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PN 07

17 March 2004

Press notice 07: Delivering stability: securing our future housing needs

The Chancellor of the Exchequer and Deputy Prime Minister today welcomed the final report of Kate Barker’s review of housing supply, which shows how greater stability in the housing market can be achieved and how to make housing more affordable for more people. The Review sets out a challenging set of reform proposals for central and local government and the house building industry to deliver increased housing supply.

The Government accepts the need for reform and intends to implement a programme of change as recommended in the Review. 

Deputy Prime Minister John Prescott said:

“This report will help us to carry forward the agenda for change we set out in our £22 billion Sustainable Communities Plan. Kate Barker sets out the challenges we face in tackling housing shortages in the south and housing collapse in the north. We are already making changes to the planning system and increasing funding for affordable housing. However, as Kate Barker's report makes clear we need to do more to increase the supply of affordable and sustainable homes. We accept the need for increased investment in social housing, and are determined to provide more affordable housing, especially for key workers, and young families. But we must avoid the mistakes of the past, delivering not just housing, but the infrastructure that sustainable communities need, whilst protecting the countryside. We will work with local authorities, business and other stakeholders to achieve this.”

In his Budget speech Chancellor Gordon Brown said:

“The report by Kate Barker published today concludes that the supply of new homes consistently lags behind demand and that the numbers of houses built in Britain must rise substantially if we are to reduce house price inflation and increase the number of affordable homes for people wishing to buy and rent. I hope that over the next year all parties will study the Barker proposals and it must be in the interests of the whole country to see whether we can forge a shared approach that would safeguard our environment, lead to more affordable housing, and at the same time keep interest rates as low as possible and contribute to the greater economic stability and prosperity of Britain.”

The Barker Review shows that in order to deliver long-term stability the current level of house building will not suffice and a substantial increase in housing supply is required. A failure to increase supply risks increasing excess demand for housing, further and threatening volatility in the wider economy.  A failure to increase supply also means diminishing affordability of housing in the private sector. The Barker Review shows how house price inflation has made home ownership in the private sector increasingly unaffordable for many groups in the population, particular for first-time buyers, with knock-on impacts on rent levels in the private sector and on demand for social housing, which already outstrips supply. This diminishing 'market affordability' has a direct impact on social exclusion and on the housing opportunities available to young people and others.

The Government agrees that to deliver its commitment to stability and affordability needs a significant increase in housing development over time. The Government will need to consider the scale of such development and how it can be delivered both nationally and regionally taking into account the economic, social and environmental implications and ensure that development is sustainable. The Government will establish a long-term market affordability goal incorporated within the Public Service Agreement process as recommended by the Review and will consult on how this should be delivered over the course of the next 18 months.

The Barker Review highlights the case for increased social housing to meet society's needs. The Government accepts that there is a case for increased investment in social housing and will begin to address this in the 2004 Spending Review.

Kate Barker sets out challenging reform proposals to deliver increased supply. The Government accepts the need for reform and intends to implement a programme of change as recommended in the Review. The Government is already taking action but recognises the need to do more. The Government will therefore consult with stakeholders on:

Planning, by:

• considering how Regional Planning Bodies and Regional Housing Boards can be merged to create a single body responsible for managing regional housing markets, and how they can be supported by stronger independent advice on the steps required to achieve affordability goals;
• improving the delivery and responsiveness of the planning system by allocating land in a way that provides developers with sufficient land to ensure delivery of agreed housing numbers and more choice as to which sites to develop and incorporates market based triggers for additional land release;
• revising planning policy on housing to consult on the application of market information and signals into the system and a presumption in favour of granting planning permissions which conform to local plans; and
• speeding up planning decisions through the allocation of £130m from the Planning Delivery Grant to reward good planning performance, with further allocations of £170 million for 2005-06.

Delivering development, by:

• providing incentives to support infrastructure to enable housing development through a Community Infrastructure Fund, making a  start as part of the Spending Review;
• building on the Local Authority Business Growth Incentive scheme to consult on creating incentives to local authorities to deliver housing growth;
• considering how government policy across all stakeholder departments can better take account of planned housing and population growth in their allocation decisions alongside other priorities; and
• asking English Partnership’s to take a lead role in assembling complex sites for development, including the use of Public Private Partnerships, surplus public sector land and joint ventures.

