Government ‘squanders’ once-in-a-generation chance to ease housing crisis

Key Commons committee says it is unacceptable MHCLG pays so little attention to how the release of public land could deliver social housing.

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Government has squandered a once-in-a-generation chance to alleviate the housing crisis by failing to develop a strategy for public land disposal, a key Commons committee says.

In a warning shot to a new Communities Secretary, the Public Accounts Committee (PAC) says it is unacceptable that MHCLG pays so little attention to how the release of public land could be used to deliver affordable homes, including social homes for rent.

The resulting report says release of public land is not translating into enough actual homes for those who need them.

Despite just 40,500 homes having been built since 2011, MHCLG’s “unacceptably loose” definition of what constitutes a new home has artificially inflated the number of new homes that have been created, the report says.

The committee also calls out the government’s lack of evidence underpinning the two disposal targets – meaning the programmes were set up to fail.

“Despite the inevitable tensions between the two land disposal targets, government has disregarded the potential impact of trade-offs between the two targets and has made no assessment of how they will manage the two programmes side by side,” the resulting report says. 

“The nation’s housing crisis has been prolonged by the government’s failure to develop a strategy for public land disposal, we are frustrated that this unique opportunity has been wasted,” said PAC chair Meg Hillier MP.

“As a major land holder, the government is in a unique position to release land for new homes; and yet the objectives of its land disposal programmes are chaotic and confused.

“We are baffled that the programmes were not designed with a view to how many homes were needed of what type, and where – nor how the proceeds will be used,” she said.

The government is acknowledged as being in a unique position to help release surplus land for new homes, specifically to support the targeted delivery of an additional 300,000 homes a year by the mid-2020s.

But to PAC, the objectives of the land-disposal programmes are muddled because:

  • At the outset, the government did not take a strategic view to determine how many homes were needed of what type, and where but instead simply focused on where surplus land existed and whether it could be sold
  • The government also failed take a strategic view of how the proceeds generated from land disposals should be used, with decisions about how the proceeds from selling land are used are taken on a case-by-case basis and at a departmental level, rather than taking a view of the best value to be obtained from them across government as a whole

MHCLG has already said it will miss its target for releasing land for new homes by such a wide margin.

By the end of the programme, MHCLG estimates it will have failed to sell the land needed for 91,000 of the homes promised under the target, equivalent to 57% of the overall target.

To PAC, this target was clearly unrealistic from the outset, with the committee concerned to discover during the inquiry that the target lacked a sufficient and rigorous evidence base when it was originally set.

The Cabinet Office is expected to achieve its proceeds target – despite almost all departments being on course to miss their individual targets – but only because of one big unplanned sale that contributed almost £1.5bn of the £5bn target.

“It is unacceptable for the outcomes of these crucial programmes to be reliant upon luck instead of judgement,” said Hillier.

“Government is optimistic that changes it has made will lead to improvements in the delivery of land disposals, but we are very concerned to see slow progress in areas we highlighted in previous reports, particularly the collection of data on affordable homes.

“Land disposal targets were set without a rigorous evidence base of what could actually be delivered. It is no real surprise, then, that the government will now fail to meet its target to sell enough land by 2020 for 160,000 homes.”

PAC has now set an October deadline for the Cabinet Office to write to the committee to set out a clear strategy for how the government will meet the its proceeds and land for new homes targets.

This, the report says, should include over-arching aims, clear outcome and an outline of the  strategy for meeting the proceeds and land for new homes targets will impact and feed into housing policy, estates strategy, asset management, and government budgeting.

PAC also urges the Cabinet Office tom maintain the frequency of its reporting and include information on land purchasers, and an explanation where sites have been sold for a £1 or less.

