Real Fiscal Crisis of the State

This extended post summarises and critically reviews the Housebuilding Market Study (the Study) that the Competition and Market Authority (CMA) published this February. This concluded that the housebuilding market in England, Scotland, and Wales is failing consumers and has consistently done so over successive decades, delivering outcomes falling well short of what a market working well should do.

Wider lessons are drawn from both the Study’s analysis and shortcomings to focus on the actions that a new Starmer-led United Kingdom (UK) government should put in hand within its first few weeks of office if it was serious in intent to achieve Labour’s proclaimed commitment to build 1.5m. additional homes during the lifetime of the next parliament in England (an average annual total of 300,000).

 Section One provides background to the process, defining the Study’s diagnosis of housing market failure taken from both the published final report and supporting evidence documents against the metrics of supply and affordability, the quality, innovation and sustainability of the delivered product, and the profitability of the 12 largest housebuilders.

Its main decisions on future actions, including the recommendations to government made concerning the future private management of public amenities on housing estates and on future consumer welfare, protection, and information outcomes are noted. Appendix A records those recommendations.

Section Two delves deeper into the causes and consequences of the wider market and the institutional failures that the Study identified, with reference to the operation of the planning system and the speculative housing model and its associated low build out rates.

The options it identified for government to consider while taking account of wider policy and other trade-offs, as well as other possible areas of government intervention that to improve outcomes across the planning and the speculative housing system and associated build out rates are discussed. Appendix B catalogues these options.

Section Three points out that the Study, like many housing policy commentaries, conveniently neglect the key political economy parameters of housing policy that need to be understood and addressed for real progress to occur.

These include the real fiscal crisis of the state, Nimbyism and related issues of local democratic preference versus the central compulsion required if set central government objectives are to be attained, lack of institutional capacity at both central and local levels, and political short-termism and the related lack of effective governmental focus on, or any real intent to achieve proclaimed objectives, most notably the overarching 300,000 supply target (the target).

Section Four points out that development timescales and almost certain substantial under-supply in 2025 mean that planning approvals and housing starts must begin their substantive upward trajectory no later than 2026 if the target is not to prove an early ‘dead duck’ or an example of ‘wishful verbiage’ for the new government, as it has proved for previous governments. It outlines an initial route map on how a new UK government could at least hit the ground running in its initial weeks in the light of that imperative.

It also demonstrates that the target cannot be achieved without a substantial step increase in the share of total supply taken by affordable and other forms of housing delivered outside the speculative model.

This – as will the enabling of New Towns and other large scale urban extensions – will require additional public investment. The 2025 Comprehensive Spending Review treatment of that investment requirement will thus provide an early and determining litmus test as of the practical application of Rachel Reeve’s fiscal rules and their positive relationship to wider macro-economic and strategic political goals.

1             Process and Diagnosis

The Competition and Markets Authority in February 2023 launched a Market Study (MS), under its Enterprise Act 2002 statutory powers, into the supply of new homes to consumers (‘housebuilding’) in England, Scotland, and Wales.

Under that Act, such a MS can be a self-standing piece of work or, where reasonable grounds for suspecting “that a feature or combination of features of a market or markets in the UK for goods or services prevents, restricts or distorts competition” are found, it can lead to a further market investigation reference (MIR), which can then culminate in the imposition of fines or other remedies on identified firms.

In November 2023 working papers on the  Private management of public amenities on housing estates, land banks, and the planning system(s). were published.

The  final report (the Study), alongside other supporting material including a supporting evidence document, was published on the 26 February 2024.  It concluded that intervention in the housing market was required for it to deliver better outcomes, across three main areas:

1. More homes overall, and particularly in the areas of highest demand, in turn reducing pressure on affordability;
2. Consistently better outcomes on new build quality, with consumers having an effective route to redress; and
3. Reduced detriment to consumers arising from the private management of amenities on new build estates.

The CMA, however, decided against making MIR references regarding the existing private management of public amenities (estate management) or the land banking arrangements it had examined in detail.

With respect to estate management, it concluded that direct government action would provide a more appropriate and comprehensive response to the consumer detriment the Study identified as occurring, as well as its future prevention.

Specific policy recommendations (see Recommendations 1.1 to 1.5, Appendix A) were made aimed at preventing the future proliferation of private management arrangements on new housing estates and to provide greater protection to households living under such existing arrangements.

It further invited the United Kingdom, Scottish and Welsh governments (GB governments) to also consider options to support the adoption of public amenities on estates currently under such private arrangements.

The Study also made specific recommendations to governments to improve quality and redress routes for consumers and purchasers of newly built housing (Recommendations 2.1 to 2.6, Appendix A.

These specific recommendations were made across both the above areas, because better market outcomes could be obtained “within the current broad market framework and (they) which do not involve significant trade-offs with other policy objectives which are outside the scope of the CMA’s study and which would involve wider political choices”.

With respect to land banking, the Study found that their size and operation reflected wider market and institutional failures, namely the operation of the planning system and the speculative private housebuilding model alongside related incentives driving the speed of private speculative build out.

These wider failures, it concluded, would be better addressed through government action focused on those areas, (see section 2 below) rather than through remedial measures made specifically to reduce the size of landbanks, as these taken in isolation would most likely reduce housing supply.

However, on the back of evidence uncovered by the Study that suggested that some housebuilders may be sharing non-public information on sales prices, on incentives, and on rates of sale, the CMA did decide to launch an investigation under the Competition Act 1998 into such suspected conduct by Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey, and Vistry, “given that it may have the object or effect of preventing, restricting or distorting competition”.

In March it announced that (outside the Study) it would commence a preliminary investigation into the proposed merger of Redrow and Barratt.

Supply and Affordability

The Study linked together two crucial facts that:

• Housing supply has persistently fallen well short of successive government targets, “compounding over time to create a growing housing shortfall”; and,
• Housebuilding has only previously reached the current 300,000 dwellings target (in England during periods where “significant supply was provided via local authority building”. Final report Figure 3.2 provides a useful annotated graphic illustrating that historically fundamental outcome.

The achievement of an additional annual supply of 300,000 is also the opposition’s target consistent with Labour’s commitment to build 1.5m homes over the lifetime of the next five-year parliament. The Welsh and Scottish governments have not hitherto set a headline total new supply target.

As Table 1, instructively, shows, the highest annual new supply (total net additions) figure recorded since 2006-07 (when the most accurate and comprehensive official housing statistical series to measure new completions and net additions in England began) was c248,500 dwellings in 2019-20: 83% of the 300,000 annual target; more pertinently, the annual average total supply across the entire 2006-23 period was c195,000 dwellings, c64% or less than two thirds of the proclaimed target.

The table also demonstrates the further substantive (albeit well known) point that the Study went on to make that new supply is also highly cyclical and prone to sharp fluctuation: the 2010-11 low point figure was barely half of the latest 2019-20 peak, as cited above.

Explaining this, the Study reported that most new homes are delivered through the private ‘speculative model’ of housebuilding for profit, where housebuilders buy land in advance of the construction and sale of homes without knowing the final price at which they will be sold.

Overall, according to the Study, around a half of GB homes are built speculatively, and a third on an affordable housing basis, sold or rented at a discount to market price; self- or other custom-built and build to rent completions account for the remainder of the total (noting that data on the tenure breakdown of completions is less accurate than total new supply data (DLUHC), certainly in the case of England.

In England, however, (less during market downswings, more during upswings) around 60% of new builds are produced through private speculative model. Scotland and Wales produce relatively more affordable housing, 45% and 50% of total new build supply in 2021-22, respectively, compared to around the 29% share that it takes across England.

