My Lords, within this group of amendments we cover some of the ground we have already covered, so I will try only to fly over the top of that. These are important amendments and I want to do them justice.
Clause 6, as we have discussed, has a clear and specific purpose: to get houses built. It will deliver private and affordable homes where those homes are currently stalled. As I said at Second Reading, stalled sites represent no local growth, no community benefit and no new housing. Across the country, we have 1,400 stalled sites, with the capacity for 75,000 homes, including affordable housing. The noble Lord, Lord McKenzie, asked me whether we could say how much affordable housing was caught up in this. Local authorities hold that information; it is not necessarily passed back to central government. I therefore cannot give him a definitive response to that, except to say that we know that a good percentage of that 75,000 is affordable housing.
We know that many councils are voluntarily renegotiating to bring sites forward; we have discussed how this can be voluntary. We are in favour of this good practice. We are supporting this approach through a mediation service, bringing together local authorities and developers to help unlock sites, so that they can come together, discuss it and see how they can move on. But where authorities and developers are unable to come to agreement, developers should have a right to challenge. Current legislation prevents the developer appealing formally for five years. This is too long when we need homes.
There may need to be a fundamental review of obligations for those agreed at the peak of the market. We intend to make regulations in the coming weeks to allow earlier renegotiation of all planning obligations agreed prior to April 2010. That was a point made by the noble Lord, Lord Beecham: voluntarily, before 2010, you could do that but the regulations will make that part of legislation. These negotiations can take time and be costly and complex, so we are also ensuring that there is a rapid, focused mechanism for a review of the affordable housing element only, where the viability of the scheme is at stake, with a right of appeal to the Planning Inspectorate.
Affordable housing often comprises the largest single contribution on residential schemes, which is why we have focused there. Research in 2007-08 found that about 50% of all planning obligations are for affordable housing. There should also be capacity to vary the affordable housing provision in most cases. The noble Lord, Lord Beecham, asked what we meant by “affordable housing”. That can be found on page 50 of the National Planning Policy Framework. I will give a snapshot and then the noble Lord can look it up for himself. Affordable housing is:
“Social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market … Homes that do not meet the above definition of affordable housing, such as ‘low cost market’ housing, may not be considered as affordable housing for planning purposes”.
Those are the three major elements.
It is important to understand that we are not proposing that developers can somehow avoid their obligations, which was suggested by the noble Lord, Lord Davies, earlier. We are simply allowing a review to be made to ensure a viable and deliverable scheme as agreed. Furthermore, we are not proposing that developers can ensure blanket removal of affordable housing requirements for their schemes. We are requiring an evidence-based approach that will adjust the affordable housing requirement by only the amount necessary to bring the scheme into viability. This would not be wholesale removal except in the most extreme cases.
Evidence will be key to this process. Developers will have to submit revised evidence to the local authority to justify why their current planning obligation is not viable. The local authority will be free to respond to this proposal and be able to collect its own evidence if it wishes. Concerns are often expressed about the quality of viability evidence. However, robust evidence must be the best basis on which to make a judgment on the viability.
To assist as much as we can in ensuring consistency in how developers and councils approach this new process, we intend to issue guidance to support this clause. The guidance will not advocate a single methodology for viability assessment, but it will work with industry practice. It will be clear on what developers need to do to support their application for review. We will discuss the guidance with professional bodies and it will be published in due course, but I hope that we will be able to have a discussion about it before Report. The guidance will also be clear on the flexibilities open to local authorities to encourage developers to start on site and to get development going.
Overall, this measure presents a real opportunity to stimulate local housing growth by ensuring that consents are viable and realistic. The provision will not affect those affordable housing contributions that are planned on viable sites; in other words, where the costing stacks up, the developers cannot come back and suggest that they contribute less affordable housing. However, the measure provides for adjusting unattainable levels of affordable housing on unviable sites. Those values may have been estimated during a high point in the market, and we are clearly not there at the moment.
I turn now to the amendments in this group. Amendments 55A and 55CD would limit the life of the clause to those planning obligations in place at the time of Royal Assent or three years after Royal Assent—this is the sunset clause. I understand the arguments being made that the intent of the clause is to address obligations made in different economic circumstances. It is about giving developers the opportunity to review affordable housing requirements and bring forward stalled sites. The difficulty that I have with the amendment, which allows applications in relation to existing obligations only, is that it assumes that we are now in a period of stability in the market and that any obligation made currently should not be challenged on the grounds of viability because we know that all is well in the property market. If we knew all the factors that were to be involved and their impact on a developer’s viability—namely, construction costs, sales values and borrowing costs—and if those were certain and fixed for the foreseeable future, we could focus on the past only. However, evidence from public sources, such as the Office for Budget Responsibility, indicates that we are not actually there yet. Evidence indicates varying performance up and down the country. House price growth remains subdued across most of the country. The recently announced 2.5% house price increases in England were driven by a 5% rise in London and a 3% increase in the south-east. Elsewhere across the country there is still a wide variation in house price growth.
There remains uncertainty in the housing market. The Government continue to provide strong support for housing growth—for example, the NewBuy and FirstBuy schemes—and we are making progress. Net additions are up 11%. Nevertheless, the wider market remains uncertain. While transactions are up year on year, they are down around 47% compared to pre-recession levels. So we do not yet have the certainty that we would like on the housing market and associated viability. The clause already includes, as noble Lords have said, a provision to allow the Secretary of State to switch off the provision by order. This has been drafted in a way that allows for a judgment to be made at the appropriate time, based on the state and stability of the housing market.
However, I am clear from the debate that we have had today that greater certainty on this would be desirable. I am also very conscious of the report published last week by the Delegated Powers and Regulatory Reform Committee of this House. We are giving the report and its recommendations very careful consideration, especially in relation to the suggestion that a sunset date should be considered. Therefore I think it would be more helpful if we return to this matter on Report, and I hope that I can have some further discussions with noble Lords before we get there.
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Amendments 55AA and 55CC, proposed by the noble Lord, Lord McKenzie, seek to prevent applications being made until the obligation is two years old. As I said, the purpose of Clause 6 is to ensure that stalled sites with planning consent, ready to provide much needed housing and jobs across the country, are brought
back into viability and built on as quickly as possible. This clause introduces a swift, targeted mechanism for a review of affordable housing obligations.
A two-year wait before a developer can apply would mean that sites remain stalled for longer, which therefore reduces the opportunities for reviewing them. We are introducing a test of economic viability, where it can be clearly demonstrated that the site is not viable as a result of affordable housing contributions. An arbitrary time limit of two years serves no real purpose.
The noble Lord, Lord McKenzie, said that the NPPF focuses on viability and asked why this is not sufficient. Individual sites will change during the life of the planning consent, even if they were originally granted as a viable scheme. In practice, sites are not all going to be identical. The noble Lord also asked why the £300 million given by the Government for new affordable homes could not be used to contribute towards the reduction of the affordable housing element. The £300 million is a guarantee to deliver up to 15,000 new affordable homes; that is above and beyond what there is. We will publish further details of how the guarantee scheme will work. As part of that, we are examining how social housing landlords will be able to bid for it. So it does not really fit in with the measures that we are talking about at the moment. We cannot make a blanket commitment to fill the gap for aspirational affordable housing requirements with grants in the event of a Section 106 agreement being negotiated. However, we are continuing to work on the design and potential use of the guarantee scheme and its associated capital grant funding. I expect to issue further information on this shortly.
I hope that that lengthy response answers the questions that noble Lords have raised, lays out the Government’s position and assures the House that we are thinking carefully about the sunset clause, to which, as I have said, we shall return before Report.