Other recommendations include:

  • Government should set targets for future housing programmes that are challenging but fully supported by a clearly explained rationale and robust evidence on what is achievable
  • More explicit government acknowledgement of tensions between its two key land disposal targets, and better articulation of  what its priorities are when it comes to the disposal of land including the creation of affordable and social housing
  • The Cabinet Office should write to the committee by October 2019 outlining how Strategic Asset Management Plans, which are not publicly available, are used to resolve tensions between targets
  • In confidence, Cabinet Office should provide the committee with an example of a Strategic Asset Management Plan with a significant land element where trade-offs between money and homes is articulated
  • MHCLG should write to the committee by October outlining the actions it will take, and the tools it will use, to accelerate the number of homes built on the land released – with more detail on the barriers to releasing land and how it proposes to overcome these barriers
  • MHCLG to better define and justify what it means by terms such as ‘homes’ and ‘new affordable homes’
  • MHCLG reporting regularly to Parliament on performance, including an annual progress update and regular data releases throughout the year – quarterly or half-yearly –  including the number and type of housing delivered against each definition, such as affordable homes, and the proceeds from land sales 

The government is a major land holder. In 2016–17, the total value of central government-owned land and property was estimated at £179bn.

These assets are managed through the Government Estate Strategy.

The size of the estate has been reducing the size of its estate for several years, owing to a policy to sell assets where they are considered to no longer serve a public purpose.

The government has two main disposal targets: a proceeds plan to deliver £5bn of receipts between 2015 and 2020 through the release of surplus public sector land and property across the UK”; and a land for new homes target known as the Public Land for Housing Programme, aiming to “increase housing supply by releasing surplus public sector land for at least 160,000 homes” in England between 2015 and 2020.

This programme follows an earlier target to release enough land for 100,000 new homes between 2011 and 2015.

Cabinet Office is responsible for the government’s estate strategy and for the proceeds target, while MHCLG is responsible for leading the new-homes target.

Individual departments are responsible for pursuing their own targets that contribute to the overall totals, while also ensuring individual sales represent value for money.

The Treasury is responsible for setting departmental budgets which are net of the proceeds expected from land disposals.

This latest report is the third time PAC has reported on the MHCLG Public Land for Housing Programme.

In 2015, the committee concluded MHCLG could not demonstrate the success of the 2011–2015 programme in addressing the housing shortage or achieving value for money.

A year later, PAC recognised that improvements had been implemented in the 2015–2020 programme but warned that the government would fail to deliver land for 160,000 homes by 2020 unless it significantly accelerated the rate at which land for new homes is made available.

There are potential tensions between the government’s two land disposals targets—for example, a sale of land that is suitable for new homes might not generate the highest proceeds.

In these situations, MHCLG were unable to adequately explain to PAC which programme takes priority and individual departments are left to decide for themselves.

Cabinet Office, MHCLG, and HM Treasury were not able to tell PAC  how much in proceeds the sale of land for new homes have generated.

To PAC that illustrates the lack of cohesion between the two targets.

The two land disposal targets were initially created in isolation without any consideration to how they might align.

PAC acknowledges progress now being made to improve the linkages between potential value and the delivery of land for homes, but Cabinet Office is said not recognise tensions between the targets and expects departments to resolve any tensions through Strategic Asset Management Plans.

However, departments are not required to publish these plans so Parliament and the public cannot see how these tensions are managed.

There is a trade-off between proceeds and delivering affordable homes—the higher the number of affordable homes, the lower the sales proceeds, but the Department does not conduct any cost benefit analysis to decide which programme to prioritise.

At the end of December 2018, under the current land for housing programme, the government had disposed of land with the capacity to build an estimated 38,000 homes.

MHCLG estimates that government will sell enough land for 69,000 homes by 2020 and will not meet its target of selling land for 160,000 homes until after 2025.

Under the first programme, which ran from 2011 to 2015, government sold enough land to support an estimated 109,000 homes, which was artificially inflated by adopting a very wider interpretation of what counted towards the target.

This is a total of 147,000 potential homes across both programmes.

MHCLG is aware of three main barriers to releasing surplus land: land still being used for operational purposes (at between one-third and one-half of sites); delays in the planning system; and environment constraints.

But to PAC, MHCLG appears to have few levers to control this.

In its 2015 report, PAC found MHCLG had no intention of collecting data on the number of homes built, because it had judged the success of the programme simply by releasing enough land to meet the 100,000 target.

