Business Voice WM Submission to the West Midlands Select Committee

Planning for the Future: Housing and Economic Development in the West Midlands

January 2010

Executive Summary

Business Voice WM comprises of over 20 business representative organisations across the West Midlands representing – via these organisations, approximately 200,000 businesses.

Further details regarding Business Voice WM can be found in Annex A.

This submission addresses each of the questions raised by the Select Committee in its calling notice of 15 December. However, the overall stance of Business Voice WM towards regional planning is that the needs of new housing and the needs of economic development must go together hand in hand.

The lessons of the past – when land for housing seemed to take very little cognisance of the need for land for local jobs – meant these new housing areas became economically unsustainable in the medium to long term. This led to negative life chances for people living on these estates and – economically speaking – was a drag on the whole regional economy – holding back greater prosperity for all families in the West Midlands region.

The business community’s bottom line is that these mistakes of the past should not be allowed to be repeated in the future.

What the change from the RSS/RES to the Single Regional Strategy (SRS) will mean for planning authorities at regional and local level. Are there any benefits or risks for the single Regional Plan process?

1.1       The business community warmly welcomes the decision to dispense with two regional strategies and two sets of public agencies dealing with separate economic development plans.

1.2       This duplication of activity did not make economic sense and led – on occasions – to conflicts between the West Midlands Regional Assembly and the Regional Development Agency on issues such as the location of offices when both the Regional Spatial Strategy and the Regional Economic Strategy were both intended to share the same goal of regional economic development.

1.3       The Examination in Public process of Spring 2009 into the Regional Spatial Strategy Phase Two review demonstrated how the confusion between the role of the RSS and the RES led to developers rightly questioning how the two strategies can be linked when divergent interpretations of economic objectives were perceived in the RSS and the RES.

1.4       Therefore the market needed confidence with a clear and streamlined single integrated strategy that demonstrates clearly how planning is critical to sustainable economic development in every part of the region – leading to an evidence based approach for the Regional Development Agency and local authorities to act upon.

1.5       While risks can occur in any transition process to the Single Integrated Strategy, business believes that the risks associated with remaining with the seemingly conflicting strategies of the RSS and the RES undermined market confidence - as the long term planning for economic development was undermined by this confusion.

Whether strategic planning in the West Midlands should continue to be set at the regional level, and whether it has an appreciable influence over development in the region

2.1       Business Voice WM has continually advocated the stance that regional planning exists to provide added value to the work of local authorities – and regional planning should not be a top down approach that ignores the needs and sensitivities of local communities.

2.2       However, we do consider that there is still a role for regional planning – particularly in the West Midlands region. For supply chain patterns, travel to work and travel to study patterns are largely self contained across the West Midlands region. Therefore developments in one locality will have an impact on other localities in the West Midlands region – even though they may be many miles away because of these close economic synergies across the West Midlands region.

2.3       It may be useful for the Committee to consider the evidence, outside of the region, for why regional planning is beneficial for local economic development.

2.4       The inspiration for the current Regional Spatial Strategy came in 1994 when Ministers from across the European Union called for the:

“development of a balanced and polycentric urban system and a new urban-rural relationship”

2.5       This eventually led to Ministers across the European Union agreeing at a summit in Potsdam, in May 1999, to the European Spatial Development Perspective (ESDP).

2.6       The ESDP is a non binding document with no legal force – but it has directly influenced the development of planning regimes across Europe – including the West Midlands Regional Spatial Strategy.

2.7       What is distinctive about the ESDP is that sustainable economic growth is at the heart of its approach.

2.8      The ESDP policy framework calls for the

Development of a polycentric and balanced urban system and strengthening of the partnership between urban and rural areas

2.9       It noted that while, in 1999, most economic activity in the European Union was around “the pentagon defined by the metropolises of London, Paris, Milan, Munich and Hamburg” other areas in the European Union fared less well.

Therefore:

The creation of several dynamic zones of global economic integration, well distributed throughout the European Union territory and comprising a network of internationally accessible metropolitan regimes and their linked hinterland – towns, cities and rural areas of varying sizes – will play a key role in improving spatial balance in Europe

2.10    This vision mirrors the aims of the current RSS – the development of the Major Urban Areas (West Midlands conurbation and North Staffordshire conurbation) as two economic development centres with complementary, but not competing, areas of economic development activity.

