… but who will cross it? As outraged housebuilders clash with the ODPM over giving planners the power to dictate mix, we commentates on the tug of war

Housebuilders have been in rebellious mood. After the news leaked out last month that the government was thinking about changing PP3 to give local authorities the powers to dictate private housing mix, shock was quickly followed by protest. There was a flurry of angry letters to the ODPM at Eland House, and two weeks ago an urgent meeting was held between the House Builders Federation and planning minister Keith Hill to which the builders brought their boxing gloves. The result was that the government agreed to delay publication of the guidance to allow for consultation.

The shock is understandable. Kate Barker’s review of housing supply gave no hint of such a seismic shift in government policy. In fact, the idea has evolved gradually. It had its origins in the ODPM social inclusion unit’s review of overbuilding in the North five years ago, and a subsequent growing conviction that planning policy should be used to exert a stronger influence on what housebuilders were building. In the North, the growth of new-build housing was leading to a fall in the value of the existing stock: in extreme cases, in Manchester and Leeds, terraces in rundown areas were changing hands for £2000 while city-centre penthouses were on at £1m. Left to itself, the ODPM reasoned, the market would go on its merry way indefinitely.

Housebuilders don’t see it like that. Their central objection is that local authorities are not capable of carrying out the analysis of the housing market that would be needed to rebalance provision. Councils already do a kind of market analysis – housing needs assessment – to determine affordable housing need, but the ODPM’s plan would require them to refer to broader and more sophisticated market assessments. This will lead to “paralysis by analysis” according to Richard Donnell, director of research at property agent FPDSavills. “There is no end of data on the market; it’s what you do with it that matters.” Even the current housing needs assessments by councils are “out of date and ineffective”, says Ben Derbyshire, managing director of HTA Architects.

Housebuilders second line of defence is commercial: they need the freedom to decide housing mix to react to changing demand. “Our housebuilder clients change their schemes during the development process to react quickly to market conditions. That process is becoming more important as they seek to differentiate their products,” says Derbyshire.

Taylor Woodrow is one of the housebuilders that wrote to ODPM, and Ed Hinchliffe, the company’s commercial director, put the commercial case to a fringe meeting at the Labour party conference last month. “If we’re giving local authorities the power to define the mix of residential development,” he said, “it presupposes that they know what the market requires – and they will only know about housing need in their area and not the market in general. It could produce standard formats, that may not be financially viable for individual sites,” he says.

Housebuilders may be indignant about the proposals, but they are not completely novel: local authorities have long influenced the mix of what housebuilder build. Waverley council in Surrey, for example, has been using its local plan to match output to need, rather than demand (see “Controlling the mix”, overleaf). John Anderson, Waverley’s development control and policy manager, believes there is good reason to have such an influence: “We know in Waverley that five-bedroom executive houses in our beautiful Countryside will sell, but that’s not what we need, so it was an attempt to say that on the larger sites we wanted to see a mix.”

Waverley’s local plan came into force two years ago and since then the council has had to introduce supplementary planning guidance to stop housebuilders from trying to exploit loopholes, but Anderson says that the move has been fairly successful in achieving a healthy supply of smaller homes. Still, despite his efforts to influence housing supply, Anderson is not convinced that the government’s PPG3 changes will bring benefits. “I’m not sure it will make it any easier because we are already doing it. The theory is fine, but the devil is always in the detail,” he says. “This really comes down to what is appropriate for an individual site.”

The ODPM’s proposal does have its supporters in the planning fraternity, however. The Royal Town Planning Institute is one of the co-signees of a letter to ODPM, with the Chartered Institute of Housing, the National Housing Federation, and Shelter, urging the government not to bow to housebuilders’ pressure. “One of the planning objectives is to create mixed communities,” says Kelvin MacDonald, director of research and policy at the RTPI. “The intention is there in the existing PPG3, but now it will be backed up by policy.”

But development specialist Roger Humber maintains that the suggested amendment to PPG3 goes beyond firming up existing policy. “This is designed to operate in a new planning system with a stronger hierarchy of development plans,” he says. “It could take proper commercial decisions out of housebuilders’ hands and give them to local authorities.”

Humber also fears that nimby local authorities could use the proposed change as a delaying tactic to turn away applications on what is known as the prematurity rule. This is when a local authority stonewalls an application until changing guidance has been converted into local planning policy. In this case if a council’s local plan does not comply with the new PPG3, it could claim that applications are premature. “If the ODPM puts out policies that allow local authorities to plead the prematurity rule and are uneconomic for housebuilders’ businesses, it could have massive implications in slowing down the system and put into place a planning framework that is virtually impossible,” he says.

For their part, housebuilders are left wondering how the new PPG3 aligns with the government’s primary and much stated objective: to deliver more homes quickly. If housebuilders lose the power to decide the mix of their developments they stand to lose their commercial advantage and could be forced to look elsewhere in order to make a profit. “We could end up doing less development,” says Taywood’s Hinchliffe. “If housebuilders perceive the risks of a site as unnecessarily high, we could walk away from it.”

What is a housing market assessment?

In future, the housing policies of local authorities will be dictated by housing market assessments, which are frameworks for analysing supply and demand in the local housing market by taking into account such factors as economic and demographic trends. HMAs will be essential not only to the proposed PPG3, but to the local development documents that are part of the new planning hierarchy.

HMAs cross local authority boundaries, and they are likely to be overseen and used by a multidisciplinary team, including local authorities, registered social landlords, regional housing boards and government offices. Input into the HMA will come from a range of partners including English Partnerships, regional development agencies, housebuilders, estate agents, private landlords, education, health and transport authorities and regeneration agencies such as urban regeneration companies.

In February, the ODPM published a housing assessment manual prepared by DTZ Pieda Consulting, which explained the HMA process in 150 pages. Since then, housing academic Christine Whitehead has been commissioned to produce more easily digestable guidance for local authorities.

Controlling the mix the Waverley way

Waverley council is already influencing the type of housing built within its Surrey boundaries. Its local plan recognises that the area has a large quantity of expensive, large family houses and so seeks to provide smaller homes. This judgment is based on a housing needs assessment.

The plan, which runs till 2006, asks for mainly one, two and three-bedroom homes. It specifies: "All new residential development should include at least 50% one or two-bed units, and at least 80% one, two or small three-bed units." But it does allow larger homes on individual infill plots, on small sites in locations where low density is appropriate, or where they are subsidising affordable housing.

The strictures have had a mixed reaction from housebuilders since they were introduced, says John Anderson, Waverley's development control and policy manager. "With the large volume housebuilders it has not been an issue. Where we have had difficulties, it has been with local developers," he says. Initially, some housebuilders tried to get round the policy in a number of ways, explains Anderson. Developers wanting to build large executive homes would submit several applications for a single large site, so that it would appear that they were working on small sites where the policy did not apply. "At the other extreme, we’ve had housebuilders wanting to cram a site with one and two-bedroom units without thinking of the context," says Anderson. Some also submitted applications for two-bedroom houses that were more generously proportioned than usual. "When we looked at the drawings we would find that they had an upstairs study, and one even had an upstairs dining room," says Anderson.

The council therefore introduced supplementary planning guidance a year ago to tighten up the plan by clarifying how it interprets applications and drawings.