Local authorities are using their new powers to cancel planned housing schemes, but that doesn’t mean housebuilders should just sit back, says Chris Cobbold

Across the country, local authorities have been abandoning plans for new housing development as they began to exercise their new right to set their own housing targets, following Eric Pickles’ revocation of the Regional Spatial Strategies (RSSs). These authorities will now be in some confusion following the High Court decision last week that the revocation was unlawful.

Ironically, the huge demand for affordable housing may now be the best grounds on which housebuilders can make their case for schemes to be allowed

However, the government is still determined to abolish the RSSs and the Localism Bill is expected to be pushed through by the end of 2011. In all probability, local authorities will therefore plough ahead with defining their own housing targets, so what does all this mean for housebuilders?

The indications are that by this time next year plans for the provision of 300,000 new homes will have been scrapped by local authorities. The position is not much changed by the recent decision giving the RSSs an extra year of life. Housebuilders need to think about how they can respond to the change in the planning environment for residential development and, specifically, whether they can mount a challenge if local authorities revise housing targets downwards.

The answer is an emphatic “yes”. RSSs may be on the way out, but local authorities still have a duty to set targets for the provision of new housing in their core strategies. Those targets must be “evidence-based”. Local politicians cannot simply come up with a number that will please their electorate and expect their policies to withstand scrutiny.

At present, there is no guidance from the communities department on how authorities should determine the number of homes to be built and until such guidance is given, housebuilders and landowners should go on the offensive to make the case for housing.

Ironically, considering that inflated affordable housing quotas have historically been a hindrance to scheme viability, the huge demand for affordable housing may now be the best grounds on which housebuilders can make the case for development.

The need for affordable housing will only continue to increase in the coming years of austerity, and we now know that the amount of public funding available for investment in affordable homes is going to be cut by more than half. How, then, are local authorities going to meet their statutory obligations to house those in need?

Housebuilders should be the first to point out that this will require authorities to build more homes. The ability to cross-subsidise affordable housing from the sale of market homes has been dented in the downturn, but there is still plenty of scope to secure some provision of affordable homes in connection with development of homes for sale. In any case, local authorities will need to develop more new market housing to help councils meet the needs of their resident population.

Without the role of ringmaster played by the RSS process, each local authority can pass responsibility for meeting its share of the nation’s need for new homes to someone else. With central government having abdicated responsibility, the overall numbers established by local authorities may simply fall short of what the nation needs.

Here, the housebuilder and landowner must play a longer game. The new Local Enterprise Partnerships are likely to have responsibility for planning, housing, transport and infrastructure. They are expected to cover “functional economic areas”, so will be best placed to provide strategic planning in terms of how many homes are needed in an area.

While the agenda for LEPs is being formulated, housebuilders and landowners should be arguing the case for these bodies to have real teeth on planning issues. In some areas, they may be the only body willing to take a strategic overview of housing provision at a regional level. Developers must therefore be prepared to play an active role in the formulation and function of LEPs to ensure that the development pipeline does not dry up.

Chris Cobbold is head of the Residential Practice Group at global real estate services firm DTZ