The 2018 Autumn Budget was announced by the Chancellor, Philip Hammond, on 29 October 2018. The last Budget before Brexit suggests a change of direction for the Conservative government after years of austerity. This article identifies some of the key points from the Budget that will have an impact on developers and local planning authorities.
Building more homes
As a result of the ongoing housing shortage in the UK, the government continues to state its commitment to build more homes.
The Chancellor announced that a further £500 million will be provided by the government for the Housing Infrastructure Fund, which is intended to enable up to 650,000 new homes to be built and means that the total fund is now worth £5.5 billion. The additional £500 million will provide additional funding for new infrastructure, in order to encourage housing development in areas of high housing demand. The example of the Docklands Light Railway is given as a beneficiary of the Fund, as it alone will receive £291 million which will be used for essential investment, aimed at unlocking 18,000 new homes in East London.
In addition, local authorities will be allowed to borrow more in order to build new homes. From the date of the Budget, the cap on the amount of money that a local authority can borrow for this purpose has been removed. Similar immediate measures are also being introduced by the Welsh Government.
Other notable announcements include:
- There will be a new scheme providing guarantees to support up to £1billion of lending to smaller house-builders.
- Up to 500 neighbourhoods will be assisted (through £8.5million of resource support) to allocate or permission land (through neighbourhood plans and development orders) for housing that can be sold to local people at an affordable price.
- The government will provide £653 million for strategic partnerships with nine housing associations in England to deliver over 13,000 homes.
High streets
Another way the Budget attempts to address the current housing shortage is by suggesting that more homes could exist on high streets.
The rise of online shopping in the UK means that high streets are under threat and, therefore, the Budget promises a range of measures to support high streets. As well as promising reductions in business rates, the Chancellor announced that a £675 million Future High Streets Fund will be spent on improving transport links, redeveloping empty shops and restoring historic properties.
Furthermore, the government has promised to consult on how the current planning rules can be modernised to facilitate the transformation of the high street. Proposals have been set out for new permitted development rights and there are suggestions that there may be further changes to the existing use class orders to make it easier to establish new mixed-use business models on the high street.
The Chancellor called for the process of converting commercial properties to new homes to be simplified. While one estimate points out that 300,000 – 400,000 new homes could be created from these measures, others believe that the relaxation of the planning regulations to convert commercial buildings will only create undesirable housing.
Independent review of build out
The 2017 Autumn Budget announced that Sir Oliver Letwin would chair a review panel looking into how to close the gap between planning permission being granted and houses being completed. The report has now been published.
The report concludes that large housebuilders are not responsible for systematic 'land banking' and that the homogeneity of housing types and tenures are at the root of the slow rate of build out. Developers will no doubt welcome this news, which confirms the position that they have been advocating for some time.
It recommends that the government should adopt a new set of planning rules which will require developers to diversify the housing on offer in areas of high housing demands to increase the market absorption rates of new homes.
It also suggests establishing a National Expert Committee to advise local authorities on these diversity requirements and to arbitrate in the event of any disagreement between the developer and the local authority.
The report gives short-term and long-term suggestions. In the short-term, it recommends that local authorities should promote diversity of types/tenures of housing through incentives, such as making any future government funding in relation to the site conditional on having a s106 agreement which conforms to new diversity rules. In the longer term, local authorities should be provided with specific powers to ensure a high degree of diversity on large sites (over 1,500 units).
The report also finds that local authorities should have the power to ensure that certain sites can only be developed as a single large site and that councils should have the power to purchase large sites compulsorily. The report points out that the open market value for land with permission subject to Letwin’s proposed stringent, large site, diversity rules would be less than for land with permission in the current regime. It notes that money would then be available to contribute to the cost of infrastructure and affordable housing.
The Chancellor promised that the government will respond to the report in full in February 2019.
Land value uplift
The Budget confirms that the government will change its existing measures for capturing land value uplift in England. The aim of this is to simplify the system and to give developers and local authorities more certainty with regards to developer contributions. It is also intended to allow local areas to capture a larger proportion of any uplift in land values for infrastructure and affordable housing.
The detail of this is included in Ministry of Housing, Communities and Local Government's (MHCLG) response to its consultation on supporting housing delivery through developer contributions (issued alongside the Budget).
The changes set out in the Budget include making it easier to set a higher zonal Community Infrastructure Levy (CIL) in areas of high land value uplift (which could well prove to be controversial) and removing pooling restrictions on section 106 contributions in all areas. The removal of 'pooling restrictions' is likely to be welcomed by local planning authorities, although it was announced in the 2017 Autumn Budget so it is not unexpected.
The MHCLG consultation response suggests that changes may be made to the CIL Regulations to incentivise the build out of developments and states that the government will legislate to require reporting of developer contributions from CIL and s106 obligations through an Infrastructure Funding Statement, in a bid to increase transparency.
The Budget also states that the government intends to introduce a strategic infrastructure tariff for combined authorities and joint planning committees with strategic planning powers, which, again, is not a new concept.
The government says that it will take forward proposals to make it clear that local authorities can seek a fee from applicants towards monitoring planning obligations.
Roads
A total of £28.8 billion between 2020–2025 has been pledged by the government to improve roads in England. Road tax will fund a National Roads Fund which will include £25.3 billion for the strategic road network (Roads Investment Strategy 2) which incorporates motorways, trunk and A roads. This is a substantial cash injection to maintain and upgrade England’s major roads and builds on the government’s Roads Investment Strategy 1. In addition, £420 million of the National Roads Fund will be directed towards local roads and further funds have been promised towards renewing bridges and tunnels and improving local traffic hotspots.
Sustainable transport
The Transforming Cities Fund will be extended by a year to 2022–23. This will provide additional funding for significant transport investment in certain areas (where there are metro mayors) and will be focused on supporting local and sustainable modes of transport.
Infrastructure strategy
The Budget included a commitment that the government will respond in full to the National Infrastructure Commission’s (NIC) 'National Infrastructure Assessment', through a National Infrastructure Strategy that is due to be published in 2019. An interim report was published alongside the Budget, which set out the government’s investment record and progress in the priority areas identified in the NIC’s report. A further NIC study (due Spring 2020) is also being commissioned, which will consider how to improve the UK’s infrastructure in light of technological advances and future challenges, such as climate change. An infrastructure finance review will also take place, although no timeframe has been given for this.
Clean growth
The Budget sets out a series of measures designed to accelerate the shift to a clean economy, including:
- An Industrial Energy Transformation Fund and a potential new Business Energy Efficiency Scheme – both to assist businesses with energy efficiency.
- An additional £20 million in funding to support local authorities to meet air quality obligations.
- Flood risk management measures and funding of £13 million to tackle risks from floods and climate change.
- A £20 million investment to address issues around plastics and recycling.
- Support of £10 million to the Environment Agency to work with partners to clear abandoned waste sites.
Interestingly, there is no mention at all of investment in renewable energy in this Budget, despite the apparent determination of the government towards a clean economy.
Commentary
The Budget promises that austerity is coming to an end with additional funding pledged in relation to housing, infrastructure, roads and transport. However, the Chancellor warns that discipline will remain and critics will argue that further spending is required to deal with issues such as the housing shortage. Some will be unconvinced whether the relaxation of planning legislation to promote housing on high streets will help to alleviate the current problems. It also remains to be seen how the government plans to improve build out rates in light of the report by Sir Oliver Letwin.
How can Burges Salmon help?
Burges Salmon regularly advises developers and local authorities on all aspects of planning and compulsory purchase, including housing, transport and other infrastructure. For more information or to discuss any of the issues raised in this article please contact Gary Soloman or Jen Ashwell.