NAO report Abdool Kara, Executive Leader March 2019 Planning for new homes NAO report Abdool Kara, Executive Leader March 2019

Background Follow-up to our two previous reports: Housing in England: overview (2017) and Homelessness (2017) A challenging ambition for the delivery of new homes A revised National Planning Policy framework Increasing local authority resource constraints, particularly in experienced planners

Background We focused on three main questions: Is the Department supporting local authorities to produce plans for how the supply of new homes will meet demand in their area? Is the Department supporting local authorities and the Planning Inspectorate in having an effective and sufficiently resourced planning function to deal with planning applications and appeals? Does the Department work effectively with local authorities and developers to ensure supporting infrastructure is being provided?

Key issue: supporting the delivery of 300,000 new homes The supply of new homes against the Department’s ambition The Government has an ambition to deliver 300,000 new homes from the mid 2020s. There were only 222,000 new homes in 2017-18. To meet the ambition, there will need to be a bigger increase in the delivery of new homes than seen in the last 13 years.

Key issue: local authorities and local plans Local authorities’ performance in producing local plans Legislative requirement to produce a local plan and review every five years. Fewer than half of local authorities have an up-to- date local plan. 13% have no local plan. Producing a local plan is complex, time consuming, and expensive. Not having a local plan gives developers greater freedoms on where they can build.

Key issue: applying the new standard method The standard method: Baseline set on national projections of growth in the numbers of households. Adjusts for affordability of housing in local areas. Increases in new homes capped at 40% above that assessed by local authorities previously. Aimed to simplify, speed up and bring transparency to the process of estimating need for new homes. Department estimates LAs on average spent £50,000 calculating the need for new homes in their areas. Takes into account the affordability of housing. Gives LAs limited flexibility to reflect local circumstances. It uses projections based on past growth in households. Consistent with the ambition for 300,000 new homes from mid- 2020s? The Department intends to revise the method sometime in 2019 HOWEVER AND…

Key issue: applying the new standard method – the regional picture The standard method affects local authorities differently. In four regions (incl London), local authorities will need to support the delivery of more new homes than they had previously assessed. The Department accepts that many of these local authorities will find this challenging. In other regions, the standard method calculates that fewer new homes are needed – which could hamper plans to regenerate localities. The number of new homes per year required by region using the standard method compared to local authorities’ assessment

Key issue: holding local authorities to account – the housing delivery test The test is how the Department will hold local authorities to account for meeting the need for new homes in their areas. There are a range of penalties for failing to meet this need: application of presumption in favour of sustainable development (which gives developers more freedoms on where they can develop) identify a 20% land buffer produce an action plan Local authorities in areas where there is a high need for new homes will find it increasingly difficult to meet the test. The test holds local authorities to account for delivering something over which they do not have full control. 34% of local authorities likely to fail the test in 2020 and face the most stringent penalty 16% local authorities likely to fail the test in 2020 and face lesser penalties Lichfields

Key issue: processing planning applications Local authorities’ performance in processing major residential planning applications Local authorities are dealing with more planning applications – from 5,244 in 2012-13 to 7,997 in 2017-18. Local authorities approve a high number of applications they process. In 2017-18, local authorities approved 81% of major residential planning applications. Local authorities are increasingly processing planning applications within timescales – from 47% in 2012- 13 to 87% in 2017-18. But this improvement may also reflect increasing use of agreed extensions to timescales. In 2012-13, local authorities agreed extensions for 107 major residential planning applications, compared with 5,464 in 2017-18.

Key issue: local authorities’ resource constraints Local authorities’ total planning income and spending In 2017-18 LAs spent £961 million on planning functions. 37.9% fall in net spending on local authority planning functions between 2010-11 and 2017- 18 (14.6% decrease when income is taken into account). Income from planning increased 24.8% from £419 million to £523 million.

Key issue: the Planning Inspectorate’s performance The Planning Inspectorate’s performance against statutory targets The time it takes PINS to determine housing appeals has risen significantly. In 2017-18 the Planning Inspectorate took on average 34 weeks to determine an informal inquiry. It is also failing to meet all its statutory targets - by some margin for hearings. The Planning Inspectorate acknowledges its recent performance in terms of timeliness has been unacceptable and short of the service it seeks to provide.

Key issue: skills gaps Planning Inspectorate staff numbers Local authorities and others are reporting shortages in experienced planners in local authorities. Planning Futures found a 15% drop in local authority planning staff 2006-16 PINS has seen a 13% decrease in staff numbers from 2010 to 2018. The Department estimates that local authorities will submit 50 local plans to the Planning Inspectorate in 2019, thus keeping up pressure on the most experienced staff members.

Key issue – funding for infrastructure Average house prices and average contributions agreed with developers per new home The way infrastructure is funded is complex and lacks cohesion, with a range of organisations involved. Departments are not required to align their investment strategies with local plans, which can create uncertainty for local authorities. The Department estimates around £12 billion a year is needed from public sources to support infrastructure for new homes. Developers agreed to contribute £6 billion to infrastructure and affordable housing in 2017-18. Average house prices have increased by 31% between 2011-12 to 2016-17, while developers’ contributions per new home remained flat.

VfM conclusion Historically, the supply of new homes has failed to meet demand, as we set out in our Housing in England: overview. In response, the Department has set out a challenging ambition for 300,000 new homes a year from the mid-2020s, together with supporting infrastructure. The planning system is a key element in facilitating this. However, looking across the landscape, it is clear that the system is not working well. Given these problems, we cannot conclude that the planning system currently provides value for money in terms of delivering new homes effectively. The Department understands the shortfalls in the planning system and its new planning policy framework aims to address some of these, such as the system for contributions from developers. However, it is too early to say how effective the new framework and proposed reforms will be in bringing about the level of change needed. The Department and government more widely need to take this much more seriously and bring about improvement if they are to meet their ambition of 300,000 new homes per year by the mid-2020s.

Recommendations The Department needs to regularly monitor the gap between the number calculated by the standard method, local authorities’ own assessment, and the ambition for 300,000 new homes and assess the risks of not meeting its ambition. The Department needs to assess the numbers of, and the potential implications for, local authorities that are at risk of failing the housing delivery test and set out how it will support those local authorities. The Department’s performance metrics for local authorities and the Planning Inspectorate for dealing with planning applications and appeals need to reflect performance more fully, the process in its entirety, and take capacity into account. The Department needs to work with local authorities and other government departments to ensure that the necessary infrastructure is funded and delivered. The Department should work with industry bodies on detailed research on the skills gaps in local authorities’ planning teams, particularly on the shortages of experienced planners with specialist skills sets.

Thank you All reports are available at www.nao.org.uk Follow the NAO on Twitter @NAOorguk Subscribe to notifications with NAO preference centre View our blog www.nao.org.uk/naoblog Explore the full report at: https://www.nao.org.uk/report/planning-for-new-homes/ Please contact Abdool Kara with any further questions Abdool.kara@nao.org.uk