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Making the case for local authority-led housing

Rob Sellen looks at the opportunities and challenges presented by local authority-led housing.

The longstanding housing crisis has impacted many of those seeking housing across all tenures, with the worst affected being those in search of ‘affordable housing’. The need to address the affordable housing supply deficit is becoming a key corporate priority for more and more local authorities, with councils willing to intervene and take housing supply into the own hands.

Throughout the last decade, and particularly during its latter half, there has been a growing appetite for local authorities to directly address the need for the types and tenures of housing to suit their residents - rather than wait, and hope, for private developers to deliver. The third instalment of the Bartlett School of Planning, UCL report (September 2021) on local authority-led housing delivery reports that, as of last year, 83% of councils across England had development companies of various forms compared with 58% of councils in 2017.

Of course local authority-led housing is not a new thing. Local authorities have a protracted history assuming the developer role, with the Local Authorities Land Act 1963 providing councils with the power to develop land. Further legislative powers emerged over the last 20 years, including the Local Government Act 2000 which equipped local authorities with the power to do anything that promotes the ‘wellbeing’ of their communities. 

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The Localism Act of 2011 was pivotal in gifting local authorities the ‘general power of competence’, enabling them to ‘do anything that individuals generally may do’. The Act further grants power to local authorities so they may do anything that individuals do for ‘the benefit of the authority, its area or persons resident or present in its area’. Regardless of political colour and affiliation, the prospect of any local authority delivering high-quality housing schemes with a generous quantum - and in some cases total complement - of affordable housing at considerably rapid rates has caused many councils to take notice.

As well as establishing subsidiary (housing development) companies which they either partly or wholly own, councils may choose other means to intervene in housing development. These have included entering into joint venture agreements with developers and providing council owned land for housing, with the capital used to invest deriving from a range of sources, namely their Housing Revenue Accounts (HRA) and/or directly from their general fund.

The benefits

The benefits for a council choosing to play a prominent and positive role in house building are far reaching. The main incentive to be directly involved is the fact that they can ensure the build actually takes place - and is delivered within its preferred timescales. By comparison, private developers may be more sensitively inclined to delay or even postpone development in light of any risks they may face. Importantly, it gives local authorities the opportunity to disconnect from market and profit-driven factors and provide homes which meet real needs, whether that’s a particular configuration, design or tenure type. This is even more of an incentive in areas where there is little interest from housing associations - or with certain sites which, for a long time, simply haven’t appealed to a developer due to factors such as remediation costs, not being the ‘right size’ to fit a developer’s model etc. On top of these incentives is the growing appetite for local pride, where authorities rightfully and proudly showcase their achievements. For example, the Goldsmith Street development of 105 homes built by Norwich City Council which won the RIBA Stirling Prize for the UK’s best new building in 2019, and more recently Ealing Council, finalists at the Planning Awards 2021 for its Regeneration of Copley W7 – noted as an ‘exemplar for other councils’ for setting up its own development company, Broadway Living, to combat housing demand. 

Local authority involvement in providing homes as part of regeneration projects provides the opportunity to improve social conditions and showcase their achievements. In the long term their involvement also acts as a catalyst, inviting private developers to contribute once effective demand has been demonstrated. A great example of this is the Trent Basin Project being progressed through the collaboration of Nottingham City Council and a private developer. Indeed, this initiative has been subject to recent public recognition, having won the Planning Award for Stakeholder Engagement in 2021.

The risks

Despite the overwhelming incentives and benefits of local authority-led housing development, there of course comes risk. Not all models are successful and they have potential to attract unwanted attention which could be hugely damaging financially, on reputation and on public trust. In recent years a development company wholly owned by a south London council ran into well publicised problems owing largely, as is reported, to financial mismanagement, a lack of scrutiny and clear governance arrangements. In this particular case, much can be put down to pure naivety and a lack of understanding how to run and manage a development company. This news caused some neighbouring councils to reconsider their interests and participation in council-run development companies, pushing back their ambitions of making a valued contribution to housing supply - for the time being at least.

The key challenges that councils face with regards to direct delivery of housing is an ever moving picture and the challenges vary greatly depending on a broad range of factors including geography, existing assets, its scale of HRA and access to general fund as well the extent of developer interest.

The challenges

A recurring challenge cited by local authorities is the need for top level investment within the council, together with a joined up alignment of aims and objectives across each department to ensure there is no conflict - particularly in relation to development goals and benefits. If a council is serious about direct delivery of housing, it must be made a council-wide corporate priority and harmonious, effective relationships both within the council and with external landowners, are key.

On the subject of conflict, governance is another a key factor to be closely considered when the council is acting as a developer; it is critical that local authority planners are impartial and uphold public trust. There is a need to create and maintain a very clear line of separation between both the local authority development arm that promotes the scheme and the planners who evaluate and determine the proposal. Along the way there should be clear transparency and accountability, with housing companies established by local authorities not including elected members. A planning performance agreement (PPA) is a useful mechanism in which to clearly outline clearly the relationships and roles of those involved as well as timeframes for delivery and quality standards expected to be adhered to.

Local project examples

In the south, Eastleigh Borough Council have long since advocated council-led housing developments and they are seen as a respected vanguard in the wider movement of local authority-led housing. Their Corporate Strategy: Housing (2018) with its objective of accelerating the delivery of new homes and encouraging a mix of housing types, tenure and sizes as well as their One Horton Heath initiative, is testament to this.

For the One Horton Heath scheme, an outline application for 2,500 residential units was resolved at committee on 30 September 2021, with the full planning application for the first phase of the development of 381 residential units resolved at committee on 3 November 2021. The proposed development sits within a semi-rural character setting on a site owned by the council and includes a new link road, a minimum of 875 affordable homes, commercial premises and community facilities with significant open space provision. Adopting the tag line ’infrastructure first’, the council-led project does not need to rely on homes being occupied first to create the revenue for supporting infrastructure. The community benefits will be ready for new occupants to use straight away.

Paris Smith’s planning legal team now continue to prepare and advise on both the newly drafted Section 106 Agreement for the first phase of the development and the ongoing Section 106 Agreement for the outline application. With the decisions expected to be issued by the council in late April and late May respectively, the development is intended to commence on the first phase of the site in January 2023.

As a close neighbour to Eastleigh, Southampton City Council are also participating in their own way by focussing on the regeneration of their Townhill Park Estate. Paris Smith are working with Drew Smith Homes in providing both planning and planning legal support alongside Drew Smith as the selected contract partner through a PCSA. The scheme, funded largely through a £3.75 million Homes England Grant, will see the creation of new community spaces and a net addition of around 250 homes - an exemplary example of a project designed with community needs at the forefront. Both these schemes at Eastleigh and Southampton demonstrate effective collaboration between the local authority and the private sector suppliers - sharing their understanding of local and community needs and experience in the planning, development and construction sector. 

In full view of the ongoing housing crisis, the government is clearly expressing its intent to boost housing numbers. But much of their emphasis has been placed on private sector developers to play their role. It may therefore be the case that current planning policy at national level does not truly recognise, and therefore effectively facilitate, the willingness and valued contribution to housing supply that is, and can be, made by local authorities.

Rob Sellen is a planning consultant at Paris Smith.

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