1. Optimising Local Authority Assets How councils are responding to the Housing and Planning Act A study by Arup and PRP 26 th May 2016 Lynne Miles, Associate, Planning, Policy and Economics, Arup John Chapman, Director, Urban Design, PRP

2. The Housing & Planning Bill received Royal Assent on 12 May, despite suffering a series of defeats in the House of Lords. The bill was in the Queen’s Speech (18 May) which sets out the Government’s policies and proposed legislative programme for the new parliamentary session and is therefore now an 'Act'.

3. Introduction

4. Arup & PRP Research Overview PRP and Arup are collaborating on this research as a thought piece from the industry perspective. PRP bring huge experience of residential design as market leaders in all types and tenures of housing. Arup bring world renowned research skills and knowledge of funding models and delivery vehicles.

5. Arup & PRP Research Aim of Research How can Local Authorities respond to the initiatives in the Housing and Planning Act to deliver more homes, more quickly? and of higher quality on public land that meet local needs? What are the associated opportunities for new delivery or financial investment models? (eg pension investment; housing company; cross subsidy from homes for sale; custom build etc). What models help deliver the initiatives in the Act? (or generates income / unlocks investment; helps meet local need; or delivers at scale).

6. Starter Homes

7. Starter Homes Overview The government has pledged to build 200,000 Starter Homes by 2020 Subsidised, discounted, 'well designed' new homes. 20% Starter Homes to be provided on all sites of more than 10 units For sale at 'affordable' purchase price - defined as min of 20% below market value Available/limited to first time buyers aged between 23 and 40 at time of purchase on salaries up to £40,000pa Value of homes capped at £450,000 in London and £250,000 elsewhere.

8. Starter Homes Opportunities Should help boost housing delivery - funding via HCA Will subsidise and encourage home ownership - good news for the better off Could help viability – but site specific Not required on rural exception sites Opportunity for Local Authorities to work with RPs who are willing to provide SHs and other forms of affordable homes

9. Starter Homes Challenges Only affordable for the better off - not those in greatest need or even on median incomes. Starter Homes imposed 'top-down' with nationally imposed targets rather than locally led targets set by Local Authorities – this is inflexible Discount repayable if sold within 5 years (or possibly 8 years) of initial purchase - thereafter reverts to full market value Reduced delivery of affordable rental accommodation – increased homelessness Reduced tenure mix Continued…

10. Starter Homes Challenges How/who will monitor ie assessing age & income/rebate if sold within 5 years etc? No minimum design standards - unless Local Authority has opted-in to National Space Standard Sub-division of larger sites into small parcels of >10 Establishing value difficult – Council of Mortgage Lenders has warned of risks of distorting market.

11. Starter Homes Application Some Local Authorities are gearing up to this, or have already – others aren't Housebuilders generally accepting of SHs (17% uplift in viability) but some disadvantages - distortion in market prices and loss of early S106 payments Some RPs see SHs helping viability and providing cross-subsidy Likely to see JVs between Local Authorities & RPs/Developers

12. Custom / Self-Build

13. Custom / Self-Build Overview Obligation for Local Authorities to ensure sufficient supply of land for self-build and custom build homes Aims to boost individual and SME opportunities to deliver housing

14. Custom / Self-Build Opportunities Can help with affordability Encourages pride in and 'ownership' of property Helps build communities where members can do organising and some of the construction work Ideal for infill and small rural sites

15. Custom / Self-Build Challenges Custom/Self-build is a niche market - it will make little impact in delivering at scale and pace What proportion of units/sites will be required? How to define 'Custom Build'? Could be just customer choice over fixtures, fittings or decorations. Could be as much as handing whole process to specialist custom-build developer Housebuilders uneasy about adverse impact of multiple contractors, unfinished homes etc on sales values

16. Custom / Self-Build Application Some Local Authorities are actively encouraging Custom Build sites One City Authority sees it as limited (minimal) benefit for housing delivery Housebuilders generally provide some degree of Custom Build Housebuilders generally less keen on offering Self-Build serviced plots.