The Study went on to highlight that this model produces too few houses, especially in the areas in which they are most needed, consequently, “exerting associated effects on local affordability and overall consumer welfare outcomes”.

“Significant variation in housing delivery relative to need” also occurs across both countries and regions, with Scotland in recent years coming closer to meeting its implied target levels than has England and Wales.

London, the South East, and the East regions (administratively defined) account for the majority of the areas exhibiting “significant under-delivery against assessed need”. All LPAs in the East of England, South East, South West, and London regions have an affordability ratio of five or higher.

Housing need is defined by the Study as “the amount of housing required for all households to live in accommodation that meets a certain prescribed standard (which irreducibly involves political judgement as to the acceptable standard)”.

This is a normative standard that invariably results in a higher figure than the 300,000 target. For instance, a 2019 Study (Bramley or Heriot-Watt Study) for the National Housing Federation (NHF) and Crisis found that around 340,000 new homes need to be supplied in England each year, of which 145,000 dwellings should be affordable.

A February 2024 Financial Times (FT) analysis  (not reported in the Study) that used the Heriot-Watt University methodology referenced above, but updated it with the latest (Office of National Statistics (ONS) population data and with net migration projections from Oxford University’s Migration Observatory, found that c421,000 additional homes were needed to be provided annually until 2036, assuming that average annual net migration to England figure will hover around 345,000 over the next 15 years.

On the other hand, the Study also cited an analysis (Study link broken, but summary by Ian Mulheirn can be found here) that argued that UK housing supply has outstripped household formation (for decades and that house price increases are a function of the main components of the cost of capital: mortgage interest rates, taxes, and expectations of future price growth.

Indeed, since the late 1990s, mortgage rates tumbled, with inflation-adjusted interest rates on five-year fixed-rate mortgages, for example, falling from 8% to around 2% which given that mortgage interest rates tend to be the dominant element of the cost of capital for homeowners, largely explaining the substantial increase in house prices experienced since 1996.

It is relevant to note in that regard that a seminal 2019 Bank of England working paper concluded that the rise in house prices relative to incomes between 1985 and 2018 can be more than accounted for by the substantial decline in the real risk‑free interest rate observable over that same period and that changes in that rate “were a crucial driver in house price changes”.

Ian Mulheirn’s study went on to posit that the housebuilding target of 300,000 would only result in a 10% decrease in the affordability ratio over 20 years. It would neither solve problems of high house prices nor low home ownership, but instead likely to result in further growth in the number of unoccupied (and under occupied?) homes, “which may not be an efficient use of scarce investment capital”.

Alternative policy solutions that it suggested included building more social housing or more generous housing benefit, “as these policies would help affordability-constrained young people”.

The CMA Study concluded that even a highly competitive private housebuilding market (which it showed did not exist) will not, on its own initiative, produce sufficient housing to meet overall housing need in accord with its wider (external) benefits (boost to productivity, education, health, and other outcomes) to society.

And, while private housebuilder incentives to build are likely to follow changes in demand, how well the housebuilding sector is delivering for consumers and wider society “is likely to be better captured by how far it is delivering against housing need”.

The CMA accordingly decided to focus on assessing supply delivery against housing need in its supply analysis (para 2.6, further evidence document).

Turning to housing demand, this, according to the Study, is determined “by the number of people or organisations willing and financially able to buy a property, either as a home, second home or investment property”; an outcome patterned by disparate factors, including aspiring buyers’ ability to sell their existing home, their access to housing equity or a deposit, their access to credit and the price of that credit (effective demand is interest-rate sensitive where prospective purchasers rely upon mortgage finance to proceed), their current income and future expectations, as well as the financial and tax implications of property ownership, their expectations of future returns, and wider market sentiment.

People will also often choose to purchase more housing when their incomes allow, for example, taking on properties with spare rooms or buying holiday homes. Thus, as real incomes increase, it can be expected – other things being equal, which, of course, they will rarely be, as above – that housing demand will expand proportionately more.

Because all these factors are constantly changing and are strongly linked to general macroeconomic performance, housing demand will fluctuate, making it difficult to measure.

In addition, buying, selling, and even moving house are all time-consuming and difficult endeavours involving high time and other transaction costs, including residential stamp duty, estate agents’ fees, removal, and reconnection costs, etc.

Consequently, people may not adjust their individual demand for housing immediately as their circumstances change.

The Study went on to posit that “although affordability is determined by factors such as household size and composition, credit conditions (including interest rate changes, presumably), population growth, and levels of household income”, if the supply of housing fails to keep pace with changes in demand, house prices can be expected to rise faster than earnings, so worsening affordability.

This the Study defined as “the level of housing outgoings (for rent, mortgage, etc.) which a household can (and will) meet from its recurrent income without significant risk of material hardship or financial stress, including the risk of being pushed into poverty”.

It has certainly worsened over time. A key ONS dataset reports that the median house price to median gross annual residence-based earnings affordability ratio rose from 5.11 in England and 6.9 in London in 2002 to 9.06 and 13.62, respectively, in 2021, before subsequently slightly falling back as house prices dipped in response to increased mortgage rates.

The Study itself reported that by 2022, full-time employees in England could expect to spend around 8.4 years of income buying a home, compared to 6.4 in Wales, and 5.3 in Scotland, noting that as rough rule of thumb, it should lie in the four to five range (mortgage lenders, for example, seldom lend more than 4.5 times of purchaser annual income).

Considerable variation within countries and regions (as well as between – exemplified by the London figures reported above) also occurs. All regions (except the North east) have LPAs in 2021 with affordability ratios of over five (see figure 2.4, CMA Supporting evidence document for an annotated and illuminating infographic defining the most and least affordable LPAs within each country and region. You could purchase then homes in Merthyr Tydfil, Barnsley, Copeland, Bolsover, County Durham, Copeland, and Stoke-in Trent, LPAs reporting an affordability ratio of less than five).

The Study pointed out such entrenched variation is likely to be symptomatic of a market that in supply response is unable to adequately adjust to consumer preferences, expressed through price signals, concerning the supply of available homes and their desired locations.

With respect to rental levels, the Study reported that the rental affordability ratio for both England and Wales since 2014 taken across the board has remained below the affordability threshold of 30% of income, used by the ONS as a normative yardstick.

More instructively, however, when lower quartile income (the income that 25% of households are at or below) are compared with the lower quartile rent (the rent that 25% of rental properties are at or below),  the ONS found that at a country level, in England and Wales, high, average, and low rents were all above the ONS’s affordability threshold and thus unaffordable for lower income households; and that they were only affordable for average-income households in Wales. In England only average and low rents were affordable for average-income households.

Quality, innovation, and sustainability

The Study recorded a lack of competitive pressure to drive up new build quality, related to factors both intrinsic to the characteristics of housing as a good and to specific shortcomings in the consumer regulation and oversight of the housebuilding market.

Intrinsic factors include that new build quality is difficult or impossible to observe prior to purchase. It becomes noticeable to purchasers only when something subsequently goes wrong. In that sense, the speculative housing market suffers from a similar market information failure or imbalance as does the second-hand car market – something the Study did not highlight.

Connected to that, prospective buyers also prioritise factors other than quality (which, as above, in any case, is difficult to observe or assess) as they hurriedly compete to complete a purchase in accord with their budget constraint and preferences and not to miss out on their hopes.

During this process they can fear that they will otherwise ‘miss the boat’ and be priced out (especially during periods of robust house price growth),  making them even more amenable to the assumption that housebuilders build to a baseline level of quality  – a reasonable one given the nature, importance, and expense of the good, when considered alongside associated seller publicity, which is often unclear and sometimes misleading (another information imbalance or failure).

