MD1366 Housing Zones Prospectus

1.1 The draft London Housing Strategy sets out a requirement to build at least 42,000 homes a year to meet London’s historic and arising housing demand. This will require a near doubling of current output, to a level of supply not seen since the 1930s. As part of this ambition, the draft strategy sets out the Mayor’s intention to develop ten Housing Zones across London.

1.2 The purpose of these zones would be to act in a way akin to Enterprise Zones, but focused specifically on accelerating the pace of housing development and generating additional homes to help meet the London Housing Strategy’s ambitious housing targets. The Prospectus invites London Boroughs to submit bids to the Mayor requesting that specific geographical areas are designated as Housing Zones. Such bids may include measures as suggested in the Prospectus, and will contain proposals, together with a delivery plan, as to how targeted financial investment and innovative planning measures, will accelerate or create new housing supply.

1.3 The new homes delivered in Housing Zones will be targeted at low to middle income occupiers. As such, bids will need to indicate how they support homes of all tenures, but in particular, low cost home ownership options. This approach will help to achieve a wide range of housing products to optimise fast delivery; it will help to create mixed and balanced communities; it will address the acute need for more housing choices for those on modest incomes; and it will assist in delivering the Mayor’s affordable housing ambitions and targets.

1.4 Housing Zones are proposed as a partnership approach to housing delivery, led locally but with strong support from the GLA. They will only be designated for areas proposed by the London borough(s) in which they are located. The offer of funding, flexibility and considerable GLA support and attention should leverage borough resources and focus onto Housing Zones to support them quickly and efficiently through the planning and delivery phases.

1.5 A flexible approach to funding, consistent with good value for money and state aid constraints, will enable housing delivery in locations that require pump-priming investment to achieve viability or accelerate delivery. In assessing bids the GLA will undertake rigorous appraisals to test the link between the proposals and the housing outputs to be unlocked or accelerated. The GLA will utilise internal and external expertise in this, including calling upon external members of the Homes for London Board who have extensive experience of housing development, for market sale and affordable and housing finance.

1.6 In order to justify spend on Housing Zones a clear and robust cost benefit analysis will be carried out for each successful bid that is funded. Although the range of items that could be eligible for Housing Zone spend is wide, all will need to demonstrate clearly that they will directly result in housing being brought forward that is genuinely ‘additional’: either greatly accelerated from when it might otherwise have happened; or that it would have stalled without the Housing Zone designation and associated policy interventions.

1.7 Detailed discussions have been held with a number of potential borough candidates for Housing Zone status in order to test the concept and identify practical applications of Housing Zone policy approaches. A number of these boroughs will be invited to bid for Housing Zone designation at the same time as the publication of the prospectus. This will be alongside a wider call for other boroughs to submit further bids for Housing Zone status.

1.8 It is proposed that bids for Housing Zones will be able to be submitted as soon as the prospectus is launched in June, and the initial deadline for bids will be the end of September. In order not to hold up borough plans to accelerate housing supply, Housing Zone designations will be announced by the GLA on a rolling basis as soon as their bid has been assessed, even if this is before the end of September. It is anticipated that the initial Housing Zone designation, and related funding profile, would last for a period of up to ten years, although we will prioritise early delivery. Each Housing Zone will be required, within its bid for Housing Zone designation, to submit a plan for overall housing delivery and the timing of that delivery and funding decisions will be on the basis of these delivery plans. Plans will be subject to legal consideration and advice, and will need to be encapsulated within formal Delivery Framework Agreements.

1.9 To support Housing Zones, £200m will be made available from the GLA’s housing capital programme. as this initiative will assist in delivering the Mayor’s affordable housing targets HM Government is proposing to make an additional £200m available to support this initiative. This additional £200m will enable the Mayor to raise the ambition of this initiative to support twenty Housing Zones rather than the ten Housing Zones originally proposed. All subsequent decisions on the designation of Housing Zones and the awarding of specific funding packages will need to go through the formal decision making procedures as appropriate.

1.10 HMG has indicated that their £200m contribution will be in the form of a ‘Financial Transaction’ and as such will be a recoverable investment. The precise terms under which this will operate, and the management arrangements for the funding, are currently under discussion between the GLA and HMG, although the Mayor has made clear that the preference is for the GLA to directly manage this fund.

1.11 The draft Housing Zones prospectus is attached as Appendix 1. Under the General Delegation contained in section 2 of the Mayoral Scheme of Delegation, the Executive Director for Housing and Land, in consultation with the Deputy Mayor for Housing, Land and Property, will have the necessary delegated powers to amend and finalise the content of the Prospectus, as required, and publish the final version of the Prospectus. Under the same General Delegation, those officers also have the power to determine the process by which bids for Housing Zones will be assessed and agreed.