2.11    For business such an approach makes sense for cities are now seen as drivers of economic growth but the needs of rural areas should not be neglected as a direct consequence of this conclusion.

2.12    The new integrated single strategy, while correct in attempting to shape and encourage the revival of cities in the West Midlands region, needs to consider, as the ESDP states, that it is the economic life of these urban areas as well as locations for housing that enable these centres to flourish.

2.13    That is why the integrated strategy should not just be linked to two policies of the Regional Development Agency, Advantage West Midlands (AWM), with Regeneration Zones and High Technology Corridors, but also to its policy of clusters.

2.14    The concept of clusters, developed by Porter, identifies the need for firms in particular business sectors to come together to improve their competitive advantage. While the Regional Development Agency policy of clusters is, rightly, not spatially defined there is no doubt that a successful realisation of a clusters strategy can have spatial implications.

2.15    Porter himself states that clusters can lead to competitive regionally based activity. Porter emphasises the links of supply chain dynamics that particularly helps SMEs to develop. Krugman made a similar point emphasising how the development of good regional supply chains in urban areas helps to drive the regional economy in accessing international markets.

Is the method used to derive the overall number of houses to be provided in the region still appropriate, or are there any potentially better alternatives? Could a better Strategic Housing Market Assessment (SHMA) process in the region lead to better regional estimates?

3.1       Two issues have collided that require a reassessment of the policy of the RSS in respect of where economic activity takes place. Under the current Regional Spatial Strategy (RSS) most major developments are ear-marked for the West Midlands conurbation and North Staffordshire conurbation.

3.2       However, the Government has signalled that an increase in house building is required across the West Midlands region while research work undertaken by the University of Birmingham has indicated that while the major urban areas (MUAs) have developed this has had unintended consequences in the location of growth industries outside the MUAs.

3.3       Ecotec identified five reasons why the Government has considered that housing pressures across the West Midlands region are so distinct. These are:

-       Demographic Change – The number of households is expected to be higher than originally expected. By 2026, it is anticipated that one third of all households will be single person households;

-       International Migration – Migration, especially to the major urban areas, from eastern Europe, Middle East and Africa, may have an impact on the number of households in the region;

-       Black and Minority Ethnic (BME) Housing Aspirations – Expected to be increased demand for housing in the core urban area of the region from black and minority ethnic communities;

-       Changing Aspirations – Rising aspirations for a better quality of life may lead to old housing stock being in the least demand;

-       Economic Structure – As there is a strong link between the housing market and employment there is likely to be high housing demand in the south and south east of the region and lower housing demand in the north and west of the region.

3.4       Business Voice WM also considers there is also a strong link between the strength of the housing market, provision of nearby employment land and the provision of good local schools and this must also be considered when considering housing market pressures in the region. 

3.5       For the business community house price inflation is a major economic determinate in setting the economic climate. The Bank of England, for instance, has stated that:

House price increases can stimulate spending in ways that other assets cannot contribute to

3.6       However, business growth is also held back by the lack of affordable homes across the region.

3.7       Herefordshire and Worcestershire Chamber of Commerce have stated “the availability and affordability of housing of all sizes and scale is a high area of concern which has an impact on the quality and availability of staff” while the Country Land and Business Association (CLA) have declared “the inadequate provision of rural housing is making it difficult for rural people to afford to stay in the communities where they grew up and is frustrating the ability of the rural economy to serve the needs of the countryside and the country as a whole” .

3.8       There have been rising concerns across the rural business community that the current Regional Spatial Strategy militates against the need to develop affordable rural housing. With the leadership of the CLA, within Business Voice WM, the West Midlands Regional Assembly’s Regional Housing Strategy was amended to enable support for an expansion of affordable housing in rural areas – and this is reflected in the draft RSS that is now before Ministers.   

3.9      Regional Housing Strategy specifically stated:

In some circumstances, it will also be appropriate to consider meeting identified local housing needs in smaller settlements provided this can be shown to contribute directly towards regenerating the rural economy or to sustaining a local community by meeting proven housing needs and where the impact on the environment and the landscape is acceptable.