The Study was clear that such information imbalances have not been rectified by the current voluntary consumer protection arrangements. It singled the House Builders Federation (HBF) Star Rating Scheme for criticism as of limited informational value, one which was not designed in the first place to ensure effective and timely rectification of defects.

Evidence of consumers encountering increasing and mounting difficulty and housebuilder resistance found by the Study when multiple number of snags or faults remain to be rectified, with a small but significant minority experiencing the most serious defects suffering significant consumer detriment: a serious matter and market failure for the most important purchase that most people make in their lives in terms both of their financial commitment and their individual/family future and welfare.

Levels of innovation in the industry were also found by the Study to seriously undershoot what it considered a dynamic, well-functioning market should foster and generate, noting that despite the largest housebuilders investing in, acquiring, or developing their own more innovative production capacity its dissemination continues to be slow, while sustainability efforts are primarily driven by expectations of future regulation, rather than endogenous (self-driven) industry momentum.

Profitability

The Study found that the profitability of the 12 largest housebuilders, delivering around 40% of total housing completions in recent years, exceeded what it would expect a well-functioning competitive market to provide, at least during “periods outside the Global Financial Crisis (GFC) and its immediate aftermath”.

That conclusion was based on a methodology predicated on the assumption that in a competitive market, a ‘normal’ profit was “the minimum level required to keep the factors of production in their current use in the long run: i.e. when the rate of return on capital employed for a particular business activity would be equal to the opportunity cost of capital for that activity”.

The rate of return that housebuilders achieved on their employed capital accordingly was compared to the opportunity cost of that capital between 2003 to 2022 inclusive.

Housebuilder profits from 2013 to 2019 were found by the Study to be particularly high against that ‘normal profit’ yardstick, because of supportive economic circumstances for housebuilders – in particular, low interest rates and quantitative easing – as well as by measures taken by the government to help homebuyers fund deposits for the purchase of new homes through the Help to Buy (HtB) scheme.

The Study highlighted that one large housebuilder, following the changes to the planning regime in 2012 was able to build out the strategic land bank it held at the time, thereby realising the greater returns associated with buying land without planning permission, before it then benefited significantly from increased HtB-driven demand; c60% of the homes sold by that housebuilder in 2018 were supported by that scheme.

Specifically, it (Table A:1) computed that during the 2016-19 period inclusive the return on capital employed (ROCE) achieved annually by the 12 housebuilders was between 29% and 34%, whereas its mid estimate (Table B.4 of Appendix B) of their pre-tax nominal annual cost of capital was between 14.4% and 14.6%: the observed profit of the largest housebuilders was thus double their expected ‘normal’ profit.

The Study had earlier confirmed (para 4.105, planning working paper, see link above) that, typically, housebuilders expect to achieve margins in the range of 15% to 25% on residential development sites, equating to approximately £46,000 to £77,000 per plot at average house prices.

It still concluded, nevertheless, that specific intervention (s) is not required to tackle such excess levels of observed profitability directly, as such intervention, according to the Study “could create an additional downward pressure on the number of houses being built, exacerbating the supply problems that have characterised this market over a long period”, because:

• the housing market is highly cyclical and is impacted by external factors, including the wider economic climate;
• profitability during the 2010s is likely to have been boosted by supportive economic circumstances and temporary factors no longer in evidence, in particular a prolonged period of low interest rates and the Help to Buy schemes’ support for first-time buyers;
• there was significant variation in the performance of individual large housebuilders in the Study sample.

 2             Causes and consequences of housing market failure

The Study found that deficient housing supply and its affordability was propelled by, in effect, two (and a half?) key drivers:

1. The nature and operation of the planning system;
2. The limited amount of housing built outside the speculative approach (such as affordable housing, self-build, and build-to-rent), with private speculative build-out rates providing an additional (related?) factor insofar that it is both cyclical and calibrated to avoid impacting on market prices.

 Operation of the planning system

Insofar that a prior condition for building houses is possessing permission to build them, the Study found that the nature and operation of the planning systems is a key driver of the under-delivery of new housing at levels required to meet government targets and measures of assessed need.

That the number of planning permissions granted over the last 10 years across GB, and particularly in England, have been “insufficient to support housebuilding at the level required to meet government targets and widely accepted measures of need” was highlighted, with the number of units granted planning permission in England in 2022-23 falling to 269,000 after several years when permissions had exceeded 300,000.

The Study pointed that due to some applications lapsing because of viability or other reasons and the time lag between when a scheme is approved and when it is built out, achievement of the 300,000 target requires the number of applications approved each to exceed 300,000 to allow enough permissions to be banked over time consistent with the delivery target.

More broadly, the ability of the planning system(s) “to support the level of housebuilding that policymakers believe is needed”, is limited by its:

• lack of predictability;
• length, cost, and complexity; and the
• insufficient clarity, consistency and strength of LPA targets, objectives, and incentives to meet housing need.

These problems, the Study added, may have a disproportionate impact on Small and Medium Enterprise (SME) housebuilders.

Four potential sources of unpredictability in the planning system were then pinpointed.

First, governments frequently use the planning system to implement new policies, most commonly environmental regulations resulting, in effect, administrative and policy overload on LPAs with limited resources causing consequent delay and confusion. Examples provided by the Study included nutrient neutrality requirements and biodiversity net gain rules in England.

Second, since the introduction of the National Planning Policy Framework (NPPF) in 2012, significant revisions have become more frequent in recent years, with the review process that starting with the 2020 Planning White Paper generating particular policy uncertainty at LPA and other stakeholder levels.

The most recent and, perhaps, notorious example was the December 2022 consultation on revisions to the NPPF, which, as this website in  and others warned would happen, has led some LPAs to delay or to even withdraw their Plans, and/or rescind previous application approvals.

The Levelling Up Secretary of State Michael Gove in a December 2023 Ministerial Written Statement announced the result of the government’s response to that consultation, in parallel publishing an updated National Planning Policy Framework reflecting the changes made.

In summary, the new 2023 NPPF, according to the government, is designed to: facilitate flexibility for local authorities in relation to local housing need, with the Standard Method (see below) for calculating housing need becoming an “advisory starting point” rather than a mandatory input for LPAs in their determination housing numbers; clarify a local lock on any changes to Green Belt boundaries; safeguard local plans from densities that would be wholly out of character; free local authorities with up-to-date local plans from annual updates to their five-year housing land supply and remove buffer requirements, save that a 20% buffer  will still be applied if Housing Delivery Test targets are not met; limit the practice of housing need being exported to neighbouring authorities without mutual agreement; bolster protections from speculative development for neighbourhoods that develop their own plans; support self-build, custom-build and community-led housing; and cement the role of beauty and placemaking in the planning system.

The 2023 NPPF also retained the 35% uplift to the assessed housing need for the 20 largest towns and cities in England and the requirement that it should be accommodated within those cities themselves, except where cross boundary redistribution agreements are in place.

According to the Study, the uncertainty arising from this latest review process have yet to be resolved, with many changes proposed to be rolled out gradually on a ‘test and learn’ basis.

Although it did not highlight introduction of the Infrastructure Levy (IL) by LURA that measure provides a prime case in point of planning reform generating confusion and uncertainty with its associated ‘test and learn’ issues risking potential and substantive future policy planning blight, as this website in Going around the Mulberry Bush  discussed in detail.