2.1 The justification for investment in any Housing Zone will be that it will deliver homes, cost effectively, that either would not have come forward at all without Housing Zone designation or which will be greatly accelerated in their rate of delivery as a result of that designation. Bids for HZ status will be required to have a minimum threshold of 1,000 new homes but we anticipate that most will be for a higher number.

2.2 Our target is twenty zones with an aspiration for these to deliver around 50,000 homes over ten years, and possibly more still over the longer term. It will be a requirement for HZ status that the new homes will be targeted to be affordable to ordinary working Londoners. Developers will be required to adhere to the Mayor’s Concordat that obliges developers to market domestically and we will wish to see other measures put in place to ensure that new homes are available to primary purchasers rather than investors.

2.3 In addition to boosting supply in specific areas, Housing Zones will also be locations in which new approaches to delivery are piloted. It is expected that they will be opportunities to test out planning and funding mechanisms that might inform housing policy more widely.

3.1 The Housing Zones initiative is a policy contained in the Mayor’s draft London Housing Strategy. In January 2014 the GLA published an integrated impact assessment (“IIA”), including an equalities impact assessment and health impact assessment, of that strategy. This considered the Mayor’s policies to increase housing delivery, including Housing Zones, concluding that these should have a number of positive impacts.

3.2 The impacts of increasing housing supply are also covered in detail in the Integrated Impact Assessment and the Strategic Environmental Assessment for the Further Alterations to the London Plan. Delivering new housing, including affordable housing, is likely to have broadly positive benefits in relation to social and economic sustainability objectives such as improving health, reducing inequalities, increasing accessibility, and economic development.

4.1 The Housing Zones programme is explicitly designed to be innovative and flexible and as such may involve novel methods of providing funding, or tailoring housing investment or planning policy to local circumstances to increase housing delivery. Any such new approaches will be set out alongside the recommendations for Housing Zone designation in the formal decision making process. Because of the possibly bespoke and innovative nature of the funding and policy packages, it is likely that additional legal advice may need to be sought in advance of further decisions, in particular with regard to any potential state aid issues.

Consultation

4.2 The Mayor consulted extensively on the London Housing Strategy with the public and a wide range of stakeholders and voluntary, community and equalities groups. That consultation is detailed in Mayoral Decision 1331. It is not considered necessary or appropriate to consult on the contents of the Prospectus prior to its publication. The Mayor will, however, engage with boroughs and other relevant bodies following publication of the Prospectus, and throughout the bidding process.

5.1 DCLG wrote to the GLA on 11 December 2013 confirming the provision of an additional £1.07bn of capital grant to deliver 32,000 affordable homes in the 2015-18 period.

5.2 Applications for funding from providers of affordable housing for the 2015-18 period are currently being assessed by officers in Housing and Land who consider that allocating £200m into a new Housing Zone initiative will assist with the delivery of the GLA’s affordable housing targets.

5.3 The likely nature of interventions in Housing Zones (up-front investment in stalled sites) means that, while it is expected that additional supply will be created, and this will assist in building a medium to long term pipeline, a considerable quantity will be delivered beyond the 2015-18 period to which the funding relates..

5.4 Central Government is proposing to provide an additional £200m of repayable funding.

5.5 The GLA-funded element of this proposal is expected to deliver proportionately similar levels of affordable housing to those to be delivered by the Mayor’s Housing Covenant, at levels consistent with the current average grant cost per unit for the GLA’s funding.

5.6 Funding for legal fees and external expertise should be covered from within the existing Housing and Land budget, although it is considered likely that this will exceed the figure of £0.1m, estimated in the report to IPB.

General powers

6.1 This Mayoral Decision asks the Mayor to approve the Housing Zones policy and bidding prospectus, which is attached at Appendix 1.

6.2 The Mayor has the power to give such approval where the policy and provisions of the Prospectus are lawful and can be lawfully implemented.

6.3 Under the Housing Zones policy, and the Prospectus, London Boroughs will be able submit bids to the Mayor requesting that specific geographical areas are designated as Housing Zones. Such bids may include measures contained in the Prospectus, and will contain proposals as to how financial and planning measures, including particularly innovative measures, will accelerate or create new housing supply.

6.4 Upon receipt of such bids, legal advice will be sought as to the legality of specific borough proposals; including advice on State Aid and the GLA’s statutory powers. This advice will be obtained before the GLA enters into any bespoke Delivery Framework Agreement with a borough.

