NAO: ‘Underperforming’ planning system can’t meet housing demand

8 February 2019 | By Neil Gerrard

Image: Dreamstime / Brinkstock

The government’s ‘underperforming’ planning system cannot demonstrate that it is meeting housing demand effectively.

That’s according to the National Audit Office (NAO), which has called on the government to ensure that its new planning policies improve the way it assesses how many houses are required and ensure developers contribute to local infrastructure.

The NAO highlighted how, despite the Ministry of Housing, Communities & Local Government’s (MHCLG) target of building 300,000 new homes per year from the mid-2020s, housebuilding has never exceeded 224,000 homes per year since 2005-06.

That means MHCLG will need to oversee a 69% increase in the average number of new homes built.

The NAO highlighted “weaknesses” in the method MHCLG has required local authorities to use since 2017 to assess the number of new homes needed in their area.

“Compared with the need assessed previously by local authorities, the standard method reduces the need for new homes in five out of nine regions, which could hamper local authorities’ plans to regenerate. The standard method sharply increases the need in London – 31,723 homes were built in 2017-18 but this will need to more than double to meet what the department thinks is necessary,” the NAO said.

The government has said that it plans to revise the method it uses.

Local authority criticism

Meanwhile, the NAO found that as of December 2018, only 44% of local authorities had an up-to-date local plan setting out their strategies for meeting the need for new homes, despite it being a legislative requirement.

“If a local authority can’t show it has a five-year supply of land for housing, developers have greater freedoms to build where they want, risking ill-suited developments. As of November 2018, the department had only challenged 15 local authorities that do not have an up-to-date plan,” the NAO warned.

And the NAO pointed out that it was “difficult” to deliver the infrastructure needed to accompany new homes because  government departments are not required to tie their investment strategies with local authorities’ infrastructure plans, creating uncertainty about how some infrastructure will be funded.

“The department has only done a rough estimate of the infrastructure funding required for new homes, so future costs are uncertain,” the NAO said.

It also warned that the systems to get developers to contribute to infrastructure costs are “not working effectively”, with developers successfully renegotiating initially agreed contributions on the basis they will be unable to maintain profit margins. Contributions agreed with developers slightly decreased between 2011-12 and 2016-17, despite house prices in England increasing by 31% and profit margins of top developers increasing.

“If developers do not contribute, either less infrastructure is built or local authorities or central government must pay more. The Department is introducing reforms in this area, but some will not take effect for several years,” the NAO said.

Planning Inspectorate 'slow' on appeals

And it cautioned that the Planning Inspectorate is slow to determine appeals from developers whose applications have been refused, with the time taken to determine an appeal increasing from 30 weeks to 38 weeks between 2013-14 and 2017-18.

Total spending by local authorities on planning functions, such as processing planning applications, fell 15% in real terms between 2010-11 and 2017-18. “The Department has attempted to deal with a shortage of planning staff in local authorities, for example by funding a bursary scheme, but it does not know the extent of the skills gap as it lacks comprehensive data. The Planning Inspectorate has struggled to recruit, experiencing a 13% fall in staff between 2010 and 2018,” the NAO said.

Meanwhile, it said that while MHCLG’s National Planning Policy Framework, published in July 2018, was an “important step” in planning policy but it is too early to tell whether the changes it introduces will be effective. It urged MHCLG to monitor the gap between its ambition for 300,000 new homes and what is being planned regularly and to work with local authorities and other government departments to ensure that infrastructure is delivered more effectively.

Amyas Morse, the head of the NAO, said: “For many years, the supply of new homes has failed to meet demand. From the flawed method for assessing the number of homes required, to the failure to ensure developers contribute fairly for infrastructure, it is clear the planning system is not working well. The government needs to take this much more seriously and ensure its new planning policies bring about the change that is needed.”

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