In February 2024, the UK government announced further changes focused on encouraging brownfield development, including a new consultation on changes to the NPPF involving introduction of a presumption in favour of brownfield residential development where a LPAs HDT result is both below 95% and it is one of the 20 LPAs in receipt of the 35% urban uplift, and a change that would expect all LPAs to give significant weight to the benefits of delivering as many homes as possible, and to be flexible in applying policies or guidance on the internal layout of developments, especially again in relation to brownfield land proposals.

There have also been significant recent changes in Scotland and Wales over the past few years.

Third, there is a lack of up-to-date Local Plans (LPs), especially in England, where on 31 December 2021, less than 40% of LPAs had updated their plans in the last five years. 22% had not either adopted a plan for more than 10 years or had no plan in place.

Updating a plan is a complex and lengthy process, with DLUHC estimates suggesting that the average time taken to produce a local plan is seven years involving substantial time and other resource costs.

The Study was told by some LPAs told us that they had difficulty getting plans adopted for political reasons, especially where the plan might require the release of green belt land to meet housing need, with analysis presented showing that the LPAs with either a significantly outdated plan, or no plan at all, typically have much higher percentages of greenbelt land within their boundaries (see Table 6.8, further evidence document).

The Study advised that LPAs with out of date or no plans  tend to the same ones that undershoot their Housing Delivery Test (HDT), (Table 6.5, further evidence document). The presumption of sustainable development ceases to apply to speculative applications where an LPA is not delivering more than 75% of its assessed housing need target, as it does where the LPA’s LP is out of date and/or where it cannot demonstrate a five-year housing land supply (5YHLS), subject to the changes made in the 2023 NPPF.

As way of background, the 2018 updated NPPF introduced both the centralised Standard Method (SM) to assess housing need and the HDT.  The SM is a baseline formula used to identify the minimum number of homes expected to be planned for in a way which addresses projected household growth, affordability and, in some cases, any urban uplift required by the 2023 NPPF.

It identifies a minimum annual housing need figure to be used in the HDT, not a housing requirement figure, which the individual LPAs are expected to define themselves.

HDT targets cover a three-year period with specific values set and calculated for each year, based on the lower of either the need level set out in an up-to-date Local Plan (LP) or the SM assessed need level. Where the LP is not up to date, as is the case for the majority of English LPAs, the HDT should assess local delivery against the local SM assessed need figure.

In short, significant underperformance of housing delivery against targets is limited to a relatively small number of LPAs, relatively highly concentrated in certain areas of the country, particularly in the South East, the East of England, and the London regions.

The Study cited its own analysis that 51 out of more than 306 LPAs (17%) in England achieved less than 75% of their need based HDT targets in 2021, whereas 214 (or 70%) of LPAs achieved more than 95% of their housing need.

The majority of the areas that achieved less than 75% (37) are located in the South East, East of England and London, with LPA performance in the HDT remaining broadly consistent since 2018 (see Table 6.1, further evidence document). The above, of course, are the same areas where supply deficiency and affordability problems and the population are most concentrated (see section 1).

The Study further found that LPAs with the highest delivery against their housing targets tend to process a higher number of applications relative to their housing stock; approve a higher proportion of those applications; have a lower proportion of their rejection decisions appealed; and lose a lower proportion of appeals, with converse being the case for LPAs with the lowest delivery against their housing targets.

Fourth, political and public attitudes to development are frequently expressed through the planning process. Residential development has become increasingly politically contested, delaying, and making harder timely Local Plan making and planning application determination, to the point that development applications and investment are discouraged.

The Study did, nevertheless, find that the strongest existing sanctions for LPAs to prioritise housing delivery exist in England, where a presumption in favour of sustainable development (due to the NPPF) comes into play if targets are not met. Housebuilders therefore have greater rights to have applications approved, compared to Scotland or Wales, where no equivalent incentive is in place.

Protected land or geographic constraints can undercut that presumption, however. Across many areas of England (footnote seven of para 66, NPPF), designated local green spaces, areas of outstanding natural beauty, national parks, heritage coast, irreplaceable habitats, heritage assets (and other heritage assets of archaeological interest), and areas at risk of flooding or coastal change, as well as designated green belt land are specifically excluded from the presumption.   The North West of England (53.1%) and the South East of England (49.6%) have the highest proportion of protected land in England

 The Study went on recognise that when all is said and done the planning system(s) was and is in large part designed to ensure that local preferences are incorporated into decision-making – adding the cavil that this does not necessarily lead to consistent decision-making at a local level.

Given that and “the wider policy trade-offs and complexities that are inherent in planning system design and operation”, the Study decided that it would be inappropriate for the CMA to make specific recommendations to governments about how such trade-offs should be made.

Rather, given “the vital role that (planning systems) play in shaping market outcomes” it offered options to make them more predictable and less costly, lengthy and complex for housebuilders.

But it left it up to governments to “consider whether the (associated) trade-offs with wider policy objectives are worth making, in the context of their overall objectives for the housing market”.

These are set out in Options 2.1 to 2.7, Appendix B.

To give a flavour of these planning options, Option 2.1 defines the features that would mark an effective methodology more likely to result in a local target that accurately reflects need:

• ease of understanding – ensuring that the assessment of housing need is easily implementable and has results that are readily understood, will allow for national and local targets to be more readily accepted and outputs to be more easily disseminated;
• using reliable evidence – using up-to-date and robust evidence will ensure that the target will more closely reflect current housing need. In addition, using evidence from credible and, where possible, publicly available sources will help ensure that the results are more easily understood and accepted;
• regular assessment – regular calculation of the housing target will help to ensure that the target is as accurate as possible; noting, however, that LPAs need a degree of stability in the national target so that they can effectively plan to deliver their local housing target for the medium and long term. Updating the target too frequently could lead to increased uncertainty at a local level, as well as the national and local target losing credibility. To achieve the right balance, the target could, for example, be updated whenever updated national household projections are available, but no more frequently than this;
• unadjusted outputs – noting that housing policy is a matter for governments and incorporating aspects of policy targets, such as brownfield land use, may be an appropriate way of achieving policy aims. However, reducing the incorporation of other policy aims in the methodology through adjustments will result in the target becoming less reflective of underlying housing need. Therefore, such adjustments should be kept to a minimum with limited scope for discretion for the governments in making such adjustments.
• local alignment with national target – limiting local deviation from the agreed methodology will result in local targets that are more closely aligned with the national target.

Appendix B should be consulted for detail on the other options that the Study presented.

Wider operation of the speculative housing system and associated build out policy issues

The Study largely echoed the Letwin Draft Report analysis in concluding competitive pressure to supply homes at a rate that exceeds the current local absorption rate was weak, “limiting the number of homes that are built over a period, removing potential downward pressure on local prices”.

Letwin’s investigation into 15 very large sites in areas of high housing demand found that their median build out period from the moment when the house builder has an implementable consent is 15.5 years; or put another way, the median percentage of a site built out each year on average through the build out period is 6.5%.

It pointed out that across the large sites of over 1,500 dwellings that it examined the revealed market absorption or build out rate went on to limit the corresponding scope to provide cross-subsidies between the units sold at market values and the affordable dwellings, consequently retarding the rate at which housebuilders can and will build out the affordable housing that may be required by any applicable affordable housing Section106 (S106) agreement.

The CMA Study put forward Options 2.8 to 2.10, Appendix B to support a higher build out rate.

Under Option 2.8, LPAs could require increased diversity of tenure for larger sites to be granted planning permission, including raising the proportion of affordable, build to rent or custom build homes on sites.

Increasing the wider diversity of housing tenures (sub-tenures?) aimed at different sub-segments of the market, could consequently allow for more homes to be absorbed within the local market “without housebuilders needing to reduce the prices of the housing they produce for the private market, thereby improving the speed of housing delivery”.

