The Secretary of State for Communities and Local Government (Sajid Javid)
With permission, Madam Deputy Speaker, I would like to make a statement on the latest stage of our work to fix this country’s broken housing market.
As I told the House in February when I published our housing White Paper, successive Governments all the way back to the Wilson era have failed to get enough new homes built. We are making some progress on tackling that: 189,000 homes were delivered last year and a record number of planning permissions granted, but if we are to make a lasting change and build the homes we need to meet both current and future demand, we need a proper understanding of exactly how many homes are required, and where.
The existing system for determining the number of new homes needed in each area is simply not good enough. It relies on assessments commissioned by individual authorities according to their own requirements and carried out by expensive consultants using their own methodologies. The result is an opaque mishmash of figures that are consistent only in their complexity. Such a piecemeal approach simply does not give an accurate picture of housing need across the country. Nor does it impress local people who see their area taking on a huge number of new homes, while a town on the other side of a local authority boundary barely expands at all.
If we are to get the right number of homes built in the right places, we need an honest, open and consistent approach to assessing local housing need, and that is exactly what we are publishing today. The approach that we are putting out for consultation follows three steps. The first step is to use household growth projections published by the Office for National Statistics to establish how many new homes will be needed to meet rising need. I should point out that those projections already take account of a substantial fall in net migration after March 2019, but that number simply shows the bare minimum that will be required in order to stand still. If we only meet rising demand, we will do nothing to fix the broken housing market, a situation caused by the long-term failure to match supply with demand.
The second step, therefore, is to increase the required number of homes in less affordable areas. In any area where average house prices are more than four times average earnings, we will increase the number of homes planned. The assessment goes up by 0.25% for every 1% that the affordability ratio rises above four. Of course, the state of the housing market means that in some areas, doing so would deliver large numbers of homes that go well beyond what communities have previously agreed to as part of their local plans.
That is why we have added a third stage of the assessment, which is to set a cap on the level of increase that local authorities should plan for. If a local authority has an adopted local plan that is less than five years old, the increase will be capped at 40% above the figure in the local plan. If the plan is not up to date, the cap will be 40% above either the level in the plan or the ONS projected household growth for the area, whichever is higher.
Those three steps will provide a starting point for an honest appraisal of how many homes an area needs, but it should not be mistaken for a hard and fast target. There will be places where constraints, such as areas of outstanding natural beauty or national parks, mean that there is not enough space to meet local need. Other areas may find that they have more than enough room, and they may be willing and able to take on unmet need from neighbouring authorities.
Such co-operation between authorities is something that I want to see a lot more of. To the frustration of town planners, local communities are much more fluid than local authority boundaries. People who live on one side of a line may well work on the other, communities at the edge of a county may share closer ties and more infrastructure with a community in the neighbouring county than they do with another town that is served by their own council, and so on.
From talking to the people who live in these kinds of communities, it is clear that they get frustrated by plans based on lines on a map, rather than on their day-to-day, real-life experience. Planning authorities are already under a duty to co-operate with their neighbours, but that duty is not being met consistently. Today, therefore, we are also publishing a statement of common ground, a new framework that will make cross-boundary co-operation more transparent and more straightforward. Under our proposals, planning authorities will have 12 months to set out exactly how they are working with their counterparts across their housing market area to meet local need and to make up any shortfalls.
The methodology that we are publishing today shows that the starting point for local plans across England should be 266,000 homes per year. Nationwide, this represents a 5% increase on the upper end of local authority estimates, showing that the local planning system is broadly on target. For almost half of the authorities for which we have data, the new assessment of need is within 20% either way of their original estimate. Nearly half—148—will actually see a fall in their assessments, which are going down by an average of 28%. In the other 156 areas, where the assessed need will increase, the average rise is 35%, but in most cases the increase will be more modest: 77 authorities see an increase of more than 20%.
We are not attempting to micromanage local development. This is not a return to Labour’s ineffective and unpopular top-down regional strategies, which we abolished in 2010. It will be up to local authorities to apply these estimates in their own areas; we are not dictating targets from on high. All we are doing is setting out a clear, consistent process for assessing what may be needed in the years to come. How to meet the demand, whether it is possible to meet the demand, where to develop, where not to develop, what to develop, how to work with neighbouring authorities and so on remain decisions for local authorities and local communities.
New homes do not exist in a bubble. New households need new school places, new GP surgeries, greater road capacity and so on. That is why earlier this year we launched our new housing infrastructure fund. Worth a total of £2.3 billion, it ensures that essential infrastructure is built alongside the new homes that we need so badly. We will explore bespoke housing deals with authorities that serve high-demand areas and have a genuine ambition to build, and we are providing further support to local authority planning departments with a £15 million capacity fund.
Those are our proposals, but experience tells me that as soon as I sit down, the right hon. Member for Wentworth and Dearne (John Healey) will leap to his feet, bang his fist on the Dispatch Box and tell us that today’s announcement is not enough and that it will not get homes built—and you know what, Madam Deputy Speaker, he will be absolutely right. These measures alone will not fix our broken housing market. I make no claim that they will. As the White Paper made clear, we need action on many fronts, and this new approach is one of them. On its own, it will simply provide us with numbers, but taken with the other measures outlined in the White Paper, it marks a significant step in helping to meet our commitment to deliver 1 million new homes by 2020 and a further 500,000 by 2022.
It is so important that we fulfil such a commitment because the young people of 21st-century Britain are reaching out, in increasing desperation, for the bottom rung of the housing ladder. For the comfortably housed children of the ’50s, ’60s and ’70s to pull up that ladder behind them would be nothing less than an act of intergenerational betrayal that our children and grandchildren will never forget or forgive. If we are to avoid that and if we are to fix the broken market and build the homes that the people of this country need and deserve, we—all of us together—must start with an honest, open, objective assessment of what is needed and where. Today’s publication provides the means for making that assessment, and I commend it the House.