News & Commentary

What’s come out of the Chancellor’s Red Box? UK Budget Insights for Property Developers

Asserson’s Planning Team has been through the fine print of the UK Budget 2017 to highlight key points for those looking to develop Real Estate projects around Britain.  They have found plenty to catch their attention.

No CIL reform

The Budget did not endorse the key recommendations of the government-commissioned review panel for CIL reform. The panel proposed the implementation of a twin-track system, combining a low-level Local Infrastructure Tariff (LIT) for all developments with section 106 agreements for larger sites. Instead the Chancellor has promised that the DCLG will consult on “speeding up the process of setting and revising CIL to make it easier to respond to changes in the market.”  See our deep-dive blog discussing the Budget’s announcements on CIL.

Creating more homes from commercial space

The Budget announced plans to consult on a new permitted development right to allow commercial buildings to be “demolished and replaced with homes”. Other proposed policy changes include supporting converting empty space above high street shops and simplifying the process of converting retail and employment land into residential use.

Speeding up permission build-out rates

The government will consult on a triple-action plan to speed up the process of commencing work on site by:

  • setting a 75% housing delivery threshold for the presumption in favour of development by 2020, a move that the Chancellor hopes will strength the Housing White Paper’s “housing delivery test” and clamp down on schemes that fail to deliver their planned housing quota;
  • expecting local authorities to bring forward 20% of their housing supply as small sites, which will help to boost smaller development companies who may struggle to compete for sites with larger housing developers; and
  • removing the exemptions from the “deemed discharge” rules, making the procedure available to a wider range of developments.

Review commissioned to examine gap between permissions and completions

A review panel will be set up to “explain the significant gap between housing completions and the amount of land allocated or permissioned, and make recommendations for closing it”. The review will provide an interim report for the Spring Statement 2018 and a full report for the 2018 Budget. The Chancellor stated in his Budget speech that if the review finds “that vitally needed land is being withheld from the market for commercial, rather than technical, reasons” then the government will “intervene” to bring the land forward for development.

Minimum densities proposed

The government is considering minimum densities for housing development in city centres and near transport hubs, with greater support for the use of compulsory purchase powers to assemble sites.

Support for small-time house builders

An extra £1.5 billion for the Home Building Fund injects more capital into providing loans specifically targeted at supporting SMEs who cannot access the finance they need to build housing. The government also pledges to explore creating £8 billion worth of new guarantees to support SME housebuilding.

No change for Green Belt

The Chancellor has reaffirmed the government’s commitment to maintaining the existing protections for the Green Belt.

 Accelerating ‘first-time buyer-led developments’

The government have vowed to consult on a new policy for granting planning permission for land outside local development plans on the condition that a “high proportion” of the residential units built are offered for affordable rent or to first-time buyers at a discount. This will not apply to the Green Belt.

Empty house premium on council tax

The government will allow local authorities to increase the council tax premium from 50% to 100% for owners of empty homes to encourage bringing the properties back into use.

£1.1 billion new Land Assembly Fund

The new fund will enable Homes England (the new name for the HCA) to work alongside private developers to develop strategic sites, including new settlements and urban regeneration schemes. This is in addition to proving Homes England with new planning and compulsory purchase powers to assist in bringing developments forward.

 Deallocating sites with no prospect of delivery

The government will consult on removing allocated sites from local plans where “there is no prospect” of a planning application being made for their intended use.

 £630 million fund to accelerate home building on small, stalled sites.

 The government proposes to achieve this by channelling the funding into on‑site infrastructure and land remediation.

 The Housing Infrastructure Fund more than doubles to £5 million

 This fund pot, launched by the DCLG in June, is intended to deliver infrastructure to ease the construction of new homes.

New garden towns

The government have committed to bringing together public and private capital to build five new garden towns, particularly focused on building in areas of high demand such as the South East.

Focus on developing the Cambridge-Milton Keynes-Oxford “brain belt”

The Budget backed the National Infrastructure Commission’s recommendations to invest in delivering up to one million new homes by 2050 to achieve the arc’s “economic potential” to be “globally significant” as a UK Silicon Valley.

Has the Budget delivered?

Many of these “fresh” initiatives were already announced prior to the Budget or included in last February’s Housing White Paper. But several points do stand out as positive moves, particularly the expansion of permitted development rights and loosening the “deemed discharge” rules to apply to more conditions. There is also support for small-scale developers, including the compulsory 20% housing allocation as small sites, although it is unclear how this will resolve conflicts between local policy and national guidance, such as the small site affordable housing contribution. Surprisingly there are no proposed substantive changes to CIL, which we look at in further detail in a dedicated article.