Some recent discussion with MP Martin Horwood (Cheltenham) and Caroline Flint (Housing Minister) primarily about whether the housing targets a likely to be reduced given the dramatic downturn in the housing sector. No much give from the Caroline Flint but even the Governments adviser on this says the housing targets should be reduced.

Oral Evidence Taken before the Environmental Audit Committee on Tuesday 3 June 2008

Members present:

Mr Tim Yeo, in the Chair
Colin Challen
Martin Horwood
Mr Graham Stuart
Jo Swinson

NB: Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

FIRST EXCERPT…

Q163 Martin Horwood: I am impressed to discover the Department’s policy is not to tell people what to do. That is news to me. One of the things you are going to do is build the two million new houses by 2016 and a further one million by 2020. Obviously those targets were created at a time of rising house prices, with all the challenges of affordability that we talked about. Given that house prices now seem to be falling and we are apparently in an economic downturn, are those targets still right? Do they need to be revised downwards?

Caroline Flint: I think they are still right. Obviously we are, as people know and I have said it on numerous occasions, dealing with a challenging time; we are seeing changes in the market but I think the underlying need for a supply of more houses has not gone away. Part of my job and our department’s job, working across government with colleagues but also with the House Builders’ Federation and others, whilst recognising the downturn at the moment, is to see if we can make sure for the medium and long term how the market can pick up. That is why we continue to work to identify surplus land across government departments and why I think now we have something like 63 per cent of local authorities that have identified their five-year land supply going forward and again how we are working on our £8 billion social housing programme over the next three years through the Housing Corporation and through private developers to meet needs there.

Q164 Martin Horwood: This is based on Kate Barker’s analysis?

Caroline Flint: Yes, it is because I do not think fundamentally there has been any change. There is a slowdown in the market but that does not necessarily mean that the supply of houses and the target for those have substantially changed.

Q165 Martin Horwood: Can I quote you what Kate Barker told this committee in 2004 when she was questioned on this point? She said: ” …there are points in the review where I stress very clearly that you might start out with an intention to build X in an area and two years down the line what has happened in the market has suggested to you that X was too big and you should cut the target, and that would be absolutely reflected in this report.” She actually talked about, “One would hope that the reaction of the house builders …. [in a market downturn] is such that they would not build the houses”. Do you agree with her that that should be the response in a downturn?

Caroline Flint: I think the key point in terms of what you have quoted is her saying “in an area”. Clearly, all the time we are working with local authorities through regional and spatial strategies and other things, such as the growth areas, to identify the housing supply that is needed. We have a national target that is underpinned by negotiation on a regional and local basis. I think it is far too early to suggest that our national target, which I think is the point of your first question, should be changed, but of course we have to be mindful of what happens out there. It probably is the case that, in terms of the present climate, this year the number of houses built will be potentially lower than last year, given that last year was a record high.

Q166 Martin Horwood: That does not seem to be what she told us. You said that the key phrase in the quote I gave you was “in an area”, but she went on to say: “I am sometimes talked about as though I always talk about the need to increase building. The report absolutely does not do that.” Her point was that it was not about an absolute number; it was about increasing market responsiveness, so that in a downturn you should decrease those numbers.

Caroline Flint: I think it is far too early and premature to suggest that we should revise our target, which is 2016 and 2020. That being said, we are mindful of the market and recognise that some of our projections may have to be looked at based on how many houses might be built this year, which is likely to be lower than last year. Then again, it is about how the market picks up when those market conditions change. That is why I think it is too early to suggest that our target for three million homes in 2020 and two million by 2016 should be moved away from at this point.

Q167 Martin Horwood: The private house builders certainly are still complaining about increased costs and I guess they would say regulatory buildings [should read:burdens] too are making life difficult in this downturn. Do you not think that there is a risk that they will go for the quick wins in development terms, which might be the most environmentally costly, and not for the more difficult but more environmentally friendly options?