LPAs could also publish their policy on housing tenure requirements, meaning that they are known by housebuilders and reflected in land transactions.

Such a requirement could be decided and operated in a similar way to LPA policies on affordable housing and developer contributions. The Study noted that the Letwin Final Report recommended a similar measure for developments providing over 1,500 dwellings, not then taken forward by the UK government.

With Option 2.10, LPAs could require housebuilders to increase the diversity of the types of homes (type, size, style, design, rather than tenure?) that they build on larger sites.

Sites with greater diversity of types may build out more quickly “as the varying types of homes entering the market are more likely to appeal to different sub-segments of the market and therefore such sites are less constrained by the local absorption rate”.

It went on to caution that were to support a higher build out rate the UK, Scottish, and Welsh governments to pursue these options that they should pay regard to the following considerations:

• requirements for housebuilders to deviate from the profit-maximising level of site diversity could impact on viability and the number of sites developed;
• to build a greater amount of affordable housing would likely require additional public funding, as such housing is sold to registered providers who are, at least in part, funded by government grants;
• as with obtaining developer contributions, site diversity requirements must be consistent and not complex, as this would increase uncertainty and create delays in the planning process.

The Study concluded, however,  that whilst housebuilders could increase the rate at which they sell speculative homes by offering them for sale at lower price, as the number of homes that housebuilders can build (and therefore sell) in an area in the short to medium term is inherently limited by the planning system, “lowering their prices is more likely to bring sales of these homes forward in time, rather than increasing their overall sales over the medium term”.

Once a housebuilder has built out and sold the homes it has planning permission for in an area, it cannot simply sell more homes. To increase sales further a housebuilder must first obtain additional planning permissions, which, as the Study reiterated, is a lengthy and risky process, meaning that over the longer-term, “supply will depend on the extent to which they can get hold of further land with planning permission in the area”.

Yet, its overall conclusion was even if policymakers made the changes the Study proposed (as set out in Appendices A and B) “the market may still fall short of delivering the quantity of homes, supporting a level of affordability”, that policymakers find acceptable” because:

• market outcomes are heavily influenced by external factors, such as interest rates, mortgage availability, the rate of new household formation, by demographic change and by the level of household incomes; and
• market cyclicality and the speculative housebuilding model means that private housebuilders do not collectively have the necessary incentives to build houses at the rate required to meet policymakers’ objectives.

The Study went to say while it is open to policymakers to deliver change through more fundamental interventions “that go beyond the way in which the market itself works but would have a significant impact on the quality and affordability of new homes being built”, such interventions often come attached with “fiscal and policy implications”.

It accordingly declined to offer recommendations or specific policy options, but did identify areas of potential intervention because, “without them our analysis of this market and the potential outputs it can deliver would remain incomplete”.

These covered the encouragement of non-speculative housebuilding models, including self- or custom-build homes.  CMA, therefore, looked to the UK, Scottish, and Welsh governments to significantly increase their delivery of publicly funded housing by local authorities or housing associations to “supplement the absolute number of houses provided by private sector housebuilders, whilst incentivising housebuilders of these types of homes to deliver homes at a faster rate than under the speculative model”.

Governments “could consider” also a more active role for the public sector in the purchase and assembly of land for development. This the Study suggested could be achieved by granting LPAs additional powers to purchase land and/or to generate revenue to support development or through Community Land Auctions.

It further noted that the Letwin review recommended the establishment of more local development corporations with strong compulsory purchase powers and the ability to raise finance to fund local infrastructure.

In that light, the Levelling Up and Regeneration Act (LURA) since its enactment in October 2023 provides for LPAs to apply for a direction from the Secretary of State to permit Compulsory Purchase Orders to be used for specific projects in the ‘public interest’, such as education, healthcare, or affordable housing, without compensating the landowner for the potential uplift in the value of the land associated with the land being granted planning permission (hope value).

Alternatively, the Study went on, across GB, expectations of higher build-out rates could be reflected in national planning policy and in local plans. LPAs could set the build-out rate it expects housebuilders to achieve and be provided with greater enforcement powers where housebuilders undershoot the required build-out rate.

In addition, the UK, Scottish, and Welsh governments may “wish to consider” measures to increase housing demand, but should then have regard to the following principles:

• stimulating demand without addressing the shortage in supply may cause house prices to rise. Therefore, implementing measures that increase supply would also be needed need to mitigate the risk that the gains from demand-side interventions accrue primarily to housebuilders and other sellers rather than buyers;
• measures that seek to stimulate demand among certain groups of customers reduce the incentives on housebuilders to reduce their prices to attract those customers, or to attract other customers. Any intervention should therefore be carefully designed to “target those potential purchasers who would not otherwise be able to purchase a home”;
• schemes that reduce the deposit requirement buyers face will also reduce the equity those buyers have in their home at the time of purchase, leaving “such buyers vulnerable to future mortgage and house price movements, with negative equity more likely”.
• any demand-focused scheme will inevitably be temporary, risking unintended consequences, “including creating winners and losers among different groups of house purchasers over time: an important temporal aspect to consider when designing such a scheme”.

 3     Review and assessment

 The Study provides a comprehensive, evidenced, and useful policy commentary (well worth careful reading for its informational and review value), rather than – as might be expected given the CMA’s formal remit to promote competition and to protect consumers – a focused technical dissection of the housebuilding market from an economic, consumer welfare and competition perspective.

Consequently, sometimes it reads more as a policy critique and reform commentary than a market analysis, written by a specialist campaigning organisation or a think tank, reprising key elements of the government’s 2019 Housing and 2020 Planning White papers, and other recent government reviews, notably the Letwin Review.

Accordingly, the Study has already been criticised by some as straying outside its territory by “not minding its own business”, indulging in wishful aspirational group-thinking distracted by well-meaning and often frequently put well-rehearsed generalisations covering the firs area of concern it identified – producing more homes overall, particularly in the areas of highest demand – that risk gathering dust within the corridors of Whitehall rather than acting quickly and directly on the policy dial.

Indeed, a danger is discernible that policy focus is thereby diverted away from its key recommendations it made to government concerning improving consumer protection and information arrangements and the private management of estates (covering the second and third of the areas where the Study identified that government intervention was required to deliver better outcomes), potentially distracting attention away from evidenced reforms and action that the CMA could and should effectively progress itself with central government, squarely within its statutory remit.

Although invariably the Study’s analysis and conclusions made from an objective technocratic standpoint are perfectly sensible and correct, it (perhaps necessarily, and certainly understandably) neglected the political force and dimension of the reasons (largely political economy based) giving rise to the problems that it identified and their constraining effect on effective remedial public action.

For example: national housing targets should be set “in an objective way that better reflects need in a more certain and consistent manner to avoid the counterproductive confusion and uncertainty of recent years, underpinned by a methodology that is easy to understand that uses reliable and up-to-date information, and is assessed at regular intervals to ensure it remains reflective of need with the government provided limited discretion to adjust the original calculation”.

As the last section recorded, the Study went on to suggest using demographic projections as a default regular mechanism to update need assessments. These, however, can fluctuate depending on the assumptions applied, resulting in large swings in local figures that require dampening or, in other words, the exercise of central government ‘discretion’; moreover, it is far from clear that such ‘a predict and provide’ indicator subject to uncertainty is the best one to use.

It probably would have been more helpful to systematically tabulate the different possible ways that local housing targets could be constructed, their pros and cons and other salient considerations, rather than just plump for one option in an ill-considered way.

The overall objective to make local target setting more consistent and certain makes perfect sense but is one hostage to politically disruptive events, inevitable in a competitive political democracy subject to the political economy characteristics of the UK, and of England especially.