17. Devolution

18. Devolution Overview Resulted from 'no' vote in the Sept 2014 Scottish independence referendum Radical new model of city government 'revolution in the way we govern England' Cities Devolution Bill 2015 Aim is to improve governance of cities and regions Greater power and control over local transport, housing, skills and healthcare Devolution deals agreed in 11 areas (38 bids received) as of March 2016

19. Devolution Opportunities Gives new powers in a number of specific policy areas to Local Authorities Enhanced power over local taxes (council tax/business rates) More flexibility over borrowing and financial management Greater efficiency in public service provision Creation of combined authorities and/or directly elected mayors

20. Devolution Challenges Negotiations carried out in secret between government teams and Local Authority leaders Deals not necessarily ratified by councillors - what happens then? Much speculation about underlying intentions of government Newly-elected mayors have differing degrees of power over different matters Mayors face being held accountable for things that s/he doesn't control

21. Devolution Application England only Local government is a devolved matter already in Scotland, Wales and Northern Ireland

22. Local Authority Approaches Case Studies

23. 1. City Region Building on Infill Sites Land owned by Local Authority Selling land to create income and rebalance tenures in areas of high social housing A new vehicle to deliver housing for sale and private rent A joint venture with Contractor Developer and Housing Association Design, development, sales and management functions outsourced Income to Local Authority for sales and rental Starter Homes not seen as appropriate

24. 2. City Council Building on Infill Sites Land owned by Local Authority - mostly clearance sites A vehicle (part of the Council) to deliver housing for sale, affordable and private rent Income to Local Authority for sales and rental New type of housing for local 'older downsizers' Now developing a range of standard house types – tailored to local need Using private sector expertise for sales and marketing Starter Homes likely to help (Help to Buy has been critical to sales)

25. 3. Regional Town with Urban Extension Land owned by Local Authority Retaining freehold interest and selling land to create income and balance tenures A new vehicle to deliver affordable housing Housing for local people – tailored to local need A flexible tenure approach 0-95% flexible ownership for young and old people ‘Staircasing’ up and down Starter Homes to be negotiated with DCLG to match need Investment in large scale production to deliver at pace Custom Build to be facilitated

26. Pension Fund Investment ARUP to add image

27. Quick delivery More appropriate tenure mix for some areas – focus on rental and potentially shared ownership Patient capital Long term income for Local Authorities depending on deal structure Provides an additional source of finance Pooling of capabilities and understanding Pension Fund Investment Opportunities

28. May not be the best model for delivery of social rented homes Not well suited for owner-occupation Not all locations and housing markets will be suited Capacity of Local Authorities to broker the right deal? Reconciling lease terms required by investors with local priorities Long term certainty of rental income from affordable units in current policy environment Pension Fund Investment Challenges

29. Pay to Stay Add image

30. RPs will be able to invest additional income into supply of new houses – opportunities for Local Authorities to work together and influence May encourage those who can afford to move to do so, freeing up stock for more ‘in need tenants’ Pay to Stay Opportunities

31. Penalises many RPs’ best tenants? Cross subsidisation issues Implementation and monitoring? Administration cost Potential work disincentive effect (taper and exemption for those on HB may help) Pay to Stay Challenges

32. Sale of High Value Assets

33. Government thinks £4.5bn could be raised Supports the Right to Buy extension to housing association tenants Opportunity to work with RPs on replacement units – may help support wider Local Authority housing & regeneration objectives Sale of High Value Assets Opportunities

34. What will be the definition of high / higher value stock? If based on actual sales it is estimated that 22,000 homes will be lost and CIH thinks only £2.2bn will be raised: funding gap expected How will government determine levy for Local Authorities? Based on RTB take up or actual stock? Will high value homes (if sold to fund levy) be replaced? Working with RPs to ensure replacement RTB stock meets local needs Sale of High Value Assets Challenges

35. Questions to the floor

36. Questions to the Floor Focus on the opportunities – what is new, innovative, that allows councils to DELIVER Where are the great examples of Local Authorities taking innovative approaches? What are the key things for Local Authorities to do to gear up to respond to the changes that are coming? Who should Local Authorities be building / enhancing strategic relationships with? (big employers in the area, pension funds, investors, RPs)