Economic incentives, by:

• launching today a consultation document, ‘Promoting more flexible investment in property’, seeking views on how a new Property Investment Fund, a UK version of the successful US Real Estate Investment Trusts, might be structured to meet the Government's objectives of further enhancing the liquidity of property investment, providing greater access to retail investors and encouraging expansion in the private rented sector; and
• announcing its intention to introduce a Derelict Land Tax Credit that will provide a tax incentive for the development of derelict brownfield land.

Industry, where the review:

• sets out a series of challenging reform proposals to the industry to increase customer satisfaction, tackle skills shortages, increase the flow of new houses onto the market and improve design and use of modern methods of construction. The Government and the industry must work in partnership to deliver these reforms. The Government will consider the progress made by summer 2005.

Delivering the Barker review package

The Barker Review concludes that a Planning-gain Supplement based on the uplift when land is sold for development would be an efficient source to release resources to help in the expansion of housing supply.

The Government accepts that, in order to meet the key objectives of stability and improved market affordability, there is a good case for additional social housing investment, incentives to local authorities to deliver housing growth, support for infrastructure to complement new developments and potentially support to the industry to train their employees to deliver this challenging agenda, all of which would require additional investment. The Government agrees with the recommendations of the Review that it is in principle fair to fund this proposed package of measures out of the uplift in land values experienced during the development process. This could also alter the balance of incentives between greenfield and brownfield development, helping to encourage a more efficient use of land.

Achieving long-term stability will require the delivery of all the elements within this overall package.  The Government will work with stakeholders to ensure that the necessary conditions are in place for the package proposed by Kate Barker to succeed.  Therefore, in considering a package of reforms to follow the Barker Review, the Government will need to be sure that:

• planning reforms are underway and the system is delivering a coherent and efficient service capable;
• there is a positive impact on supply from the introduction of these incentives;
• the industry is responding to the Review’s recommendations and is capable of rising to the challenge;
• the 2004 Spending Review has begun to put in place increased investment for social housing; and
• the design of the proposed Planning-gain Supplement is effective and workable.

The Government will review progress against these objectives by the end of 2005.  If the Government is satisfied that these are all on track, it will bring forward this package to deliver economic stability and improved affordability to address housing needs.

NOTES FOR EDITORS

The Sustainable Communities Plan

The Sustainable Communities Plan (SCP) is a long-term programme of action backed by £22 billion of investment to improve housing and planning in order to build sustainable thriving communities. It covers a wide agenda, which recognises that to develop communities in which people wish to live, housing policy needs to be linked to improving economies, public services, transport and the environment at a local level.

The SCP recognises the importance of affordable housing in maintaining balanced and successful communities. Our aim is to deliver new affordable housing where it is needed, in more sustainable forms. We're investing £5bn in more affordable housing, including £1 billion for key worker housing, over the three years to 2005-06 - double the level in 1997.

Latest figures show a continuing increase in new house building in England. Starts and completions in the quarter to December 2003 were up 10% and 8% on the previous year.  In London and the wider South East some14% more new homes were provided in 2002-03 than the year before.

Under the SCP the Government has identified four growth areas (Thames Gateway, Ashford, Milton Keynes / South Midlands, London-Stansted-Cambridge) where the Government will concentrate additional housing. Combined with London, the growth areas have the potential to deliver an extra 200,000 homes above planned levels and over 300,000 jobs.

A new Key Worker programme to help keep the skills needed in key public services, such as in health, education and community safety, will be launched later this month. The new programme builds on the success of the Starter Home Initiative, which is on track to place 9,000 key workers into home ownership by 31 March 2004.
 
ODPM is working hard to meet its commitment to make all social housing decent by 2010.  Since 1997 funding for housing has trebled, helping to reduce the number of non-decent homes by 1 million. The Government is investing £2.8bn over the next three years to improve council housing (three time what it was in 1997). 

The Barker Review report can be found on barker review

Further details on the Sustainable Communities Plan can be found on ODPM's website: http://www.odpm.gov.uk/

ODPM PRESS OFFICE
Press Enquiries:  020 7944 8915
020 7944 5945 (out of office hours)
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