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Government There have been calls to reform the charges on house builders to ensure that the gains from rising land values also benefit local residents.
MPs said communities were being deprived of vital amenities due to loopholes in the processes to secure appropriate financial contributions from developers.
Two primary mechanisms for capturing land value to help finance new facilities schools And gp surgery There are planning obligations, negotiated through Section 106 agreements and community infrastructure levies.
An Inquiry by Cross-Party AccommodationThe Communities and Local Government Committee found that existing arrangements have failed to deliver results for communities because processes are “marked by lengthy negotiations” and variation in local approaches.
The complexity of the current system also creates additional cost pressures for under-resourced local planning departments, the Committee said.
The report finds that loopholes in existing arrangements have enabled developers to repeatedly negotiate reducing their affordable housing contributions on the basis of feasibility after development has started.
The committee said that the government’s upcoming reforms to guidance on feasibility assessments should ensure that developers deliver agreed levels of affordable housing, with commitments only to be changed “in the most exceptional circumstances”.
It also recommended that all local authorities in England be encouraged to set a minimum percentage target for affordable housing in local plans, with a fast-track planning route for developments that meet this target.
A report by the Housing, Communities and Local Government Committee also raised concerns about the affordable housing target and the government’s ability to meet its target of 1.5 million new homes.
It said the delay in publishing the long-term housing strategy had “left the industry in the dark, without a clear understanding of the trajectory of housing supply, and without a comprehensive plan for how such an ambitious target will be achieved”.
The report said there is “significant potential” for the Ministry of Housing, Communities and Local Government to experiment with “new mechanisms” of capturing land value to fund proposed new cities.
“There is significant potential for using land value capture as part of financing for proposed new cities, particularly on green zone sites.”
But it added: “We are deeply concerned that the Government has announced adequate details of 12 potential sites without a planning policy to protect land value, contrary to the recommendation of the New Towns Taskforce.
“We call on the Government to announce new funding for the establishment of development corporations in the Autumn Budget 2025, so that they can begin acquiring land on the first New Town sites without delay by spring 2026.
“Furthermore, we recommend that development corporations are mandated to give priority to homes for social rent within the 40 per cent affordable housing requirement rather than other types of affordable housing.”
The proportion of affordable homes developers must deliver is being slashed as they try to plan faster as part of emergency measures to tackle London’s housebuilding crisis.
The government announced that the amount affordable housing developers have to include in the scheme is being reduced from 35 per cent to 20 per cent in a bid to speed up their approval process.
The move is aimed at boosting sclerotic housebuilding in the capital, which ministers said was “facing a perfect storm due to the combination of rising construction costs, high interest rates, the legacy of the previous government, the impact of the Covid-19 pandemic, regulatory barriers and macroeconomic conditions”.
However, the report highlights that the Greater London Authority had told the inquiry that cuts to affordable housing requirements could result in increased land values and/or developer returns and slow delivery.
The committee said it was “gravely concerned” by the cut to the affordable housing target.
Recognizing that the national target cannot be met without increasing housing supply in London, the committee said a “significant proportion” of new homes must be affordable for local people.
Committee chair Florence Eshalomi said: “The government must urgently pursue reforms to land value capture to ensure that developers can make a fair contribution to the infrastructure and affordable housing that communities rightly expect.
“We need more homes, but we need homes that are affordable. Any proposed changes to land value capture measures, such as the Community Infrastructure Levy, must be able to answer the key question of how this will support critical infrastructure as well as increase the number of affordable homes available.
“The Government must not overlook the infrastructure needs that residents expect in high-quality new developments, and developers must continue to contribute appropriately to this.”
A spokesperson for the Ministry of Housing, Communities and Local Government said: “We are doing everything we can to build Britain back – including our Planning and Infrastructure Bill, a £39 billion investment in social and affordable housing and the landmark New Towns programme, which will restore the dream of home ownership and create thriving communities.
“We have already sought views on streamlining Section 106 negotiations and will continue to work closely with the sector to ensure the developer contribution system provides the homes people need.
“We will carefully consider the report and respond in due course.”