There follows HBF's immediate note on the Pre-Budget Report housing announcements.
PRE-BUDGET REPORT 2005
HOME BUILDERS FEDERATION (HBF)
NEWS SPECIAL
5th December 2005
1. INTRODUCTION
The Government has today publish its formal response to the Barker Review, along with consultation documents on a range of issues, including a Planning-gain Supplement, the Code for Sustainable Homes and a revised PPS3.
HBF played a major role in representing members’ interests to the Barker Review team and generally welcomed the Review’s final findings and recommendations. We have a good, constructive working relationships with the ODPM and Treasury and will be actively involved in the forthcoming consultations. We will also be seeking members’ views through meetings, briefing papers and two special conferences in January (PPS3 and PGS) and February (a third major HBF Barker Conference) – for details contact: events@hbmedia.co.uk.
Our priority in assessing all of the new proposals will be whether they are practical and workable, and whether they will assist or impede achieving an increase in the supply of implementable planning permissions.
2. PLANNING-GAIN SUPPLEMENT (PGS)
The Treasury’s Planning-gain Supplement consultation is available on the Treasury’s web site at:
www.hm-treasury.gov.uk
The Government is consulting on the Barker suggestion of a Planning-gain Supplement (PGS) to help finance strategic and regional infrastructure while preserving incentives to bring forward land for development alongside a “scaled-back planning obligations system” (S106) “to matters affecting the environment of the development site and the provisional of affordable housing”. The PGS would be applied throughout the UK. The Treasury says “the workability of PGS is a key determinant in assessing the merits of this proposal”.
The PGS would not be implemented before 2008. It would cover residential and non-residential land, but exclude housing improvements. The Treasury says it would consider a lower PGS rate for brownfield land. It is still reviewing whether there should be a threshold to exclude smaller sites. It is considering allowing the PGS paid by the developer as an allowable expense for tax purposes. “For the purposes of capital gains the landowner will make, and be taxed on, a potentially smaller gain than if PGS had not been a factor.”
The PGS would capture a “modest proportion” of the uplift arising on land for which full planning permission has been granted. The Treasury does not specify the rate at which PGS would be levied.
“The base for calculating the PGS would be the “planning gain” – the difference between the land value with full planning permission (planning value or PVC) and the value of the land in its current use as permitted by the planning system (current use value or CUV). The charge would be calculated by applying the PGS rate to the difference between the two values.”
“Current use value is the market value of the land the moment before full planning permission is granted”, while the planning value would be determined at “the moment after full planning permission is granted. (“Land” would include any development currently on the site.) The expected costs of developing the land, including remediation costs, could affect the PV. Contributions made under a reformed planning obligation regime would be taken into account for the PV.
The PV and CUV would be self-assessed by the chargeable person and payment would be required when the development commenced. The Government proposes the creation of a statutory “Development Start Notice” procedure for sites with a potential PGS liability, with the “chargeable person” identified through this Notice. Development could not lawfully proceed without a validated Development Start Notice. The chargeable person would be required to make a PGS return to HM Revenue & Customs, including the two self-assessed valuations. Non-compliance measures are outlined in the consultation document. The Treasury also acknowledges the need for a transition period, with permissions granted before an appropriate appointed date not subject to the levy.
The proposed scaled-back system of planning obligations, known as the “development-site environment approach”, would reduce and clarify the range of matters that can be negotiated – see Consultation Document Table 5.2, page 27. “The exact nature and scale of the obligation requirements could still be governed by tests of relevance to planning; direct relationship to the development; reasonableness; and proportionality”, the proportionality test to become statutory. Affordable housing will remain within the scope of planning obligations.
The Treasury offers various options for allocating revenue raised by the PGS, but says it is an essentially local measure so that “a significant majority of PGS revenues will be recycled to the local level for local priorities”, with the “overwhelming majority” of funds recycled within the region from which they are derived.
The closing date for the PGS Consultation is Monday 27th February 2006.
HBF COMMENT
The Treasury appears to have taken on board many of HBF’s concerns, outlined in a submission in May 2005. However HBF will need to consult widely on the proposals, including their relationship with the proposed scaled-back planning obligations system. In responses to the ODPM and press, we have stressed that concerns about the PGS centre on whether it would be compatible with increasing the supply of land with planning permission. We have also stressed the need to achieve political consensus for any final proposal.
3. GOVERNMENT’S RESPONSE TO BARKER REVIEW
The Government’s response to the Barker Review is available on the Treasury’s web site at:
www.hm-treasury.gov.uk
The government accepted the case set out in Barker of a step change in housing supply, noting the ODPM’s own projections for average household formation of at least 190,000 per year in England up to 2021, as against annual net new housebuilding of around 150,000 currently. The response also noted that homes need “to be well designed built and maintained” and “new homes must have supporting infrastructure.”