Caroline Flint: Firstly, the building industry is working with us as part of a ten-year strategy towards zero carbon new build homes by 2016. I think that work has been a good example of how government can engage with industry and over a really pretty long lead-in time but with a challenging target at the end of it really to make some changes to the way in which our building industry addresses these issues of energy efficiency. We have had the report recently from the UK-Green Building Council on the zero definition. We are consulting this summer on how zero carbon might be applied to commercial buildings. I have witnessed and seen myself some of the prototypes that have already been developed by some volume builders like Barratt in terms of zero carbon homes. I think having a clear sense of direction, a ten-year lead-in time, is one of the ways we can work very productively with the industry but that also gives us time to look at how the costs might be brought down. I do believe that the costs, whilst high at the moment – and that is something on which clearly we are working with the industry – if the expectation is that all houses will meet these demands, then I think that has an impact on lowering the costs over time. I think we have the right balance here between target and delivery towards that target.

Q168 Martin Horwood: I think other colleagues will question you a bit more about the standards.

Caroline Flint: That is about standards, is it not, zero carbon homes?

Q169 Martin Horwood: What I am trying to question you about is the impact of those targets. You say it is too early to say that the current downturn in house prices is one for which you should adjust the targets. Let us say it continues and that in due course you do have to adjust that target downwards, as Barker has suggested, what happens to the land that has already been designated for development? Some of it is sensitive greenfield sites and some of it more difficult urban regeneration, more difficult small developments around rural communities and things like this. Surely for developers, once the easier wins, the greenfield big developments, have been released for development, it will be impossible to pull them back from that and they will naturally as business people go for the more profitable sites and urban and small rural community regeneration will end up coming second?

Caroline Flint: Again, this is where local authorities have a crucial role to play in developing their local development frameworks.

Q170 Martin Horwood: If you will forgive me, that is based on the current targets. What I am saying is: if those targets in a downturn have to be or ought to be cut back as Barker suggested, in practice how does a local authority cut them back? How do they reclaim land?

Caroline Flint: Speculating on whether we will reduce our targets or not when I have indicated it is too early to give you a position on that – and actually the overall housing supply and demand is still there, regardless or not of the downturn – I do not think would add anything to the debate. What I can say is that we work with the building industry, and I think it is absolutely right that this is where Government does set a direction that shows leadership, about the types of homes that we feel should be the standard for the future. In doing so, we work with the industry because we do recognise at the end of the day they are the ones that will be putting up these buildings and they have costs; they are private firms and so forth. The other part of the question in terms of costs is that we are working with the industry at the moment to look at some of the issues around cumulative costs that are put on them as a result of different things that Government, not just my department but other departments, are asking of them. Again, I think that is a demonstration of a common-sense approach to having ambition but at the same time setting a realistic and common-sense framework to deliver on the target.

Q171 Martin Horwood: I am sorry to press this point but can I bring you back to the targets again? Kate Barker very clearly told us that in a downturn the targets should be reduced. That is the implication of what she said very clearly. Accepting that you think it is too early at the moment, are you saying that you will never look at reducing those targets and that she is wrong or are you accepting what she told us that in a downturn X might prove to be too big and therefore you should build less?

Caroline Flint: What I am saying is that the targets we have set are challenging but the long-term demands are not going to change. Whilst any government has to look at what is happening in the market and how it affects it, and our trajectories for housing growth is one of those areas, the long-term demands for housing still exist and will continue to exist in the future.

Q172 Martin Horwood: So when she says, “What has happened in the market has suggested to you that X was too big and you should cut the target”, you think she was wrong?

Caroline Flint: What I am saying, as I said earlier, is that I think it is too early to say that we should cut the targets.

Q173 Martin Horwood: I know that. I am sorry to press you, Minister. We have accepted that you think it is too early now. We are looking at the theoretical possibility that if the circumstances that Kate Barker described as a market downturn persist and that X proves to be, in her words, too big, then you should cut the target. Do you accept that she was right to say that, accepting that you think it is too early at the moment to make that judgment? Do you accept that that is possible, even in theory?

Caroline Flint: I would rather have a conversation wider than Kate Barker or a discussion around the demands that are made, which she identified in her report. Whilst we might have a situation in terms of our delivery that the number of houses that is projected to be built in any one year might be reduced because of market intervention, that does not necessarily mean in terms of the long term that we would move away from our target. The other point that I think is crucial to this is that as and when the market picks up, and the market will, have we got the necessary foundations in place to make sure that house building can move on quickly and as is needed in those communities? That is why some of the fundamentals like identifying land now is very important to all of that.

Q174 Martin Horwood: I am sure Kate Barker would agree with you about market responsiveness and that was part of her theme as well, but it sounds as though you are saying that those targets would stand regardless of the market. Is that right?