Without knowing the number of homes built as a direct result of the programme, PAC says it would be impossible to judge its success.

MHLG reports that the two programmes have led to 40,500 new homes – less than 30% of the potential amount.

This includes 4,279 pre-existing homes that have simply been transferred from the public to the private sector and 12,500 homes on land which was sold prior to the first programme that started in 2011.

When selling surplus public land, MHCLG does not place specific requirements on the type of housing that should be built on that land – councils are responsible for this.

MHCLG asserts that adopting a specific target could create a risk that affordable homes are concentrated in specific locations, which might not create good communities.

However, it already makes exceptions to this, for example the NHS has committed to prioritising homes for its staff.

Homes England has methods at its disposal which allow for greater control over what types of homes are built on land sold, but these are not widely used.

PAC says MHCLG has still not collected and published data on how many affordable homes and homes for key workers have been built, despite previous recommendations – although it is now collecting this data and has committed to reporting publicly on it alongside its next data release. 

Government expects to achieve its £5bn proceeds target by 2020, despite almost all departments being significantly behind in achieving their individual targets.

This is largely due to the unanticipated sale of Network Rail’s railway arches in February 2019 which raised £1.46bn – nearly 30% of the overall target.

By March 2018, £2.48bn of proceeds had been raised from land and property disposals.

Together with the proceeds from the railway arches sale, government only needs to raise £1.06bn before 2020 to reach the £5 billion target.

PAC says the inclusion of the proceeds from the sale of the railway arches was “extremely fortuitous” because this sale was not planned at the programme outset.

Without this large sale, the government would still need to raise over £2.5 billion in the remaining two years of the programme – which PAC recognises as “extremely challenging”.

PAC is  unconvinced by Cabinet Office and Treasury attempts to downplay the importance of the sale of the railway arches in achieving the proceeds target by saying that with any target, some things come into scope while others fall out of scope.

Once proceeds have been raised from a sale and released back to Treasury, in most cases it is impossible to say how government used the proceeds.

It would, says PAC, be a concern if proceeds from land disposals are being used to plug short-term funding gaps rather than to re-invest in assets. 

PAC is also concerned that MHCLG continues to use loose definitions that inflate the programme’s performance, and that the MHCLG also took a similar approach to meet its target under the 2011–2015 programme.

The report references the example of MHCLG ‘s definition or example, the Department’s definition of what constitutes “a home” includes care homes.

Similarly, PAC identifies MHCLG as not outlining what type of housing is included under the definition of “affordable homes”.

Without fully defining these terms, PAC sees  a danger that less attention is being paid to the types of affordable homes delivered under the programme, such as social rent and shared ownership.

MHCLG has provided limited transparency over the programme’s performance by only publishing one Annual Report since 2017, saying this delay is due to the high level of ministerial turnover.

PAC does not accept this and MHCLG has now committed to publishing the programme data, specifically information on the number of sites disposed and homes that are built, as a formal statistical release at regular intervals.

But it has not yet committed to publishing an Annual Report on the programme’s progress, which we previously recommended in 2015.

Cabinet Office publishes annual reports on the progress towards its £5bn target, but it does not analyse this data at a programme level to determine if the same buyers are purchasing land or what the land is subsequently used for.

It also fails to include any explanation as to why 176 sites were sold for £1, with the Department having been responsible for 160 of these.

The first Public Land for Housing Programme target to sell land for 100,000 homes by 2015 was not supported by any evidence on what could realistically be delivered.

MHCLG The Department asserts that some improvement had been made during the setting of the target to release enough land for 160,000 homes for the second programme, but acknowledges that it was still a top-down target and lacked a well-grounded evidence base.

The evidence base has not been supported by the necessary detailed analysis by departments and was further extended by Ministers to make the target more challenging.

This ultimately resulted in the 160,000 target being over-optimistic and unachievable over the programme timeframe.

The minimum requirement for setting deliverable, yet challenging, targets is to understand the whole estate to identify what land is surplus to policy, and whether it can be sold to build homes and the kinds of homes needed in each location.

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