Government builds on planning changes with new funds for housing

The announcement includes £1.67 billion in additional funding for affordable housing in London, taking the government's total investment to £4.8bn, or 116,000 additional affordable homes; plus £100 million as part of a bespoke housing package for the West Midlands, in support of the mayor's plans to deliver 215,000 new homes by 2030/31.

The chancellor also announced an additional £120m in funding for the Housing Growth Partnership, made up of £60m from the government and £60m in 'match funding' from Lloyds Banking Group. The fund, which provides support to small and medium-sized housebuilders, is now worth around £220m.

The announcements come on the back of a major overhaul of the National Planning Policy Framework (NPPF) and planning policy guidance (56-page / 696KB PDF), which were published for consultation last week on Monday and Friday respectively. Former Cabinet Office minister Sir Oliver Letwin has also published the initial findings from his independent review into the gap between planning permissions granted and homes completed, which was announced by the chancellor as part of the Budget in November.

In a letter directed to both the chancellor and housing minister Sajid Javed, Letwin said that he had looked into "commercial and industrial constraints" cited by housebuilders on large sites as reasons for the gap, which is also referred to as the 'build out' rate. He said that he was "not convinced" that the gap could be attributed to these factors, which included constraints on skilled labour, building materials and capital, the slow speed of installations by utility companies and lack of local transport infrastructure links.

In Letwin's view, the main reason for the gap between planning permissions granted and homes completed on large sites is to do with the 'absorption rate'; which is the rate at which the housebuilder believes that newly-constructed homes can be successfully sold into the local market without affecting the market price. This is in turn influenced by factors such as the type of homes being constructed, and the pricing of those homes, he said.

Letwin intends to further explore this issue in his full draft report, which he expects to publish in June. The report will also look into the issues cited by housebuilders in more detail, based on further discussions with builders and their suppliers and examination of the relevant economic data.

Housing and planning law expert Richard Ford of Pinsent Masons, the law firm behind Out-Law.com, said that the absorption rate is "very much dependent on mortgage availability and interest rate movements as they underpin market demand".

"The government needs to continue to work closely with mortgage providers to ensure good supply," he said.

Ford welcomed the government's London and West Midlands-specific announcements. As part of the latter, the government has also announced that Perry Barr, site of the 2022 Commonwealth Games, can progress to the next stage of the competitive Housing Infrastructure Fund (HIF) process. A planned announcement next week will set out the full list of 44 areas across the country that are hoping to obtain funding for housing-related infrastructure via a competitive process.

"Given the huge housing challenge facing the West Midlands and London as the mayors, Homes England, local authorities and developers work together to help co-ordinate housing delivery in the regions, these funding commitments are a welcome addition to the focus being given to the issue," he said.

"The HIF funding for the Commonwealth Games Athletes Village is particularly noteworthy as the Games helps to regenerate part of Perry Barr, with the nearby Alexander Stadium being remodelled and Homes England investment in the wider area. This has the combined potential to be a real boost to that area of Birmingham," he said.