Letwin’s push for housing diversity risks further complexity

Sir Oliver Letwin’s review of “build-out rates” was, as promised, delivered on time as part of the Budget, writes Jonathan Seager, executive director, policy, at London First. I suppose it had to be, given the topic. The verdict? Well, it’s hard to say. In dealing with a complex set of issues, Sir Oliver has gone for a complex set of solutions. Trying to unpick his proposed “build-out bureaucracy” could become a full-time job itself. The Letwin Review was initiated by the government as part of a broader push to get the housing industry firing on all cylinders and tackle a lingering political concern that volume housebuilders were, in some way, not doing their bit on delivery. The review was tasked with understanding why there is a gap between housing completions and the amount of land allocated or permissioned to build on in areas of high housing demand – and looking at how this gap could be closed. Letwin produced a thoughtful interim analysis earlier in the year, and it was always going to be interesting to see how he could tackle this issue. Based on his interim findings, he was never going to rip apart the volume housebuilder model; instead his aim was to try to find a clever workaround to encourage a greater diversity of housing provider to deliver a greater diversity of housing product. In other words: how could large sites typically delivering a for-sale product be encouraged to deliver other tenures of housing – such as affordable or build to rent – and to diversify the size and design of homes? His top-line recommendations are that the government should: introduce new planning rules for all future large sites (1,500 homes or more) in areas of high housing demand, requiring these sites to provide a diversity of homes (as set out in the new detailed policy); and create a new group – the National Expert Committee – to advise on the interpretation of the diversity requirements of the new policy and settle any disagreements between local authorities and developers. Letwin suggests the new planning rules should kick in from 2021. But to encourage early adoption, an incentive (for that read penalty) should be offered to developers, which makes future government funding for housebuilding contingent on accepting the new planning rules. If these new rules pose a challenge to a scheme’s viability, there could be a “small amount of funding” available to address concerns. Alarm bells ringing yet? That’s another layer of planning policy and a new non-departmental body created in a blink of the eye. And how realistic is it to retrofit new policy to live schemes? Furthermore, what are the chances that adequate funding will be put in place to address genuine viability concerns? Looking longer term, Sir Oliver gets even more complex and radical. He calls for the government to: give local planning authorities the power to designate areas as land that can be developed only as a large site and in conformity with the new diversity rules; give local authorities the power to purchase land for large sites that reflect the diversity requirements – he suggests that the level of diversity that should be introduced should generally cap residual land values for large sites at around 10 times their existing-use value; and create new powers for large sites to be brought forward through two different structures – essentially one led by the public sector and one eventually led more by the private sector. These are potentially substantial reforms that would not only push Letwin’s diversity requirements but also start to stray into other big areas such as land value capture. As is so often the case, a document written for central government overlooks the nuance about how the planning system operates in London. Some of the suggestions in the report, to some extent, are already features of London’s planning system, and the report’s frequent references to Homes England playing a central role in the new system would need to be modified for London – where, in the main, the GLA undertakes Homes England’s role. It is entirely legitimate for public policy to consider how large sites could be built out more quickly, and Letwin’s focus on trying to introduce a broader range of tenures and styles into such sites does make sense. However, overall, it feels like considerable thought has been put into producing a series of recommendations that make sense in theory. But when applied to live developments and considering the real-world politicking that they will inevitably create, they might fail to gain traction or be upended by their own complexity.