One such disruptive event was the 2021 Chesham by-election when the Conservatives lost to the Liberal Democrats in a campaign coloured by concerns of additional housing adversely impacting on the local environment and the quality of life of a generally well-heeled population. It practically acted as a death sentence on the 2020 Planning White Paper.

Likewise, the December 2022 NPPF consultation and the subsequent December 2023 changes cannot be divorced from government political electoral concerns that similar affluent seats across the ‘Blue wall’ of the London environs – including the Surrey Heath seat of Micheal Gove, the current Secretary of state – could be lost at least in part due to similar concern.

Key political economy characteristics other than Nimbyism and the associated tension between local democratic preference and the levels of central compulsion needed to secure nationally set objectives, include the real fiscal crisis of the state, lack of institutional capacity at both central and local levels, as well as the time divergence between the short-term concentrated cost and political pain of planning and other housing reform measures versus their long-term diffused benefits. A tension that can undermine and discourage the levels of sustained political focus needed for desired change to be effectively and substantively actuated.

A more fundamental criticism of the Study was its choice to focus on the extent that housing need is being met as the key metric of effective supply delivery. This comes across as mixed up, big time given that its purported focus was the housebuilding market.

In short, there is no reason why speculative housing market should deliver supply sufficient to meet normatively defined levels of housing need rather than effective demand. Many in housing need will be unable to afford or access the speculative market; and put simply, private housebuilders cannot be expected to act as housing charities.

That is not to say that it would be more economically and socially optimal for private housebuilders to migrate down the value chain and make a more diverse tenure and type offer, consistent with Options 2.8 and 2.10 that the Study advanced (see previous section).

It should have logically gone further and concluded that unless the share of such housing approached 50%, neither the 300,000 nor an alternative target based on housing need will be met.  But, as noted earlier, the Study concluded instead that while this might bring forward additional housing supply, overall, it would not increase numbers in total as these are constrained by the planning system and its ability and capacity to generate sufficient additional planning permissions. That, however, does not necessarily follow.

Indeed, at a practical policy level, the achievement of a sustainable stable and less volatile annual new supply level of 300,000 dwellings in England presupposes a much-enlarged state-enabled housing sector providing or enabling at least 100,000 dwellings a year, whether of social rented or intermediate sub-tenure: 50,000 more or broadly double than the average level of affordable gross supply achieved over the last decade, (see, Annex Table Four ) 

The Study itself reported that, since the Second World War, private developer output has fluctuated between roughly 150,000 and 200,000 dwellings per annum, implying that between 100,000 and 150,000 of a 300,000 total target will need to be met from other sources.

Not only would increasing the share of affordable housing (or requiring it to be built earlier) increase the supply of affordable housing sooner but such an intervention could encourage LPAs to approve applications in the first place.

Also, if the 300,000 target is to be attained, schemes of 2,000 homes of which 1,000 are affordable need to be approved rather than 1,500 homes of which 500 are affordable.

A connected conceptual problem with the Study was that its twofold diagnosis of deficient housing supply and affordability – the nature and operation of the planning system and the limited amount of housing being built outside the speculative approach (such as affordable housing, self-build, and build-to-rent), alongside with too low private speculative build-out rates– was sometimes likewise confused.

Subsequent media attention has largely focused on the emphasis the Study gave to the negative impact of the planning system on market outcomes and the resulting need for the system(s) to be made more predictable and less difficult and costly to navigate, and on occasions the Study seemed to assume that  the planning system provided the overarching problem and that its reform would provide the needed remedy to systemic housing under supply.

Yet it also emphasised that the private speculative housing market due to its particular and developed characteristics and its sensitivity to wider macro-economic conditions meant that model was intrinsically incapable of meeting societal objectives.

In the view of this website, it would have been more intellectually honest and potentially more impact effective (as well as more in accord with its remit) for the Study to highlight that an incremental and partial shift to a contracting rather than speculative provision model was a necessity  if policymakers declared objectives are to be attained, referencing that conclusion to robust and evidenced demonstration of housing market multiple failure.

Such a shift should increase the market absorption rate as well as both total and affordable housing supply. Known public purchases of affordable housing should involve a far lower profit rate than is currently levied and expected on speculative housing as housebuilders would no longer be subject to demand risk, although they would still be subject to some economic risk concerning construction and other costs.

But the levels of expanded public supply consistent with the attainment of the 300,000 target will require additional public funding, bringing it into conflict with the real fiscal crisis of the state: the unwillingness of governments to raise or commit to levels of needed social expenditure due to unwillingness to tax or borrow the necessary sums.

That crisis is not simply a reflection of real economic or financial constraints but also one of underlying denial that UK governments can both achieve desired social objectives based on citizen expectations of service delivery and quality as well as pursue the goal of low taxation.

But the Study, when recognising that the supply share taken by government-supported affordable housing must increase if supply targets are to be met, qualified that conclusion by recognising the policy and resource trade-offs involved, including increased public grant support versus wider macro-economic and public finance imperatives and increased developer contributions versus scheme viability considerations. In other words, it soon reverted to bureaucratic caution, pulling its punches.

So, on one hand, the Study went on ‘right-on’, boldly arguing on the primacy of housing need – as one would expect Shelter and Crisis to do – while, on the other, it then shied away from following the hard policy implications of that chosen approach.

The need for increased affordable housing and social rent has been previously advanced not infrequently by parliamentary Select Committee findings (often populated by MPs in favour of lower taxes and fiscal prudence), that then attract an invariably anodyne governmental response.

Certainly, the issue that must be understood and tackled is, why successive governments of whatever political colour, despite widespread cross party and public support for more affordable housing, have failed or felt unable or unwilling to act in the manner recommended by endless parliamentary committees, successive commissions of the ‘great and good’, as well as much of the mainstream media.

It would have more useful and pertinent for the Study to have queried the seriousness of intent of the UK government’s supply target; in short, is it simply aspirational or, put more cynically, an example of “wishful verbiage” (as a recent commentator put it in a wider political context) rather than a public policy objective backed by real political, financial, and institutional commitment.

If the former, the Study will be one of many that in the past and no doubt in the future that has or will say much the same things, without any or little policy impact, as this website’s earlier submission to the Study, tracked.

Of course, the CMA cannot directly intrude into the sphere of macro-economic and public finance management, but simply recognising such fundamental trade-offs hardly takes matters further.

Rather it behaved more like a pressure group facing both ways. By taking assessed housing need as the correct determinant of target setting – even though, as described earlier, that most studies indicate that would require substantial upward revision of national and local targets (above the national 300,000 level).

Such upward revision, however, would involve further methodological and process change – the same that the Study cautions against on planning certainty grounds and, in any case, would prove an exercise in futility insofar there is no prospect of a higher target being anything other than aspirational in the current and foreseeable policy environment.

The Study also at the same time seemingly ‘swallowed’ developer takes on profitability, viability, and the relationship of the second hand to the new home market.

While the much larger second-hand market (c90% of purchases) may put a partial lid on new build prices in particular locations and contexts, the new build and the second-hand market are not one and the same (perfect substitutes).

Many the housebuilders migrate up the value and price chain and as the Study itself highlighted the new build market has been underpinned by government interventions, most notably in the past by the HtB; nor should the impact of the information imbalances between housebuilder and new build purchasers be under-estimated.

Indeed, the Study itself noted the existence of a new home premium (perhaps 5% in some locations). Its figure 9.1 (supporting evidence document) suggests that during the upward part of the house cycle that premium increases.