Caroline Flint: No, I think I said that at the moment I do not think there is a justification at this point for changing any target.

Q175 Martin Horwood: Not at this point; we accept that.

Caroline Flint: But I have just said in terms of the market now, and I can only talk about the market now. I think it would be unwise to theorise about where the market might be next year or the year after that.

Q176 Martin Horwood: Your adviser did: Kate Barker talked about the scenario in which a market downturn meant that the targets were too big and should be cut. Why will you not just answer the question about whether in theory you would accept that and say that if the scenario turns out to be a market downturn —

Caroline Flint: I think I have said – I am sure the transcript of the meeting will bear this out – that based on the present situation, I do not think there is a necessity for targets to be cut.

Q177 Martin Horwood: Can you imagine any scenario in which the target would be cut?

Caroline Flint: I do not think it would be useful for me to answer that question.

SECOND EXCERPT:

Q199 Martin Horwood: On the green belt, may I declare a constituency interest because the precise scenario I am going to describe to you applies to my constituency. We have an urban district council which is almost entirely ringed by green belt.

Caroline Flint: Where is it?

Q200 Martin Horwood: Cheltenham. It is AUNB [should read: AONB, for Area of Outstanding Natural Beauty] on one side but green belt on three sides. It has been handed down in the regional spatial statutory housing targets which project about 6,000 houses inevitably going into the green belt. Local councils of all colours have been committed to protecting that green belt but they are being asked to meet the housing target. How do they do it?

[There was a really long pause before she answered. M]

Caroline Flint: You will have to forgive me; I will have to be careful about what I say about anything that is in terms of the Regional Spatial Strategy and individual housing targets for legal reasons. What I will say is that we have protected the green belt and the procedures that underpin its protection are not something that we plan to change at all. In fact, in England the green belt has actually increased by 64,000 acres since 1997. The proportion of land in England counted as urban is something around 8.5 per cent of it, certainly under 10 per cent, well below 13 per cent of land in England that is currently green belt. Our view and our guidance underpinning this is that we should be looking to develop on brownfield. I think we increased from 56 per cent to nearly 75 per cent brownfield use since 1997; a quarter of new homes built on brownfield has risen by those figures. In some cases clearly green land as opposed to green belt has been utilised as well. My general advice to any local authority is to make sure that it has looked to all planning guidance that is provided, that it has looked at what available land outside the green belt is there for it to use. In those circumstances, that will be part of the negotiations for any house supplier or house delivery on the ground. As I say, there are cases sometimes where green belt I understand is infringed on in some way but often as part of negotiation. That is then offset by creating green belt elsewhere or it is on a marginal point in terms of the development. But, overall, green belt has increased and brownfield sites have increased.

[discussion about amount of new Green Belt omitted here. M]

Q203 Martin Horwood: To bring you back to the original question, if the Regional Spatial Strategy specifically says that 8,000 or 10,000 per year [shouldn’t read ‘per year’] of an area is the maximum capacity, all the potential exploited, therefore a larger number has to go into the green belt, how does any local council that wants to commit to protecting the green belt square that circle?

Caroline Flint: As I say, I think it is only in exceptional circumstances that green belt boundaries can be amended through the development plan process and only after there has been robust public consultation, an independent examination and the independent examination of the draft proposal. It is important therefore if a local authority has any view on the development in its area that it looks at making those cases and that is part of the discussion that takes place in the negotiation. I cannot really say any more than that.

Q204 Martin Horwood: You said it was exceptional but CPRE has told us that there are 37 current or projected reviews of green belt boundaries. Is that right?

Caroline Flint: They may have situations where development plans come forward in which they want to impact on green belt. That does not necessarily mean that they are going to be allowed to go forward. The whole point is that these are subject to very robust investigations and examination. That sounds logical to me. We cannot stop a situation where someone might put a plan forward but by putting the plan forward that might infringe on the green belt it does not mean it is necessarily going to go ahead at the end of the day. That is why there are the various planning policy statements and other guidance available to underpin the importance of the green belt and for that therefore to be used by local authorities and others in their negotiation about whether a development should or should not go ahead.

Q205 Chairman: So in very broad terms what would be the ratio of proposals to amend the green belt which are rejected?

Caroline Flint: I will have to come back to you on that.

Chairman: Thank you very much for coming this morning. I am sure what you have said will be useful to us in writing our report.

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