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Government will fail to meet key land disposal targets

24 July 2019

  • Severe shortage in some areas of affordable homes, particularly social homes for rent.
  • Government has failed to develop and execute an effective strategy to meet land disposal targets.
  • The Department estimates it will have failed to sell the land needed for 91,000 of the homes promised under the Land For New Homes target, equivalent to 57% of the overall target

Report summary

The UK is in the grip of a housing crisis, with a severe shortage in some areas of affordable homes specifically social homes for rent. Despite these pressing issues, the government has failed to use its position as a major land owner to develop and execute an effective strategy to meet land disposal targets.

We are incredibly disappointed that the Ministry for Housing, Communities and Local Government will miss its target for releasing land for new homes by such a wide margin. By the end of the programme, the Department 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. This target was clearly unrealistic from the outset and, as we were concerned to discover during the inquiry, 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. However, this is because of one big unplanned sale that contributed almost £1.5 billion of the £5 billion target. It is unacceptable for the outcomes of these crucial programmes to be reliant upon luck instead of judgement.

Yet again, the government did not help itself by having muddled objectives at the outset. 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.

We remain frustrated that the release of public land is not translating into enough actual homes for those that need them. Despite just 40,500 homes having been built since 2011, the Ministry of Housing, Communities and Local Government's unacceptably loose definition of what constitutes a new home has artificially inflated the number of new homes that have been created.

Chair's comments

“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.

“The UK needs more houses. 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.

“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. But with a gap of 91,000 fewer potential homes than anticipated, we are extremely concerned that the nation's housing shortage will only get worse.

“Building affordable homes should be a key part of the objectives of the government's land disposal strategy. However, we are concerned at the Department's disregard for how the release of public land could be used to deliver affordable homes, particularly social homes for rent.

“We call on the government to set out a decisive course of action for how it will execute its land disposal strategy so that it translates into actual homes for the people that need them most.”

Conclusions and recommendations

The government has wasted a once-in-a-generation opportunity to alleviate the nation's housing crisis by failing to develop a strategy for public land disposal. Not enough new houses are being built and, as a major land owner, the government is in a unique position to help release land for new homes. It has committed to deliver an additional 300,000 homes a year by the mid-2020s and selling surplus public land for new homes supports this. However, the objectives of its land disposal programmes are muddled. At the outset, the government did not take a strategic view to determine how many homes were needed of what type, and where. Instead, the government 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. It makes decisions about how the proceeds from selling land are used 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. Public sector land is finite and the government is wasting an opportunity to use this land and the proceeds raised from sales to deliver much needed homes.

Recommendation: By October 2019, the Cabinet Office should 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 should include over-arching aims and clear outcomes. The Cabinet Office should also outline how its 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.

Government's lack of evidence underpinning the two disposal targets means that the programmes were set up to fail. The government will miss its target to sell enough land by 2020 for 160,000 homes by the considerable margin of 91,000 homes. This failure is largely because of the unrealistic targets the centre of government imposed on departments without enough thought about the issues that would need to be overcome to make sales happen. 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. 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. Its 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.

Recommendation: For future housing programmes, the government should set targets that are challenging but fully supported by a clearly explained rationale and robust evidence on what is achievable.

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. 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, the Department and the Cabinet Office were unable to adequately explain which programme takes priority and individual departments are left to decide for themselves. The Cabinet Office, the Department, and HM Treasury are not able to tell us how much in proceeds the sale of land for new homes have generated, which 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. Although progress is now being made to improve the linkages between potential value and the delivery of land for homes, the Cabinet Office does 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.

Recommendations: The government needs to acknowledge more explicitly the tensions between its two key land disposal targets, and articulate more clearly 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, the 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.

We are concerned by the Ministry of Housing, Communities and Local Government's failure to translate surplus land into new homes and are struggling to see how this could improve in the coming years. 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. The Department 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. The Department 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. The Department appears to have few levers to control this. In our 2015 report, we found that the Department had no intention of collecting data on the number of homes built. This is 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, it would be impossible to judge its success. We therefore recommended that the Department needed to start counting the number of homes built on land sold. The Department reports that the two programmes have led to 40,500 new homes—less than 30% of the potential amount, but this includes 4,279 pre-existing homes that have simply been transferred from the public to the private sector. It also includes 12,500 homes on land which was sold prior to the first programme that started in 2011.

Recommendation: The Ministry for Housing, Communities and Local Government should write to the Committee by October 2019 outlining the actions it will take, and the tools it will use, to accelerate the number of homes built on the land released. We also expect the correspondence to include more detail on the barriers to releasing land and how it proposes to overcome these barriers.

It is unacceptable that the Ministry of Housing, Communities and Local Government pays so little attention to how the release of public land could be used to deliver affordable homes including social homes for rent. Building affordable homes is not possible without central and local government support. When selling surplus public land, the Department does not place specific requirements on the type of housing that should be built on that land, as the local authorities are responsible for this. The Department 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. The Department has still not collected and published data on how many affordable homes and homes for key workers have been built, despite our previous recommendations, although it is now collecting this data and has committed to reporting publicly on it alongside its next data release.

Recommendation: The Ministry for Housing, Communities and Local Government should write to the Committee by October 2019 explaining how it pursues its affordable homes policy. We expect this to include how the land disposal target fits into the overarching strategy for affordable homes and how the Department will interact with local government to deliver this important objective.

Government's likely achievement of its £5 billion proceeds target is more through luck than judgement and it does not know how it the proceeds are spent. Government expects to achieve its £5 billion 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 £1.46 billion, nearly 30% of the overall target. By March 2018, £2.48 billion of proceeds had been raised from land and property disposals. Together with the proceeds from the railway arches sale, government only needs to raise £1.06 billion before 2020 to reach the £5 billion target. 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 2 years of the programme, which would be extremely challenging. We are unconvinced by the Cabinet Office and HM Treasury's 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 HM Treasury, in most cases it is impossible to say how government used the proceeds. It would be a concern if proceeds from land disposals are being used to plug short-term funding gaps rather than to re-invest in assets.

Recommendation: HM Treasury should write to the Committee by October 2019 with details of how it ensures that the money raised from land disposals, which is a once-only opportunity to generate proceeds, is reinvested and not being used to fund short-term day-to-day spending across government.

Gaps at all levels in the government's data on what it is achieving against the disposals targets means there is an unacceptable lack of transparency in how it is performing. We are concerned that the Department's continued use of loose definitions have inflated the programme's performance, and that the Department also took a similar approach to meet its target under the 2011–2015 programme. For example, the Department's definition of what constitutes “a home” includes care homes, with little rationale for doing so. Similarly, the Department does not outline what type of housing is included under the definition of “affordable homes”. Without fully defining these terms, there is 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. The Department has provided limited transparency over the programme's performance by only publishing one Annual Report since 2017. It asserts that this delay in publication is due to the high level of ministerial turnover; however we will not accept this as a reason for limiting transparency and public scrutiny. The Department 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. The Cabinet Office publishes annual reports on the progress towards its £5 billion 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.

Recommendations: The Ministry for Housing, Communities and Local Government should better define and justify what it means by terms such as ‘homes' and ‘new affordable homes'.

The Ministry for Housing, Communities and Local Government should fulfil its duty by reporting regularly to Parliament on performance, including an annual progress update and regular data releases throughout the year—quarterly or half-yearly. These updates should include the number and type of housing delivered against each definition—such as affordable homes—and the proceeds from land sales.

The Cabinet Office should 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.

Further information

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