The circularity of the argument that reducing housebuilder profits will or may reduce development viability should also be understood.  This is true only to the extent that c20% profit levels are treated as a fixed parameter – predicated on an assumption that they are a necessity – reflecting the characteristics and failures of the market as currently configured.

A six or seven per cent profit level rather than one in the 15% to 25% range represents a difference in price of between £30,000 and £50,000 per home for a home valued at c£300,000, making a big difference at the margin on affordability levels.

Many housebuilders have emphasised that policy certainty and clarity was more important than, for instance, the existence or the level of housing contributions, which they could then factor into their business plans and plan and respond accordingly.

The Study itself also identified evidence that developer contributions could be increased especially on greenfield sites, suggesting that a more consistent and certain approach could induce such an increase.

The fly in the ointment that remains is the associated need to underpin such a partial shift to a contracting model with increased public grant and policy support within the real fiscal crisis of the state, perhaps explaining why the CMA felt that a focus on the planning system was more expedient and more immediately policy relevant, notwithstanding the case made above that is was not intellectually robust  and consistent – cognisant of the prospect that planning reform has been declared as representing an early priority of a new Starmer-led government. That choice is revealing, perhaps, of prevailing civil service attitudes during what is likely to be a political transition year.

4             What should the next government do?

The political and policy challenge is to select and progress the line of least resistance to effectively reform Britain’s flawed institutional housing model, done in such a way that puts both total and affordable supply onto an upward trajectory to a sustainably higher and less volatile level more aligned to national economic and social needs.

The working assumption made here is that a new Starmer-led government, elected sometime in the autumn/winter of 2024-25, facing an immediate economic and political imperative to boost growth sooner rather than later to safeguard and release resources for necessary and vital public service provision and reform without increasing headline direct tax rates, will prioritise planning reform.

This in line with Starmer’s stated commitment that the government will “build rather than block” to support the provision of 1.5 million homes – equivalent to 300,000 homes per year – during the lifetime of the next parliament.

Indeed, it appears that Labour hopes that planning reform by generating a recovery and increase in housebuilding will kickstart the new government’s attempts to achieve higher growth, sidestepping the constraints on additional public investment that the debt reduction component of the fiscal rule framework (public debt as proportion of gdp will fall within five years) will impose.

Rachel Reeves, in her March 2024 Mais Lecture, confirmed the set fiscal rules as central to achieving macro-economic security and stability – the essential states of sustainable steady production-rather than debt-fuelled growth, in her economic worldview.

An alternative view and context is set out in his MainlyMacro blog (Tuesday 26^th March)  by an economist who has been instrumental to fiscal rule development, pointing out further that capacity material and labour constraints – likely to especially acute within the housebuilding industry (something that the CMA study omitted) –  actually requires private consumption to be dampened by across the board tax increases.

The inevitable and potentially prolonged time lag (before any planning reform translates into building activity, and certainly into completed homes) translates into growth and productivity outcomes, presents an immediate problem.

That underscores the need for the new government to act quickly, decisively and with laser-like focus, notwithstanding the incessant competing pressures and priorities that it will inevitably face.

If it doesn’t, any prospect of Labour achieving its housing target will be hobbled at the start. On the 300,000 target itself, it is fair to say that it is a figure that has little or no evidential basis, whose virtue seems to be that it is a convenient round number, higher than current supply performance, which has been achieved in the past.

The location, type, and affordability of dwellings provided (composition) are as least, if not more important, than the bald total. The reason, of course that governments, or oppositions expecting to be the next government, do not disaggregate the supply target down into an affordable component is because their insufficient public housing investment would be exposed.

That said, the set target is understandable and visible and, if assumptions are strained to breaking point, potentially achievable – at least temporarily or fleetingly during the peak of the housing cycle.

Yet its current definition is unrealistic. Insofar that it unlikely that net new supply during 2024-25 and then 2025-26, will exceed 250,000 dwellings, a shortfall against that target will start to clock up from the outset. That new supply completions by 2029-30 will be closer to 400,000 than 300,000 (reflecting start levels of that magnitude during 2026-28), sufficient to offset early under performance, is simply not credible.

The lack of effective critical scrutiny is depressing. Even more so, it suggests, that Labour’s commitment to build 1.5m homes is for political show rather than made in serious intent.

Certainly, whether that is an unfair and unfounded accusation will become apparent soon enough. Unless its target is supported both by a committed strategy, detailed policies, and annual plans (very much a ‘Mission’ approach, echoing the committed efforts of early post war governments to achieve 300,000 new homes annually), it can be safely assumed that Labour’s target, as was the Conservatives, will remain an aspirational sop to ‘polite society’ rather than a ‘blood and guts’ political programme.

That Mission should be all encompassing, covering not only New Town and Urban Extension policy and planning, LPA empowerment, the declassification of ‘grey’ green belt land, and affordable housing, but also flats above shops/pubs, transport node densification, and community housing.

The shadow housing spokesperson has promised the imposition of “mandatory targets that bite on individual local planning authorities”.  Settling on what objective sustainable basis they are to be set at a local level itself will take time, given consultation requirements, as would other associated changes consistent with it, such as the conditions when Green Belt land can be used for housing, some of which, such as co-operation with other LPAs, may require primary legislative amendment to LURA rather than NPPF revision (the author of this post is not a planning expert and expects the Shadow Levelling Up and Housing teams to be fully engaged now in working through these issues ready for alternative government detailed engagement with the civil service) .

Rather than getting hang up on what demographic projections should be used, simpler metrics such as local affordability and past delivery (perhaps measured by delivery of additional housing per 1000 dwellings could be used, if possible.

But Gove’s December 2022 changes (Gove changes) should be rescinded with best possible alacrity and replaced with emergency guidance that LPAs in future will be expected to deliver locally housing volumes that summed across the country are consistent with the achievement of the national 300,000 target with some additional buffer provided, covering the points below and others.

LPA’s that have paused Plans or rescinded planning approvals in the wake of Gove changes, should be individually instructed to resume Plan-making in line with that target, as should LPAs without an up-to-date Plan, and given a deadline to do so, monitored by the DLUHC, or whatever its successor may be called. Rescinded approvals should be revisited in line with the new guidance again within a deadline, which if missed will mean that determination by the Independent Planning Inspectorate.

Securing change working with such ‘reluctant soldier’ LPAs will not be easy. However, it is best to take any political pain in the early period of government, necessary in any case because of the timelag issue, as identified above.  Any ‘Chesham’ effect will be better withstood earlier than later in the government’s lifetime.

The CMA Study, indeed, provides civil service and administrative cover and support for such actions and thus now provides a timely and useful resource.

LPAs should be given every possible encouragement and incentive to deliver additional housing sooner rather than later whether through mechanisms, such as the New Homes Bonus, infrastructural and other financial support, the expeditious approval and support of New Town Local, and other Development Corporations where appropriate, and though linkage to measures more specifically designed to increase affordable housing, such as lifting local borrowing caps and the use of CPOs,  as well as the reinstatement of 100% receipt recycling, especially across areas where additional housing is both most needed and most likely contribute to productivity enhancement.

Then, of course, the overarching real fiscal crisis of the state overarching constraint could bite. Yet, public infrastructural investment in transport and sometimes other supporting social infrastructure, will invariably be required to pump prime private housing development investment in relation to large scale schemes.

These include the Oxford-Cambridge corridor, New Towns and urban extensions, and transformative brownfield urban developments, such as along the Thames estuary.

The same point applies to the necessary shift away from the private speculative towards a more towards a more public contracting partnership model, where upwards to 50% of the annual 300,000 additional housing target is affordable, custom-or built to rent.

