We begin with a Select Committee statement. Florence Eshalomi will speak on the publication of the third report of the Housing, Communities and Local Government Committee, “Delivering 1.5 million new homes: Land Value Capture”, HC 672, for up to 10 minutes, during which no interventions may be taken. At the conclusion of the statement, I will call Members to put questions on the subject of the statement. I will then call Florence Eshalomi to respond to them in turn. Questions should be brief, and Members may ask only one question each.
It is a pleasure to serve under your chairship, Ms Jardine. This week, the Housing, Communities and Local Government Committee published our third report, following our inquiry into land value capture. I am grateful to the Backbench Business Committee for allocating time for this statement, and I thank the HCLG Committee staff for their help in preparing the report. I also thank our specialist adviser, Professor Richard Dunning from the University of Liverpool, for his guidance throughout the process.
In many ways, the cost of land is one of the biggest root causes of the housing crisis. Land is usually the single biggest expense of any new housing development. When farmland is granted planning permission for housing, its value can soar. The value of private land also rises when we build new infrastructure nearby, such as road schemes or train links. Those increases in land values are not caused by investment from landowners; they are the result of decisions by local authorities. It is therefore right that land value capture policies seek to recover a fair percentage of those profits for public benefit.
Currently, England’s land value capture system has two key parts. The first is planning obligations through section 106 agreements, which require developers to build affordable homes and public infrastructure alongside homes. The second is the community infrastructure levy—a cash payment to local authorities to fund roads, GPs, schools and other critical investment.
If the Government are serious about delivering new towns, new communities and the infrastructure they require, they must look at reforming land value capture. Our inquiry considered how pragmatic reforms can help to support a rapid increase in house building, which would contribute to the Government’s target of delivering 1.5 million new homes during this Parliament. Our report also takes stock of the Government’s first-year progress towards that target.
As my hon. Friend has mentioned, land value increases exponentially if planning permission is granted or new public infrastructure such as transport links are developed. In my constituency of Ribble Valley, we have had lots of house building, which is largely welcomed as an affordable way for people to stay in the area and not be priced out, but what is not welcomed is when promises to build infra- structure such as schools, social housing and roads are reneged on. The existing mechanisms for land value capture—section 106 agreements and the community infrastructure levy—are failing to deliver the maximum funding level for our communities for a variety of reasons, often because of drawn-out negotiation processes. Does my hon. Friend agree that land value capture reforms must be explored so that developers begin to make fair contributions to the areas that our constituents call home?
I thank my fellow Committee member for her useful points. I know this is an issue close to her heart. She represents a rural constituency where additional infrastructure is needed with the new housing, because people need to get to work as well as having somewhere to live, and community facilities are vital. For far too long, many developers have been promising the earth to get over the hurdle of the planning application. Good developers fulfil their obligations, but some renege on them. We hope the Government will look at our recommendations to make the process a lot easier so that there is transparency and, most importantly, so that communities get the infrastructure that they were promised as part of the new developments.
The cut to London’s affordable housing target has a direct knock-on effect on constituencies like mine in Huntingdon, where we are being forced to deliver thousands of new homes, creating an urban sprawl that could destroy the individual character and charm of many of our villages. In a Sky News interview last week, Sadiq Khan was challenged on how he has been reporting the figures for years by counting housing starts that have had no building work done and no spades in the ground, with no increases to London’s affordable housing stock. At least 2,000 houses that he counted as started in 2023 before his re-election have still not been started today. In Ealing alone, almost 1,000 homes that he claimed have been started simply have not. Will the Committee investigate and scrutinise the manipulation of housing stock figures by the Mayor of London?
I thank the hon. Member for his question. I know that there are constituencies on the outskirts of London that are feeling the impact of a lack of affordable housing, and there are issues with temporary accommodation. A number of London boroughs simply do not have enough homes to house people, so they look to neighbouring boroughs. The Government are working with the Mayor of London to investigate the issue. They are challenging the mayor on his commitments in the London plan, and we continue to work with him to look at that as well. The Government hope to commit to ensuring that our Committee has monthly updates on the new affordable housing targets that they have agreed with the mayor. That will be open for public scrutiny once the Committee has looked at that.
It is an honour to serve on the Select Committee with my hon. Friend. As she knows, I am biased when it comes to the importance of new towns. I represent two fantastic new towns: Hatfield and Welwyn Garden City. What she said this afternoon about the new towns of the future and how we get the balance right was really important. Hatfield and Welwyn Garden City are communities that have stood the test of time because land value was captured and a good amount of social housing was built right at the start of those developments. It is imperative that we do the same this time around for the new generation of new towns that the Government seek to build. Does my hon. Friend agree that when we get spades in the ground in our new towns, it is crucial not only that we invest in infrastructure, but that the homes for social rent that we so desperately need are built in the first phase of development and are a core part of those communities from day one?
