Following the government’s “fiscal event”, Matthew Spry of Lichfields examines the key policy announcements on Investment Zones and meeting the housing need
Throughout the summer, we had been awaiting the government’s intentions for how it will complement the Levelling Up & Regeneration Bill with a reformed policy for planning. Initially expected in July, changes at Number 10 have heralded both a delay and a directional shift. The Growth Plan “fiscal event” and subsequent turmoil highlighted planning as a totemic supply-side intervention relied upon to deliver the former prime minister’s priority of “growth, growth, growth”.
During its brief period in office, the Truss regime made much of its Investment Zones policy. Councils and combined authorities feverishly assembled bids, with identified sites (typically already in local plans or on brownfield registers) hoping to benefit from tax reliefs and undefined planning freedoms. But this work may have been in vain, with reports that the new initiative will be downscaled or even abolished.
Removing the Standard Method for local housing need
Another much-anticipated policy – and one more likely to survive a new prime minister and have a more striking impact – is the removal of top-down housing targets, which planners call the Standard Method for calculating housing need. This was a leadership election policy of both Rishi Sunak and Liz Truss, the latter memorably describing the targets as “Stalinist”.
As we explain in our blog, this comes as housing delivery heads in the wrong direction: inertia since the 2020 White Paper has stalled local plan-making. Year-on-year starts on site are down 15%, net additions are down 11%, and just 280,000 homes were granted permission, down 16%. And with market turmoil impacting mortgage availability, Capital Economics forecasts a further fall in starts of 38% to just 110,000 in 2023 and 2024, before a small recovery to 130,000 in 2025.
None of this is good for economic growth or the ability of families to get on the housing ladder.
The Standard Method is disliked by “blue wall” MPs because it inflates housing numbers in their constituencies, where housing is least affordable, and businesses struggle most to recruit. And yet the government’s stated aim in its reforms is to “boost housebuilding and drive economic growth”.
Targets help to deliver homes
But how? Analysis by Lichfields has tracked the rate of housebuilding over the past 30 years, during which national policy has been through two distinct phases. It tells us that, when allied to a policy strongly focused on meeting needs, targets help deliver homes. Kate Barker’s seminal 2004 report was a watershed; between 1991 and 2005, despite a generally strong economy, housing delivery was low (annual additions hovered around 150,000-160,000), with planners directed to concentrate on achieving a 60% brownfield land target.
From 2005, the policy increased emphasis on need and delivery, strengthened in 2012 by the NPPF. The flow of housing additions in the 15-year period post-Barker has been higher (averaging 185,000). Strip out the five years of the financial crisis, and annual output has been 210,000. The past five years (output driven by the NPPF) saw an average of almost 230,000. Not enough, but gathering momentum.
Why do targets work?
They help council planners strike a balance between the benefits and impacts of new development in the public interest, cognisant of the need for people to have quality homes and for businesses to access local labour. They help areas plan for infrastructure and direct public investment to where it gives the most policy bang for the buck.
Without a target, it becomes too easy for councils – often politically ambivalent to development – to reduce the supply of homes they provide and “duck difficult decisions” (as the 2017 White Paper put it).
So what does ditching the Standard Method mean for how many homes are built? It depends on the policy replacement, but a vacuum or “target-lite” approach could mean just 140,000-160,000 homes. Why? Because left to their own devices, councils would probably start with ONS (2018-based) household projections (currently 164,000 per annum, baking in constrained household formation), and many would soften their ambitions in the face of perceived constraints or shortage of land, without the expectation that neighbouring areas pick up the slack. Any dividend from deregulation or tax breaks might not generate additionality because councils would simply offset this by reducing their land allocations on the basis that they were no longer ‘needed’.
Better would be to take a fresh look at the system introduced by the 2012 NPPF, but with a streamlined plan-making process (linked to digital reform), clearer evidential and data parameters for assessing needs locally, and better governance for dealing with planning across our city-regions. This can sit alongside – not cut across – sensible ambitions for delivering improved design quality, place-making, and achieving net zero carbon.
With political will, the tools are available for a more effective approach to planning for the homes we need. Still, prolonged uncertainty or a target vacuum will make it harder for supply to bounce back from the inevitable downturn.
Matthew Spry
Senior director, head of London office
Lichfields
Tel: +44 (0)20 7837 4477