3.10    This principle needs to be firmly taken into account as there is now a large affordability gap for housing in rural areas and this does not seem to receive the consistent attention that this urgent issue requires, despite of the recommendations of the Taylor Report to the Government on the rural affordability housing crisis. Regional and local planners need to focus on the steps they can positively take to close this gap if the rural economy - and its need for key workers – is to be addressed.

3.11    This principle must also be taken forward into the single integrated strategy. However, it can not end there. Local authorities and the Regional Development Agency – working with the business sector – must develop a clear framework for what allocation of proposed new housing needs to be classed as affordable.

3.12    To leave such decisions to occasional S106 agreements – a procedure where a council can oblige a developer to develop a proportion of affordable housing within a specific development – is against the interests, aims and point of establishing a long term regional approach to planning.

3.13    However, the housing scenarios that are currently being envisaged as a consequence of Government signals for a significant increase in house building go beyond the issue of the availability of affordable homes to the issue of where these new homes for all income groups will be built.

3.14    If the Government is determined to go down this track then it needs to be considered whether the new homes could be linked to areas which act as centres for economic activity.

3.15    Such matters must also consider the link to the skills agenda. Training provision must be part of the services provided to new housing developments so that local sustainable job opportunities can be accessed. Housing needs to be available for key workers in growing sectors if the economy is to grow and be robust.

3.16    It is at this point that we need to consider the work undertaken by the University of Birmingham that has shown that new economic centres have emerged in the West Midlands region.

3.17    Work undertaken by the University of Birmingham for the development of the Regional Economic Strategy identified a distinctive economic growth area known as the E3I belt. This is a doughnut shaped belt around the West Midlands conurbation reaching towards the edge of the North Staffordshire conurbation.

3.18    The term E3I stands for Economic, Entrepreneurial and Innovative dynamism combined with Environmental attributes – in other words a nice place to live – hence E3I.

3.19    This research states:

From the analysis it is apparent that the spatial patterning of economic activity in the West Midlands region is shifting away or expanding from Birmingham and the Black Country to a belt that encircles the conurbation

It added:

This belt lies between 20 km and 40 km from the conurbation and includes Stratford upon Avon, Warwick, Lichfield, Cannock, Bridgnorth and Bromsgrove. Within the belt there is an important differentiation of activities from centre to centre. This means that the region has developed an increasingly polycentric structure. This structure is being extended by innovative activity that is occurring in centres beyond the belt including Newcastle under Lyme, Stafford, Telford, Malvern and Worcester.

3.20    The authors of this report noted that part of the belt was first identified in 2002 and it seems that the revival of the West Midlands conurbation had a role to play in the development of the belt – alongside the strong influence of London:

The E3I belt is perhaps partially driven by the conurbation, but equally its drivers are elsewhere . . . . . . Some of the drivers are outside the West Midlands and perhaps reflect the on-going incorporation of the West Midlands into the economy of London and the South East. For example, some London commuters living in the south east of the region eventually establish local firms. These firms form around or even in homes and would not be established in the conurbation

3.21    The concept of the E3I belt also seems to have been, in part, confirmed by work undertaken by the West Midlands Regional Assembly. It stated that:

During 2003/04, the amount of (employment land) completions within the Major Urban Areas (MUAs) declined while the number of completions outside of the hierarchy increased. The MUAs, therefore, did not act as the main focus for development, contrary to the policy objectives of the RSS.

3.22     It added that this trend changed in 2004/05 but:

Development within sub regional foci and other large settlements also increased as compared to 2003/04, with the sub regional foci of Telford and Wrekin a significant source of completions

3.23    How, then, does the business community respond to the challenges set by the RSS Partial Review on housing and the emergence of evidence of new economic centres?

3.24    If the housing projection figures for the Government are to be accommodated without establishing a new settlement then some towns may have to be expanded and classed as part of the MUAs. This may then address the need to support the E3I belt by integrating it more into the RSS and the Regional Economic Strategy and meeting housing demands as set out by the Government.

3.25    This cannot be achieved without three key matters being addressed. First, that the infrastructure development – from water to transport to energy – can meet these new demands.

