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PM: developer bonuses create ‘perverse incentive’ on housebuilding
The prime minister took aim at developers in a speech this morning, in which she announced proposed changes to the planning system to boost housing delivery.
Speaking at the Institution of Engineering and Technology in central London, Theresa May said bonuses paid to developer bosses create a “perverse incentive”.
In a speech trailed by government over the weekend, she said: “The bonuses paid to the heads of some of our biggest developers are based not on the number of homes they build but on their profits or share price.
“In a market where lower supply equals higher prices that creates a perverse incentive, one that does not encourage them to build the homes we need.”
Former minister Oliver Letwin has been tasked with reviewing the causes of the gap between planning permissions being granted and the number of homes built. The prime minister said if Mr Letwin finds evidence of “unjustifiable delay”, she will not rule out any options for ending the practice of paying bonuses based on profits.
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Ms May also said the solution to the housing crisis “does not lie in tearing up the green belt”. She said “barely” 13% of the country is covered by green belt land “but it serves a valuable and very specific purpose”.
She accused “too many” councils and developers of taking a “lax view” when it comes to considering development on green belt land. She added: “They’ve been allocating green belt sites for development as an easy option rather than a last resort.”
“So we’ll expect any development, whether in the green belt or outside it, to look first at sites that have previously been built on, rather than opting immediately for virgin countryside,” she said.
She added: “I’d rather see an ugly, disused power station demolished and replaced with attractive housing than a wood or open field concreted over – even if the former is in the green belt and the latter is not.”
The speech came as the government unveiled planned changes to the National Planning Policy Framework, which includes planned changes to the controversial use of viability assessments to reduce affordable housing.
The prime minister said in much of the country’s housing is “so unaffordable that millions of people who would reasonably expect to buy their own home are unable to do so”.
“Others are struggling even to find somewhere to rent. The root cause of the crisis is simple. For decades this country has failed to build enough of the right homes in the right places,” she said.
At-a-glance: the proposed planning changes
These are the key changes to the National Planning Policy Framework outlined on 5 March 2018:
- A shake-up of viability assessments making it harder for developers to negotiate down affordable housing contributions
- Reform of Section 106 and the Community Infrastructure Levy to make the systems simpler and more standardised
- Introduction of Housing Delivery Targets forcing councils to oversee delivery of new homes, first proposed in the Housing White Paper
- Stronger protections for the green belt
Lord Gary Porter, chair of the Local Government Association, said the government’s “threat” to take planning powers away from councils is “unhelpful and misguided”.
Asked for a response to this criticism, Ms May said the government had increased the borrowing cap for councils to borrow to build up to £1bn.
She added: “As we look at what we need to do in terms of getting more homes built overall, what we need is to see this as is an issue that has to be dealt with by us all. Government plays its part, local government plays its part, developers, planners – this is something we all need to come together to address.”
John Healey, shadow secretary of state for housing, said: “We’ve heard hand-wringing on housing from Theresa May before, but there’s nothing new here that will make a difference. After eight years of failure, it’s clear this government has got no plan to fix the housing crisis.
“Homeownership has fallen to a 30-year low, rough sleeping has more than doubled and the number of new homes built for social rent has fallen to the lowest level since records began.”