The response says that “new housing supply in England will need to increase over the next decade to 200,000 net additions per year, within the range of house building exemplified by Kate Barker.” The Government announced that it will further reform the planning system to “ensure that local and regional plans prepare and release more land, in appropriate places, and at the appropriate time, to meet our future housing needs.” The Government also announced a consultation on the Planning-gain Supplement (PGS) [see above] to “help local communities fund and deliver the infrastructure necessary to support housing growth”, as well as a review to coordinate “the strategic delivery of infrastructure necessary to support housing growth and share in its benefits” in the run up to the 2007 Comprehensive Spending Review.
The government has accepted Barker’s proposal that planning “should reflect long-term objectives for affordability, set out at both the national and regional level and will bring forward detailed proposals as part of the Comprehensive Spending Review process.”
Regional Planning Bodies and Regional Housing boards are to be merged by September 2006. A National Advice Unit will be set up “to strengthen the evidence and analysis on improving housing market affordability available to regional planning bodies throughout the regional planning process.”
The Government is to publish a new Green Belt Direction to further protect against urban sprawl, requiring certain planning applications on Green Belt sites to be referred to the Secretary of State.
The Government welcomed steps the industry has taken on Barker recommendations, particularly the annual survey of customer satisfaction and “development of a strategy from the increased use of modern methods of construction, led by the Home Builders Federation.” The Government is awaiting HBF’s proposals for a model form of contract and HBF has also been charged with compliance to the framework provided by the OFT’s Consumer Codes Approval scheme.
However, “the Government remains concerned that the industry continues to show strongly cyclical behaviour, despite rising long-term demand…. The Government will continue to monitor the industry’s progress in addressing the Barker recommendations as well as the level of overall competition in the sector.”
4. CODE FOR SUSTAINABLE HOMES
The draft Code for Sustainable Homes is available on the ODPM web site at:
www.odpm.gov.uk
Today the Government announced the publication of the consultation on the Code for Sustainable Homes which runs until 6 March. The aims of the Code are to improve environmental protection while constructing new homes. It builds on the approach of the EcoHomes standard and will set a star rating of 5 levels for homebuyers on the energy efficiency and environmental sustainability of new homes.
The Labour Party manifesto for the code states
From April 2006 all new homes receiving Government funding will meet the new Code for Sustainable Buildings and we will encourage local authorities to apply similar standards to private homes
All new homes built by RSLs (or others) with Housing Corporation funding will comply with higher levels of the Code together with homes developed by English Partnerships and any of the ODPM’s housing growth programmes.
Our yardstick in assessing this government proposal is whether it is an efficient and cost-effective way of encouraging further improvements in sustainability as part of an increase in housing supply.
On that score, while we welcome the less prescriptive approach set out in the proposed code, if it is going to assist the delivery of new housing there remain some significant issues to resolve, notably the code’s relationship with the planning system.
Although voluntary, it would appear that the code could be required as a planning condition, thereby making compliance mandatory not voluntary. This could cause further delays to planning applications.
There are other areas in the technical detail of the code that our working party will be addressing at their next meeting. A more detailed briefing will be issued to members shortly and HBF will be responding officially to the Government’s consultation.
5. PPS3
The PPS3 Consultation Document was released by the ODPM too late for inclusion in this News Release. A Summary will be emailed tomorrow (Tuesday). The ODPM web site link is:
www.odpm.gov.uk
6. HBF PRESS RESPONSE TO TODAY’S ANNOUNCEMENTS
The following is HBF’s immediate press response, released this evening. We will be circulating a more detailed release tomorrow (Tuesday). During today, HBF has been heavily involved with the press, including a range of radio and TV interviews (BBC, Sky, Channel 4) with Executive Chairman Stewart Baseley.
Monday 5th December
Home Builders Response to Pre-Budget Report
The Home Builders Federation (HBF) today welcomes the Government's renewed endorsement of the Barker Review and the need for a step change in housing supply. The HBF also welcomes the opportunity to play a full part in building the new consensus on housing provision called for by the Chancellor.
The key test of the proposals will be their workability - in particular whether they lead to an increased land supply for the housing that is so greatly needed to meet our future social and economic well-being.
Commenting after the pre-budget report, Stewart Baseley, Executive Chairman of the HBF, says:
"The Home Builder's Federation, wants to ensure that the country has the right number of new homes, of the right types in the right locations. The Government's increasing commitment to increase housing supply is to be applauded. Over the next 20 years there is a real possibility that housing supply can be brought into a better equilibrium with demand and aspirations, giving more people the opportunity to buy a home of their own. If we are to achieve this we need to ensure that we have a planning system and fiscal environment that helps, not hinders, the industry to build more homes. We will be participating fully in the discussions launched today to further this objective."
John Stewart
5 November 2005