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Using Paragraph 72 to Solve the Housing Crisis – A Guide for Landowners

The UK housing crisis has recently been well covered in press releases. However, for well over a decade, barriers to home ownership have been consistently diminished. Whilst unprecedented amounts of support was provided to assist the construction and housing market during Covid by the removal of stamp duty, this, alongside the desire for more space to gear towards new ways of working, has assisted in creating a huge demand for UK homes. Rising interest rates, energy prices and inflation on top of this have additionally reduced the amount available for a deposit for First Time Buyers – so with house prices increasing to record levels month on month, first time home ownership is quickly becoming unobtainable.

The political climate doesn’t lend itself to a focus on the housing crisis either. Current party politics are designed to attract their traditional base – alienating NIMBY’s and Green Belt homeowners with policies to release available, deliverable land would significantly stifle future election chances.

Government targets recommend a minimum of 300,000 houses to be built per year, though this heavily relies on two things – and doesn’t necessarily increase the amount of low cost housing:

  • Local authorities releasing deliverable land available for development within Local Plans
  • Development of the land within timescales to contribute to the Local Housing supply, and not adding to the land bank.

Local Councils set their own targets for affordable housing, generally under a housing mix that shows a preference towards Affordable Rent and Shared Ownership models. In the main the targets are met, though targets for affordable housing can be challenged by viability to reduce the amount required. Whilst over time meeting the Government target for new homes will increase supply (therefore reducing relative prices), low cost homeownership outside of traditional affordable models for the younger generation is therefore pipe dream.

For developments contributing to the Local Authority’s Local Plan, there is level of acceptance in relation to affordable housing. Ultimately, developers are a business looking to make profits – if particular requirements for the implementation of off-site works, other infrastructure or community assets reduce the levels of acceptable margins, there is a need to reduce the level of affordable housing – with other site related infrastructure assists being the route to creation of a socially sustainable community, and making a site viable for business profit generation.

For Landowners with standalone sites, the route to adoption through the Local Plan process can be a costly exercise, sometimes spanning years of strategic assessment to prove deliverability. Ultimately, whilst the margins involved upon disposal for a higher percentage of market sale are more significant, there is no guarantee of success here, can sometimes hinder the route to development, and still only generates ‘affordable’ housing in line with local housing needs such as affordable rent.

So where does this leave us with low cost routes to home ownership?

Whilst Housing Associations & Not-For-Profit Organisations have an important part to play within the housing crisis, the level of reliance on grant funding and business models geared towards longer term asset retention ultimately lends itself to increasing housing stocks for affordable rent & shared ownership models.

The National Planning Policy Framework (NPPF) however identifies a number of different types of affordable housing:

  • Affordable Housing for Rent
  • Starter Homes
  • Discounted Market Sales Housing
  • ‘Other affordable routes to home ownership’ (including shared ownership & rent to buy).

So there are other routes for affordable home ownership.

Paragraph 72 of the NPPF states as follows:-

Local planning authorities should support the development of entry-level exception sites, suitable for first time buyers (or those looking to rent their first home), unless the need for such homes is already being met within the authority’s area. These sites should be on land which is not already allocated for housing and should:

  1. comprise of entry-level homes that offer one or more types of affordable housing…
  2. be adjacent to existing settlements, proportionate in size to them*, not compromise the protection given to areas or assets of particular importance**… and comply with any local design policies and standards.

*Not larger than 1 hectare in size, or exceed the size of the existing settlement
**Not within Green Belt Land, AONBs or National Parks

Landowners just outside of existing development areas therefore have an important part to play in the delivery of new homes. Whilst exception sites have long been included to achieve affordable living accommodation, the inclusion of exception sites within Government policy now paves the way for low cost home ownership without a reliance on development for profit.

Although sites of this type would ultimately have a reduced market value compared to other allocated housing sites, the value for landowners is significantly more than if no development was possible. So long as there are no barriers to development such as access constraints or abnormal site conditions, although a reduced market rate for home ownership is to be achieved, healthy capital proceeds can also to be made for landowners upon the disposal of the site to a developer purchaser, and avoiding the need for uncertainty within the Local Plan process.

With Government support for this type of development identified within the NPPF, alleviating the issue of low cost home ownership can become a reality. Supported by Development Appraisals to determine the Residual Land Value compared to an undeveloped site, and identifying comparisons for the chances of success within the Local Plan, RDC are able to assist landowners throughout the process of gaining planning approval for low cost home ownership sites – in addition to supporting their disposal and ultimate development.

If you would like to find out more, please don’t hesitate to get in touch!

Written by Guy Siragher (Associate Director, RDC)
Connect with Guy here on LinkedIn.