Let councils buy big housing sites at ten times existing use value, advises Letwin

BUDGET 2018: Local authorities should have statutory powers to buy large housing sites at prices of around ten times existing use value rather than the 'huge multiples' that currently apply, the government's adviser on increasing the rate at which planning permissions are built out has said in his final report.

Oliver Letwin
Oliver Letwin

In his final report on his independent review of build-out rates, Sir Oliver Letwin recommends that the government should give planning authorities in places with high housing demand the power to designate certain areas within their local plans as land which can be developed only as single large sites.

The former Tory Cabinet member says ministers should give councils clear statutory powers to buy the land designated for such large sites compulsorily. He said that councils should be ablr to do so at prices that reflect the value of those sites once they have planning permission and masterplans that reflect the new requirements for greater housing diversity he recommends.

Letwin says local authorities should be given guidance to "press the diversity requirements to the point where they generate a maximum residual development value for the land on these sites of around ten times existing use value".

Elsewhere in his review, he also recommends:

  • new planning rules for sites of more than 1,500 homes in high demand areas requiring diversity of housing product
  • the creation of an expert committee to arbitrate between developers and authorities where diversity requirements prompt an appeal
  • the creation of new vehicles through which authorities can control the development of large sites

Letwin’s recommendations reflect his conclusion in his draft analysis, published in June, that
the "homogeneity" of the types and tenures of homes on offer on large sites, and the limits on the rate at which the market will absorb such homogenous products, "are the fundamental drivers of the slow rate of build-out".

He says his recommendations set out ways in which the government could increase the variety of what is offered on these large sites, raise the proportion of affordable housing and raise the rate of build-out.

He says the government should:

  • Adopt a new set of planning rules for all future large sites (which would initially be defined as those over 1,500 units) in areas of high housing demand, requiring those developing such sites to provide a diversity of offerings, in line with diversification principles in a new planning policy document.
  • Establish a "national expert committee" to advise local authorities on the interpretation of diversity requirements for large sites and to arbitrate where the diversity requirements cause an appeal as a result of disagreement between the local authority and the developer.

With the aim of maximising the chances that the new planning rules for large sites will have an early effect, he recommends that the government should:

  • Make any future government funding for housebuilders or potential purchasers on sites of over 1,500 units conditional upon the builder accepting a section 106 agreement that conforms with the new planning policy for such sites.
  • Consider allocating a small amount of funding to a large sites viability fund to prevent any interruption of development on existing large sites that could otherwise become non-viable for the existing builder as a result of accepting the new diversity provisions.

If local authorities were to be given the power to designate certain areas within their local plans as land which can be developed only as single large sites, Letwin further recommends that ministers should "give local authorities clear statutory powers to control the development of such designated large sites through either of two structures".

The first of these would be a local development company (LDC) to carry out the development role by establishing a masterplan and design code for the site, then bringing in private capital to pay for the land and invest in the infrastructure, before "parcelling up" the site and selling individual parcels to particular types of builders or providers offering housing of different types and different tenures.

The second would involve the authority establishing a local authority master planner (LAMP) to develop a masterplan and full design code for the site, then enable a privately financed infrastructure development company (IDC) to purchase the land from the local authority, develop the infrastructure of the site and promote the same variety of housing as in the LDC model.

In the Budget documents, the government says it will respond to Letwin's review in full in February 2019.
It also says that the review "found no evidence that speculative land banking is part of the business model for major housebuilders, nor that this is a driver of slow build out rates". 

Responding to the document, RTPI president John Acres said the recommendations signal a "much overdue strengthening of public sector planning" and reflect a "full grasp of the fact that untrammelled market forces alone have not been delivering enough homes and will not deliver what the people need". 

"The delivery role of the public sector has been limited in recent years to responding to private sector proposals," Acres said. "We also support the core proposal that sites need greater diversity in home type and tenure, but believe this needs to be extended across a much wider section of the housing market, not only to very large sites".

The property industry umbrella group also responded positively. Melanie Leech, chief executive of the British Property Federation, said Letwin's drive for a more diverse, multi-tenure approach to large sites would help "to address market absorption rates and deliver homes quicker and help to create more sustainable places, home to different demographics, socio-economic backgrounds, fostering a greater sense of community".

But others were more sceptical. Matthew Spry, senior director at consultancy Lichfields, said that Letwin was proposing a "parallel planning system for all sites of 1,500 plus units". He tweeted: "Is what is, in effect, the nationalisation of the master developer role for large sites realistic? The risk appetite and capacity among local authorities is decidedly unproven, particularly in places where large schemes are most needed".

The representative body for landowners, farmers and rural businesses was critical of the review. "We are concerned that planning authorities would be given the ability to unilaterally decide where large scale housing development should take place, backed up by the threat of compulsory purchase, irrespective of the wishes of the landowner," said CLA president Tim Breitmeyer.  

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