Without such a shift, the 300,000 target, cannot and will not be met. It will require, however, some additional public funding support and guarantees that, in turn, will need to be an integral part of the 2025 Comprehensive Spending Review process.

It must be understood that if funds are not apportioned to public infrastructure and housing investment, neither the new government’s overarching economic nor its housing objectives will be met. As such it will provide an early test of the pragmatism – both in wider economic as well as political terms) of the application of Labour’s fiscal rules, as well as of its housing policy.

In planning policy terms, early planning guidance could provide a nudge in that direction by indicating an expectation that 50% of additional new supply should be locally affordable, whether officially defined as such or targeted to home buyers at lower quartile prices. Early delivery of affordable housing within large schemes along the lines that Letwin advocated should be put in train.

Creating a fast-tracked route for in-principal approval for applications that are in line with an adopted local plan, providing housebuilders with greater certainty to begin development, could also enter the policy menu.

Appendix A

Preventing the proliferation of private management arrangements on new housing estates

Recommendation 1.1: Common adoptable standards

The UK, Scottish, and Welsh governments each implement common adoptable standards for public amenities on new housing estates.

Recommendation 1.2: Mandatory adoption

The UK, Scottish, and Welsh governments each implement mandatory adoption of public amenities on new housing estates (outside of minor, well-defined exceptions).

Providing greater protection to households living under private management arrangements Recommendation 1.3: Enhanced consumer protection measures

We recommend that the UK government, in consultation with the Scottish and Welsh Governments, introduce enhanced consumer protection measures, underpinned by a robust enforcement regime, for households living under private management arrangements. Recommendation 1.4: Prohibition of new embedded management arrangements

The UK, Scottish, and Welsh governments each prohibit the establishment of new embedded management arrangements.

Recommendation 1.5: Guidance for residents’ management companies

We recommend that the UK, Scottish, and Welsh governments each provide guidance to members and directors of residents’ management companies to support and enable them in effectively managing the amenities on their housing estates.

Quality of new homes produced and service provided by housebuilders A single mandatory consumer code and the New Homes Ombudsman Scheme

Recommendation 2.1: A single mandatory consumer code

The UK government, in consultation with the Scottish and Welsh Governments, develops and approves a single mandatory consumer code for all housebuilders operating in GB. Recommendation 2.2: New Homes Ombudsman Scheme

The UK government, in consultation with the Scottish and Welsh Governments, activates the New Homes Ombudsman Scheme.

Eliminating drip pricing and providing greater clarity to buyers regarding the true cost of their new home

Recommendation 2.3: Prohibition of drip pricing

The UK government, in consultation with the Scottish and Welsh Governments, establishes a specific banned practice on the drip pricing of all mandatory elements of a new home, as well as other charges that are presented as ‘optional’ but which it is reasonably foreseeable that most consumers would have to pay, even if others could avoid them.

Recommendation 2.4: Disclosure of optional extras

The UK government, in consultation with the Scottish and Welsh Governments, requires that where housebuilders present consumers with genuinely optional extras as a part of the purchasing process, these optional extras and their prices are prominently and fully disclosed alongside the headline price.

Developing an independent single consumer satisfaction survey and publishing key quality metrics

Recommendation 2.5: Single consumer satisfaction survey

The UK government, in consultation with the Scottish and Welsh Governments, requires an independent body to develop, maintain and undertake a single consumer satisfaction survey on the quality of new homes and the service provided by all housebuilders.

Recommendation 2.6: Publishing key quality metrics

The UK government, in consultation with the Scottish and Welsh Governments, requires housebuilders to participate in the survey, display their key quality metrics to consumers, and share this information with an independent body for public dissemination.

Appendix B

Reforming the planning process

Option 2.1: More objective and effective use of targets to ensure housing need is met.

Governments are best placed determine an appropriate methodology to set a national housing target. In determining an appropriate methodology, the governments will need to consider: (a) how LAs could effectively align their local plan with the national target; and (b) whether and, if so, how the target should reflect the need to address existing levels of supply, as well as meeting future housing need.

Option 2.2: Effective monitoring and enforcement of local plans to encourage housebuilders to bring forward successful planning applications and build new houses.

• LPAs should be incentivised to have an up-to-date local plan in place. Incentives could include: ringfencing funds that LPAs can use only if they have an up-to-date local plan in place;
• making it more difficult for LPAs to reject planning applications if they do not have a local plan in place or if they do not have an up-to-date plan in place;
• central governments taking over the decision-making authority in a local area until a local plan is in place and as a last resort, imposing a local plan on the LPA, noting that “this would go further than the government’s recently announced plans to drive an improvement in local plan production”.

Option 2.3: Streamlining the planning system to significantly increase the ability of housebuilders to begin work on new projects sooner and bring forward marginal projects which may have previously been non-viable due to the costs of taking them forward.

The UK, Scottish, and Welsh governments could consider the following options for streamlining the planning systems:

• increasing the emphasis on local plans as the key means by which communities and their elected local officials decide the amount, mix, design, location, and overall standards of new housing in their area, rather than by reviewing planning applications on a case-by-case basis;
• creating a fast-tracked route for in-principle approval for applications that are in line with an adopted local plan, so housebuilders have greater certainty to begin development;
• formally reviewing the varied LPA schemes of delegation with a view to harmonising the complex set of rules and removing the use of Planning Committees for those applications which are broadly in-line with the local plan and/or which below an agreed threshold;
• improving the appeals process, as informal hearing and written representations appeals can cause delays and have an adverse impact on the delivery of smaller housing schemes and on SME housebuilders.

 Improving the planning processes

Option 2.4: Clearly defining and rationalising statutory consultees to reduce the delay caused by the statutory consultation process.

 Option 2.5: Effective monitoring and enforcement of deadlines for statutory consultees so as not to unnecessarily delay the planning process.

Measures to support reforms to the planning systems and processes

Option 2.6: Improving LPA capacity and resource by raising planning fees to a cost reflective level and ringfencing those fees.

Option 2.7: Additional support for SME housebuilders through better guidance, standardised LPA policy and a simpler ‘outline’ stage of planning permission.

Measures to support a higher build-out rate

Option 2.8: LPAs could require greater diversity of housing tenure for larger sites to be granted planning permission.

LPAs could require increased diversity of tenure for larger sites to be granted planning permission by increasing the proportion of affordable, build to rent or custom build homes on sites allow for more homes to be absorbed within different sub-segments of the local market(s) without housebuilders needing to reduce the prices of the housing they produce for the private market, thereby improving the speed of housing delivery.

They could publish their policy on housing tenure requirements, meaning they are known by housebuilders and reflected in land transactions to be decided and operated in a similar way to LPA polices on affordable housing and developer contributions, noting that the Letwin  Final Report recommended a similar measure for developments providing over 1,500 dwellings, although it has not been taken forward by the UK government.

Option 2.9: LPAs could be incentivised by governments to increase the number of homes that are delivered through smaller sites.

The UK government’s NPPF requirement that LPAs should identify land for at least 10% of their housing requirement on sites no larger than one hectare could be strengthened to require explicit identification of the sites that will comprise this 10%, alongside regular enforcement of the policy. A similar policy could also be considered by the Scottish and Welsh Governments, to support SME housebuilders and increase housing delivery rates.

Option 2.10: LPAs could require housebuilders to increase the diversity of the types of homes they build on larger sites.

LPAs could require housebuilders to increase the diversity of the types of homes (type, size and style, design, rather than tenure?) that they build on larger sites. Sites with greater diversity of types may build out more quickly as the varying types of homes entering the market are more likely to appeal to different sub-segments of the market and therefore such sites are less constrained by the local absorption rate.