6.5 The Housing Zones policy, and the Prospectus, provide that the boroughs can bid for Housing Zone funding from the GLA. It is understood that a borough may bid for a grant or a loan and that, further to the bid, such funding may be provided to the borough itself, housing developers, or other parties involved within a potential Housing Zone (who will all be required to sign up to a Delivery Framework Agreement). The Prospectus provides that such GLA funding may be used for a wide range of uses provided it is demonstrably proven to unlock or accelerate housing supply.

6.6 Under section 30 of the Greater London Authority Act 1999 (as amended) (“GLA Act”) the Mayor has the power to do “anything” he considers will further any one or more of its principal purposes of promoting economic development and wealth creation in Greater London; promoting social development in Greater London; and promoting the improvement of the environment in Greater London.

6.7 The GLA therefore has the power to provide such funding and to agree other measures to be applied in Housing Zones (to be contained in a Delivery Framework Agreement) if, following consideration of a borough bid and all (and only) relevant and material factors, the Mayor is of the view that providing such funding and agreeing to such measures will further any one or more of the GLA’s principal purposes, and subject to legal advice being obtained on specific proposals contained in borough bids.

6.8 In determining whether or how to exercise the power conferred by section 30(1) of the GLA Act, the Mayor must:

(i) have regard to effect that his decision will have on the health of persons in Greater London, health inequalities between persons living in Greater London, the achievement of sustainable development in the United Kingdom and climate change and its consequences (sections 30(3-5) of the GLA Act;

(ii) pay due regard to the principle that there should be equality of opportunity for all people (section 33 of the GLA Act); and

(iii) have due regard to the Public Sector Equality Duty; namely the need to eliminate discrimination, harassment, victimisation and any other conduct prohibited by the Equality Act 2010, and to advance equality of opportunity between persons who share a relevant protected characteristic (race, disability, gender, age, sexual orientation, religion or belief, pregnancy and maternity and gender reassignment) and persons who do not share it and foster good relations between persons who share a relevant protected characteristic and persons who do not share it (section 149 of the Equality Act 2010);

6.9 As noted in paragraphs 3.1 – 3.2 above, in January 2014 the GLA published an integrated impact assessment (“IIA”), including an equalities impact assessment and health impact assessment, of the London housing strategy, which included a policy for Housing Zones. Going forward, the Mayor will also need to have due regard to the Public Sector Equality Duty, and the matters set out in section 30(3-5) of the GLA Act, when considering specific borough proposals and entering into Delivery Framework Agreements.

6.10 In addition to paragraph 6.8 above, where the Mayor is proposing to use the power conferred in section 30(1) of the GLA Act, the Mayor must consider consulting in accordance with section 32 of the GLA Act. Paragraph 4.2 above refers to the consultation and engagement that has taken place in relation to this matter, and which will continue following publication of the Prospectus. The Mayor will need to consult in accordance with section 32 of the GLA Act, as appropriate, prior to entering into any Delivery Framework Agreements.

6.11 Section 31 of the GLA Act prohibits the GLA from using its general, section 30, power to incur expenditure in doing anything which may be done by Transport for London, the Mayor’s Office for Police and Crime, or the London Fire and Emergency Planning Authority. It also prohibits the GLA from incurring expenditure in providing any education services, any social services, or any health services. This will be considered for any specific borough proposals to ensure compliance with section 31 of the GLA Act.

6.12 Under section 34 of the GLA Act, the Mayor is empowered to do anything (including the acquisition or disposal of any property or rights) which is calculated to facilitate, or is conducive or incidental to, the exercise of any functions of the Authority exercisable by the Mayor.

Social housing

6.13 Upon receipt of specific borough bids, consideration will also need to be given to the effects of sections 333ZE and 333ZH of the GLA Act, which make various provisions in relation to the provision and recovery of financial assistance for social housing.

6.14 Under section 333ZE(2)(b) of the GLA Act, the GLA has the power to provide social housing financial assistance.

Procurement

6.15 The award of GLA funding for Housing Zones is not a procurement, and is not therefore subject to the requirements of the Public Contracts Regulations 2006. This notwithstanding, the GLA is still subject to the overarching duties of fairness and transparency.

Delegation to GLA Officers

6.16 Section 38 (1) of the Act provides that any function exercisable on behalf of the GLA by the Mayor shall also be exercisable on behalf of the GLA by any member of staff of the GLA if or to the extent that the Mayor so authorises, whether generally or specially, and subject to any conditions imposed by the Mayor.

6.17 Under the General Delegation contained in section 2 of the Mayoral Scheme of Delegation, the Executive Director for Housing and Land, in consultation with the Deputy Mayor for Housing, Land and Property, will have the necessary delegated powers to amend and finalise the content of the Prospectus, as required, and publish the final version of the Prospectus. Under the same General Delegation, those officers also have the power to determine the process by which bids for Housing Zones will be assessed and agreed.