to use under current rules and are handed back to the Treasury. One local authority is reported to be focussing on attempting to develop sites where fly-tipping has been reported. Other local authorities are looking at ‘hidden homes’ – that is how their own housing estates can be reconfigured through development of car parks, additional floors on existing housing blocks, reconfiguration of out of date stock or new extensions at the end of blocks. Finally, some authorities are achieving far greater number of shared ownership homes through the use of s106 and CIL for affordable housing rather than other contributions for facilities such as schools.

The recent Housing White Paper has included local authorities as potential providers of homes. Is this the kind of activity for only a few or could it be taken up by most local authorities? This is what the research is investigating but the method of establishing a housing company that is wholly owned by the local authority is open to all.

Currently there are about 125 and the number is increasing across the country. Frequently, developments by these companies are financed by councils obtaining loans from the Public Works Loans Board at low rates and then lending to the housing company at a higher rate, enabling the local authority to earn a margin. The housing company employs local authority staff such as those providing financial, legal or planning advice and these too are funded from the company. In some cases, local authorities are developing on their own land and elsewhere they are purchasing sites for investment. While some local authorities are building for sale, there is usually a mix on each site and market rents are also meeting some gaps and providing a return on investment for the council’s income stream.

How are planners getting involved in this? So far we have heard of a number of ways. In some it is about providing planning advice whereas in another four local authority planners are funded full time by the housing company. In one local authority, the planners have successfully used their engagement in the council’s housing company to support their assessment of the housing market at their local plan examination. In other cases, difficult or long vacant sites, that may have been purchased for unrealistic hope value are being targeted through SPDs and then followed through with compulsory purchase processes to promote development. Buildings left vacant and in poor repair are also being targeted for development through planning processes.

Where local authorities are moving into this new engagement with housing provision, there appear to be some common features, although this needs to be investigated further. Firstly, there seems to be a progressive engagement in a variety of methods of delivery. While local authorities may start with one initiative to develop housing, this expands over time and some are using six or more methods, selecting the most appropriate to each situation. A second way in which these schemes are coming together is through the near location of housing, planning and regeneration teams in open plan offices. This closer working seems to be an increasingly practical approach to achieving housing delivery.

How much development will local authorities contribute to the local housing supply? As yet, this is a question still under review.

Some private sector colleagues wonder if local authorities have the requisite skills but, as with other services, these can now be bought in and acquired over time. Local authorities have realised that selling their land is a short-term gain. Holding their land and developing it or moving towards site assembly makes more contribution to the local authority’s income stream. This approach can also support local small builders and improve local skill levels. It enables local authorities to build in locations that may have more need and on smaller sites than perhaps housing developers would favour. This filling of urban gaps can help with place-making as well as housing provision. These smaller schemes may also be helpful in meeting the new requirements to consider housing for older people. All this is about proactive planning and will involve planners in all sectors.

The research will report on its interim findings before the summer and again in the autumn before the final report at the end of 2017. The research team welcomes any views or examples from RTPI members during the project.

Janice will be speaking at the RTPI Planning Convention on 21st June 2017.

Guest blogs may not represent the views of the RTPI.

Regional events

As part of the project, sessions are being held at RTPI regional events to discuss the research and identify possible case studies of local authority provision, including:

Yorkshire: 8th May 2017, Leeds

North East: 15th May 2017, Durham

West Midlands: 13th June 2017, Lichfield

East of England: 15th June 2017, Letchworth

North West: To be scheduled

Sessions are also being held at:

National Planning Forum meeting: 4th April 2017, London

RTPI Planning Convention: 21st June 2017, London

Janice Morphet

Janice Morphet

Janice Morphet is a Visiting Professor at the Bartlett School of Planning. Twitter: @janicemorphet