Last updated: 9 February 2017
The government’s blueprint for boosting housing supply originally due out last year was published on 7 February 2017. As already announced, there has been a key shift in government policy focus away from home ownership towards a tenure neutral approach. The housing white paper includes provisions on rented accommodation and scales back some of the ambition of the starter homes programme.
Much of the paper is concerned with planning issues and with policies to speed up build-out of new homes (where both sticks and carrots are in evidence for builders). The government is also keen to diversify sources of supply and encourage smaller and medium sized builders; and to attract institutional investment into buy-to-rent.
The executive summary states that for lenders, “the government is offering a clear and stable long term framework for investment, including products for rent. In return, we call upon lenders and investors to back developers and social landlords in building more homes.”
On custom build, the white paper wants to work with lenders to increase their lending in line with customer demand
On modern methods of construction, government wish to bring lenders, valuers and industry together, to ensure lenders will lend on these properties, focusing on data.
On starter homes, the scheme detail is revised and the availability of starter homes is restricted to those with income below £80,000 (£90,000 in London). The restricted period on selling the homes at full market value has been extended to 15 years, its detailed operation to be set out in regulations. There will no longer be a requirement for new build sites to contain a 20% proportion of starter homes, but government are consulting on a lower ‘planning policy expectation’ minimum of 10% affordable home ownership provision.
There is a discussion on meeting the needs of an ageing population through appropriate housing provision.
The government will consider the future of the Help to Buy Equity Loan scheme post 2021, in conjunction with stakeholders.
There will be an investigation of leasehold issues.
And for those renting, there is support for family-friendly tenancies of three years or more, and the ban on letting agents’ fees is re-announced.
Our press release responded to the key announcements.
What’s in the White Paper?
Increasing the pace and volume of new housing supply across all tenures is now the government’s priority.
Homes for rent
- The paper states that “We want to … attract major institutional investment in new large-scale housing which is purpose-built for market rent,” especially those offering longer term tenancies. This is welcome but it is unlikely to have a significant impact on the rental market in the near term: building 40,000 build-to-let homes would add just 1% to private rented sector supply.
- The paper states that “We are proposing to make the private rented sector more family-friendly by taking steps to promote longer tenancies on new build rental homes”. Elsewhere it refers to “family-friendly tenancies of three or more years… available for those tenants that want them on schemes that benefit from our changes.” We are surprised that there is not more discussion about promoting longer-term tenancies generally in the private rented sector. This may be because DCLG is awaiting the report of the Affordability and Sustainability Working Group before proposing action.
- The paper states that “We will consult early this year, ahead of bringing forward legislation as soon as Parliamentary time allows, to ban letting agent fees to tenants.” This was already trailed in the Budget. It is worth noting that this does not refer to upfront fees but just to “fees”. There was previously some ambiguity about whether it would apply only to upfront fees; this does not eliminate that ambiguity but does make it appear more likely that the government will seek to ban all fees. We would expect the result to be a reduction in service – for example, management agents will no longer attend homes out of hours.
- The paper states that “The government will implement measures introduced in the Housing and Planning Act 2016, which will introduce banning orders to remove the worst landlords or agents from operating, and enable local councils to issue fines as well as prosecute.” We will want to ensure that the security of lenders is protected. For example, lenders should be allowed to impose an LPA Receiver rather than forcing the landlord into a fire-sale. This will also protect the tenant, who would otherwise face eviction if the landlord was forced to cease letting their property.
Homes for ownership
- The Starter Homes scheme will be modified to better target the scheme to those who need it most; there will be income caps mirroring shared ownership, a requirement to have a mortgage, and a 15 year repayment period where the discounted amount or part of it, is repaid when the home is sold on. Lettings restrictions are also being considered.
- The government has reaffirmed its commitment to Shared Ownership and to the scaling-up of delivery in this tenure. The white paper announces that government is keen to explore how to attract greater institutional investment into shared ownership provision.
- The paper confirms that the Lifetime ISA will be introduced in April 2017. We responded to the recent FCA consultation on Lifetime ISA, noting the complex nature of the offering for customers.
- There is confirmation that the Help to Buy: Equity Loan scheme will be funded until 2021; and government has announced it will consider the future of the scheme, with stakeholders, beyond that. This is welcome, and we stand ready to engage on options for the future of the scheme that avoid cliff edges in the operation of the housing and mortgage markets.
- The paper re-states the government’s commitment to support a larger regional pilot of the Right to Buy for housing association tenants. Government will fund the discounts sufficient to support 3,000 purchases.
