On Tuesday 7 February, the Department for Communities & Local Government (DCLG) released its much awaited housing white paper, entitled “Fixing Our Broken Housing Market”.

The scale of the challenge is clear. Sajid Javid, the Secretary of State for Communities and Local Government, stated in the House of Commons that “relative to population size, Britain has had Western Europe’s lowest rate of house-building for three decades.”

Although the Paper was greeted with cautious optimism, in this summary Neil Lambert interprets the key announcements and poses the question, will these proposals ultimately fix any of the market’s well-documented problems?

The following areas face changes as a result of the white paper:

Private Rented Sector (PRS) Tenancies

When introducing the white paper in the House of Commons the Secretary of State announced that all PRS tenancies for new build properties will be for a minimum term of three years. Current PRS tenancies will not be impacted by this change in policy.

The intention of this change is clear – those who are renting should have a sufficient degree of certainty over how long they will remain in the property. Currently new build properties could be let on six month tenancies offering very little security. Javid expressed the hope that this will allow renters the stability to be able to save deposits for a new home.

Councils

Councils will be asked to encourage the building of housing in greater density where local infrastructure supports such development.

Furthermore, councils will have to only wait two rather than three years to issue a completion notice to a developer to force the developer in question to begin construction once planning permission has been granted.

The intention here is clear. Developers should not get away with land banking, where they obtain planning permission and then delay construction for as long as possible, thus holding up valuable new completions. Of course developers could now just wait longer before applying for planning permission to get around this if they choose to do so.

Affordable Housing

Not a great deal was said about affordable housing although a promise was made to amend the definition of ‘affordable’ in a housebuilding context.

As part of the £1.4 billion funding earmarked for the housing sector (as part of the Affordable Homes Programme), developers have been promised a consultation to allow the opportunity to develop more affordable rent along with other forms of affordable housing. Councils will also be urged to prioritise Build to Rent schemes and make the construction of affordable homes easier.

Homes England

Homes England is the new name for the funding arm of the Homes and Communities Agency, after it was announced that the funding and regulatory arms would be separated. Homes England will aim to “make a home within reach for everyone”. The regulatory arm’s powers are still to be confirmed after the changes announced in the Housing and Planning Act 2016, with more information anticipated later during Spring 2017.

Increased number of developers?

60% of all properties are constructed by only 10 developers. The Government are looking to reduce this percentage by increasing competition. This will be achieved through the £3 billion Home Building Fund which will provide loans to small developers, along with essential local infrastructure to ensure that a project can go ahead. It is hoped that along with the requests to councils to prioritise Build to Rent, this will encourage smaller developers to re-enter a market they had seem themselves too small to compete in.

Lifetime ISA

The government has announced the Lifetime ISA which rewards savers by giving 25% of any savings up to £1,000 per year (i.e. the saver puts aside up to £4,000 per annum and the Government provides up to £1,000 per year). To receive the 25% bonus the savings must be used towards the purchase of the savers first home (or else can be withdrawn with the bonus when the saver reaches 60.)

Green belt ‘safe’

The green belt (13% of all land in the UK) has retained its protected position. Sajid Javid stated that there is enough available alternative land in which to solve the housing crisis, but he did however go on to say, that in exceptional circumstances after all other options had been considered, a council may consider permitting construction on green belt land.

Sajid Javid went on to say that “Government shouldn’t be in the business of land-banking, so we will free up more public sector land more quickly…We will increase transparency around land ownership, so everyone knows if someone is unfairly sitting on a site that could be better used.”

Vacant land

The Government has proposed to make it easier to establish who owns land, including who has options to purchase land and the owners of restrictive covenants over land. The intention is to introduce a Bill into Parliament to implement the Law Commission’s proposed amendments to restrictive covenants. This will provide greater clarity over who owns, or more importantly who controls, certain pieces of vacant land.

The Government will also publish information on their land ownership to help speed up the process of selling off land which would be suitable for development.

It is hoped that with greater clarity over who owns/controls land, deals can be made and more properties built.

Housing Associations

The White Paper has confirmed that rents charged by housing associations will continue at -1% per annum until 2020, but that a new rental strategy will be announced for the period thereafter. Further to this the Government have announced that it is committed to keeping housing associations in the private sector (and therefore keeping their £60 billion of debt off the Government’s books) and will take the necessary measures to return them after being re-classified as public sector bodies by the Office for National Statistics.

Conclusion

John Healey, Shadow Secretary of State for Housing, described the paper as “feeble beyond belief”. It is certainly not the fundamental shake up to the system that Sajid Javid had been alluding to prior to the Paper’s release.

In short, the paper appears to offer some welcome clarity and tidying up, but hardly sets out the revolutionary changes to the system which are required to put the UK’s housing market on better – and more stable – foundations.


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Neil Lambert

Senior Associate

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+44(0)20 7551 7603

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n.lambert@bwbllp.com
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Posted on 08/02/2017 in Legal Updates

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