Reform levies on developers as communities are denied amenities – MPs

Communities continue to be denied vital amenities because of flaws in processes intended to secure fair financial contributions from developers, MPs have said.

The Government has been urged to reform levies on house builders to ensure rises in land values which feed profits also benefit local residents.

A report by the Housing, Communities and Local Government Committee also raised concerns about affordable housing targets and the Government’s ability to meet its 1.5 million new homes target.

The two primary mechanisms for capturing land value to help fund new amenities such as schools and GP surgeries are planning obligations, negotiated through section 106 agreements, and the community infrastructure levy.

An inquiry by the cross-party Housing, Communities and Local Government Committee found current arrangements fail to deliver for communities as processes are “marked by protracted negotiations” and variation in local approaches.

The complexity of the current system also creates further cost pressures for under-resourced local planning departments, the committee said.

Flaws in current arrangements have enabled developers to frequently negotiate down their affordable housing contributions on viability grounds after development has started, the report found.

The committee said the Government’s forthcoming reforms to guidance on viability assessments must ensure developers deliver agreed levels of affordable housing, with commitments only altered “in the most exceptional circumstances”.

It also recommended that all local authorities in England are encouraged to set a minimum percentage target for affordable housing in local plans, with a fast-track planning route for developments which meet this target.

Commenting on the Government’s 1.5 million housing target, the committee said the delay in publishing a long-term housing strategy “left industry in the dark, without a clear sense of the trajectory of housing supply, and without an overarching plan as to how such an ambitious target will be achieved”.

The report added there is “significant potential” for the Ministry for Housing, Communities and Local Government to experiment with “new mechanisms” of land value capture to fund proposed new towns.

“There is significant potential to use land value capture as part of funding the proposed new towns, especially on green field sites.”

But it added: “We are deeply concerned that the Government has announced substantial detail of the 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 to establish the development corporations at the Autumn Budget 2025, so they can commence land acquisition on the first New Towns sites without delay by spring 2026.

“In addition, we recommend that development corporations are mandated to prioritise homes for social rent within the 40% affordable homes requirement, rather than other types of affordable housing.”

The proportion of affordable homes developers must provide when trying to fast-track planning is being slashed as part of emergency measures to tackle London’s housebuilding crisis.

The Government announced that the amount of affordable housing developers must include in a scheme to speed up their approval process is being lowered from 35% to 20%.

The move is aimed at ramping up sclerotic housebuilding in the capital, which ministers said is facing “a perfect storm due to a combination of spiralling construction costs, high interest rates, the legacy of the previous government, impact of the Covid-19 pandemic, regulatory blockers and wider economic conditions”.

However, the report highlighted that the Greater London Authority had told the inquiry that reductions in affordable housing requirements can result in inflated land values and/or developer returns and slow down delivery.

The committee said it was “seriously concerned” by the affordable housing target being cut.

While acknowledging that the national target cannot be met without increases in housing supply in London, the committee said a “significant proportion” of new homes must be affordable to local people.

Committee chairwoman Florence Eshalomi said: “The Government should immediately pursue reforms to land value capture to ensure developers make fair contributions towards the infrastructure and affordable housing which 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, should be able to answer the crucial question of how it will increase the number of affordable homes available, alongside vital infrastructure.

“The Government must not lose sight of the need for the infrastructure which residents expect in high-quality new developments, and developers must continue to make a fair contribution towards this.”

A Ministry of Housing, Communities and Local Government spokesperson said: “We’re pulling every lever to get Britain building – including our Planning and Infrastructure Bill, £39 billion investment in social and affordable housing, and landmark New Towns programme will restore the dream of homeownership and create thriving communities.

“We’ve already sought views on streamlining Section 106 negotiations and will continue to work closely with the sector to ensure the developer contributions system delivers the homes people need.

“We will consider the report carefully and respond in due course.”