It is really good to have my hon. Friend’s knowledge and expertise on the Committee; he is always citing reasons why new towns are successful and something that this Government should support wholeheartedly. The key thing that we want to ensure is that funding is attached to deliver on those recommendations, including by ensuring a mixture of homes in new towns. The new towns taskforce has recommended a 40% target for affordable homes, including a minimum target of 20% for social rent. We hope the Government will look favourably on that recommendation, and we can see how building those homes will help to make a dent in the housing crisis that exists across all constituencies in the UK.
1:44 pm
Sitting suspended.
Stakeholders told our inquiry that there are several easy wins for reform of section 106. Modest changes could streamline the process for local authorities and small and medium-sized enterprise developers, while delivering more affordable housing, including much-needed homes for social rent.
Currently, the section 106 negotiation process can be unpredictable, complex and drawn out. We heard that local authorities are often tasked with formulating complex legal wording when they should be focusing on site- specific factors such as the community benefits from the development. We therefore recommend that the Government should introduce template clauses for section 106 agreements, and that local authorities should be encouraged to adopt them.
Local planning authorities must be supported with the resources they need to negotiate section 106 agreements on behalf of communities, but the reality is that planning departments have been long stretched. The Government’s pledge to fund 300 new planning officers demonstrates that they recognise the problem, but that is equivalent to less than one planning officer in each local authority in England.
What is more, the Government are restricting access to level 7 planning apprenticeships, despite the skills White Paper’s ambition for more young people to pursue degree-level apprenticeships. We recommend that the Government look at that again and extend access to degree- level planning apprenticeships to students of all ages.
We heard that only 52% of local authorities are currently charging the community infrastructure levy, perhaps in no small part because planning departments are so stretched. Local authorities often want their staff to prioritise affordable housing delivery rather than administering CIL, which cannot be used to fund affordable housing. However, where CIL is charged, we have heard that it is a vital tool to fund infrastructure, which residents expect alongside new housing. Therefore, the Government must push for greater coverage of CIL where it is financially viable. To support that, we recommend that the Government publish a map of CIL coverage. That would make the whole system easier for developers to navigate and bring an end to the complex patchwork of different local rates.
The evidence we heard from across the sector, including from developers, was clear: the Government must extend CIL coverage where possible to support new communities and unlock more housing. That is why we were surprised to hear last week that the Government are planning to cut CIL for some developments in London and effectively cut London’s affordable housing target from 35% to 20%. The Secretary of State has said that cutting London’s target will increase the number of social and affordable homes built overall. My Committee has asked to see what impact assessment the Department has done on that, but the modelling has not been published yet.
We are concerned that, in evidence to our inquiry, the Greater London Authority said that reducing affordable housing targets can inflate land values, inflate developer returns and slow down housing delivery. The Department must therefore publish its modelling in the coming weeks. The Committee has recommended that if there is a decline in the number of affordable homes built in London, the Government should reinstate the 35% target. That is an area that my Committee wants to scrutinise further in coming weeks, including when the detailed consultation is launched in November.
Our report also finds that there is a vital opportunity for land value capture in new towns to fund the roads, GPs and schools that they will need. However, we are concerned that some of the opportunity may have already been missed. The Government have published maps of possible site locations, yet without policy to protect their land value from speculative development. The new towns taskforce specifically recommended that the Government protect the locations or risk
“jeopardising the new town plans.”
We are concerned that land values in those areas may already be rising, long before the Government have set up the development corporations to purchase the land. Therefore, we recommend that the Government bring forward the funding development corporations at the Budget so that the land agreements are in place before the final locations are confirmed in the spring.
Finally, our report takes a step back from land value to consider the progress towards the target of 1.5 million new homes. It is fair to say that the Department has had a busy first year, with a range of planning reform and legislation. However, our Committee has heard a lot of doubt and uncertainty from the sector. Even the Government told us that the target is “stretching” and “hugely ambitious”. The Government were quick to update the housing targets in the national planning policy framework last year, but on average local plans are still taking seven years to produce. We recommend that the Government implement a new 30-month local plan timeline as a priority so that the national reforms lead to change on the ground.
The truth is that while planning reform might be able to deliver more planning permissions, that is not the same as building 1.5 million new homes. The Government must look at the wider issues in the housing market such as mortgages, build-out rates and the workforce capacity. They have started consultation on some of those issues, but there is no overarching long-term housing strategy. The Government promised that the strategy would be published in spring of this year, but we are still waiting. We hope that the strategy will include an impact assessment to show how the policy changes will add up to the 1.5 million new homes and finally give the sector some certainty about what is planned for the rest of this Parliament.
Our most urgent request of the Government is to bring forward the long-term housing strategy within weeks, not months. The sector needs to have confidence in the road map ahead. We think that some of the pragmatic, uncontroversial reforms to land value capture would help to unlock new homes and should be part of that road map. We look forward to a timely response from the Government. I thank all the witnesses and organisations who supported our inquiry, and I commend the report to the House.