- The government will consult on a range of measures to tackle unfair and unreasonable abuses of leasehold, with a particular focus on onerous ground rents and freehold purchase costs, and leasehold houses. Commonhold and leasehold law will also be reviewed in conjunction with the Law Commission. All of these issues are being discussed in our working group on leasehold and we welcome the government focus on this issue.
- There will be consultation on how the Land Registry can better reflect all forms of land ownership and interests, and consider how to improve the availability of such data.
- A draft bill will be published to implement the Law Commission’s proposals for the reform of restrictive covenants and other interests in land.
- Government want to identify what more can be done to reduce delays and fees resulting from conveyancing to help ensure the market works better for home buyers – we expect the government will look to publish a call for evidence on the home-buying and selling process on the back of this.
To support housing associations to build more, government will:
- set out, in due course, a rent policy for social housing landlords (housing associations and local authority landlords) for the period beyond 2020 to help them to borrow against future income, and will undertake further discussions with the sector before doing so. The aim is to ensure that associations have the confidence they need about their future income in order to plan ahead. The government also confirms that the 1% rent reduction will remain in place in the period up to 2020;
- put social housing regulation on a more independent footing. Government will make the Social Housing Regulator a stand-alone body.
- reiterate its position that housing associations belong in the private sector and that the government is committed to implementing the necessary deregulatory measures to allow them to be classified as private sector bodies.
All of these announcements are welcome, particularly that relating to rent policy up to and beyond 2020. We look forward to more detail on the rent policy and stand ready to engage with government and the housing association sector on development of the detail, as appropriate.
The government is committed to developing a sustainable and workable approach to funding supported housing which provides value for money. The government has stated its commitment to working with the sector to get the detail right. The detailed arrangements for implementing the new model and approach will be set out in a green paper to be published this spring.
We look forward to the detail and are ready to engage further on this to ensure there is sufficient certainty for commercial funders of supported housing providers in the housing association sector.
Homes and Communities Agency
The Homes and Communities Agency will be rebranded as Homes England. This will apply to the Agency’s functions in relation to land, investment and development. It will not include social housing regulation, which will become independent.
Homes for older people
- The government is introducing a new statutory duty through the Neighbourhood Planning Bill on the secretary of state to produce guidance for local planning authorities on how their local development documents should meet the housing needs of older and disabled people.
- The government is committed to exploring the issues further and finding sustainable solutions to any problems that come to light. To do this, it will draw on the expertise of a wide range of stakeholders including house builders (both specialist and mainstream); mortgage lenders; clinical commissioning groups; housing associations and local authorities; and most importantly older people and the groups that represent them. The government wants to build on the evidence that already exists to help deliver outcomes that are best for older people.
We ready to engage on these issues and will be progressing its existing work in relation supporting older borrowers.
Planning and land
The government is focusing on a range of measures to better assess need and speed up building, centering around changes to planning policy. This includes:
- Building more homes close to city centres and transport hubs.
- Developers will be able to “build higher” where there is a shortage of land, in areas near transport hubs.
- Developers will need to be more transparent, and to show how quickly they start development.
- Councils will have to publish realistic projections for housing demand and review them every 5 years.
- Keeping compulsory purchase law under review and considering further reform to support development.
- Improvements to the operation of developer contributions including the Community Infrastructure Levy and Section 106 planning obligations, which the government will look to standardise.
Diversifying the housing market
The government wants to end the reliance on the major private house builders, and traditional construction methods, as they see this as a constraint on rapid supply. Government plans to make greater use of modern methods of construction by:
- stimulating growth in the sector through the accelerated construction programme and Home Builders Fund.
- supporting a joint working group of lenders, valuers and industry to ensure mortgages are readily available, focusing on enhancing core data on modern methods of construction. We have already called for more comprehensive data on modern methods of construction to help valuers and lenders, and will be exploring more in our existing working groups and valuation panel.
Government wants to work with lenders to ensure they have plans in place to increase lending to custom build in line with consumer demand. We have already been engaging with members and DCLG officials on this issue and will continue to explore issues via our new build working group.
Annex to the white paper
The annex to the white paper includes further detail and consultation proposals on a number of planning matters, including the minimum site requirement ‘expectation’ for starter homes.
We will respond on issues that affect lender interests.
CML position and next steps
We support the tenure neutral position now being promoted by government through its white paper proposals.
We stand ready to engage with government on development of the detail needed to ensure delivery of the new homes needed not only for ownership, but also for the rental markets
We will work with government to ensure the detailed policy environment for delivery enables the required level of mortgage lending activity into the housing market in all tenures.
We will progress this work and member engagement through our network of specialist panels and groups, and our executive committee as required.