3.26    Second, that such developments are planned in recognition that these plans can only be sustainable in the short to long term if business economic developments are factored in. This necessity was recognised with the planning for the North West RSS, for instance, with the need for:

More informed anticipation and modelling of sub regional economic growth scenarios and better assessment of the implications for the level, composition and potential location of future household growth.

3.27    Third, the construction industry has to be consulted to find out if, in practice, such an increase in house building can be met.

3.28    Business Voice WM would not urge a rush to judgement on this issue – but nor should we shy away from the consequences that the twin challenges that the evidence of the E3I belt and the Government’s possible intentions for a large house building programme within the region could lead to. Therefore a regional housing market assessment may be beneficial in this regard,

3.29    In addition, when housing on employment land is proposed, decision makers must be clear in their assessment of the impact this will have on the economy. Impact economic assessments must be taken in this regard if short term pressures are not to cause hazards to economic development.

How local authorities will approach the task of providing different types of housing for their own areas within the broad quantities they are allocated

4.1       Business believes that the silo approach to addressing housing and economic development must end. For, as stated above, the lack of affordable housing does not only cause social problems but also leads to problems for businesses trying to attract key workers for their firms when there is a corresponding lack of affordable housing for these key workers.

4.2       We therefore propose that the obligation on local authorities to develop Local Economic Assessments should assess – amongst other matters – how the lack of affordable homes is having an impact on recruitment of skilled workers and how this will relate to the overall economic performance of a locality. By adopting such an analysis, the economic role of housing can be viewed holistically rather than considering the role of housing in addressing short term social pressures alone.

4.3       The issue of whether regional strategy and Local Development Frameworks are fully aligned is a matter that has not been satisfactorily addressed in the region for some time. The regular monitoring reports from the West Midlands Regional Assembly shows that alignment between Local Development Frameworks and the Regional Spatial Strategy is far from ideal in all planning categories. We believe, as a direct consequence, that local authorities need to ensure these problems are not repeated with the introduction of the Single Integrated Strategy- especially when local government will be playing a more active role in setting regional strategy under the new arrangements.

4.4       The development of the Total Place agenda is helping to bring services and the development of sustainable mixed neighbourhoods together. This is an aim that business shares and we recognise the leadership role of local authorities to achieve these objectives.  

Whether central government is providing adequate guidance and support to bodies involved in housing delivery, and what role the Homes and Communities Agency plays in the strategic planning process

5.1       Government guidance on housing has been confusing as there seems to have been a shift from a focus on the major urban areas to the rural/urban fringe. This was complicated by Government guidance on eco towns which did not seem to correspond to Government guidance on developing sustainable transport solutions. This was best exemplified by the process that led to Long Marston in Warwickshire being considered for some considerable time as a location for an eco town even though robust transport links to this area are very poor.

5.2       It is this confusion in Government guidance which has contributed to confusion in respect of long term spatial planning. Business believes that this confusion in aims and objectives from Government over a relatively short period of time has been detrimental in giving market confidence to developers and other market participants as to the levels of investment that should be devoted to new housing developments.

5.3       As stated earlier in this paper, business has been particularly concerned that the link between housing and land for employment has not been given sufficient weight and attention either via Government guidance or, to some extent, at the regional level. This disjointed approach is not practical from an economic perspective and can lead to social problems in the future if housing developments are some distance from local employment opportunities.

5.4       However, one of our concerns has been that existing Government guidance was not fully taken on board during the Phase Two review of the Regional Spatial Strategy. As Business Voice WM pointed at the Examination in Public of this review in Spring 2009, neither the Phase Two housing options nor the Government Office for the West Midlands commissioned evidence on housing took cognisance of the requirements of the Government’s Planning Policy Statement (PPS 11). PPS 11 focuses on how Regional Spatial Strategies should be developed. It specifically refers to the need for transport planning to be undertaken when housing numbers are being considered. Regrettably, no such detailed transport modeling has taken place in respect of these housing projections for the region – and this has led to tangible business concerns that short term pressures are not addressing medium and long term needs for the wider region.   

5.5       As recorded by the Office of National Statistics, there has been a sharp rise in repair and maintenance activity, which is partly a reflection of the collapse in new build, with owners of property increasingly looking to make good and extend the life of existing buildings. The lack of new starts suggests that the onus on improving the existing stock will continue to be a key feature of the construction market for some time to come.

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