The government is unlikely to meet by 2020 its target to release sufficient public sector land to build 160,000 homes, but it does expect to achieve its target to raise £5 billion in proceeds by selling land and property1 2, according to the National Audit Office.
In setting targets for new homes, the government had a limited evidence base. An earlier NAO report looking at the first programme of land disposals for new homes (2011-2015) found that the government had no supporting documentation or economic evidence behind its target of 100,000 homes. Our 2016 progress report on the second programme, which seeks to release enough land for at least 160,000 homes by 2020, found that departments would need to deliver more land for new homes in the remaining four years of the programme than they had achieved in any year of the previous programme.
The Ministry for Housing, Communities and Local Government (MHCLG) expects departments to have released enough land for around 65,000 (41%) homes by 2020, against a target of at least 160,000. By December 2018, land with a capacity for 38,166 homes had been released. The government currently does not expect to reach the 160,000 target until after 2025. MHCLG estimates that some 40,500 homes have been “brought to market”3 since 2010 on land released under the previous (2011-2015) and current programmes. MHCLG told us that of the 40,500 homes brought to market, around 10% relate to pre-exisiting homes. The NAO has not audited this data.
MHCLG has identified several challenges to delivering the target. For example, public bodies might still be using land to provide services; sales of some large, complex sites have been delayed due to planning issues; sites might require decontamination; and in some cases, progress is hampered by not legally owning or controlling all the sites that could potentially count towards their targets (for example sites owned by NHS foundation trusts). MHCLG has not quantified how many sites fall into each of these categories.
MHCLG has made limited improvement to the data it collects and publishes since the first programme. It commissioned the collection of information on the number of homes brought to market following a Committee of Public Accounts (the Committee) recommendation on the 2011-2015 programme. MHCLG told the NAO that it has started to collect data on affordable homes but this has not yet been audited or published. Until April 2019, the MHCLG had not published an annual report on the land for new homes programme since February 2017 despite committing to do so, and has not published any information on new homes built under the entire programme, which the Committee asked for.
The government currently expects to achieve its £5 billion proceeds target by March 2020, with two transactions responsible for more than £1.8 billion of the total. Between April 2015 and March 2018, the programme had generated £2.48 billion in proceeds. The largest single sale by value during that period was the Old War Office, which the Ministry of Defence sold in 2016 for £357 million. Network Rail completed the sale of the railway arches in February 2019, generating proceeds of £1.46 billion. Including the Network Rail sale means the Government needs to generate a further £1.06 billion worth of proceeds in the final two years of the programme.
The NAO’s analysis shows that of the 1,500 sites sold between April 2015 and March 2018, 176 (12%) were sold for £1 or less. MHCLG sold the great majority of these and said that the main reasons were sites requiring the buyers to incur costs of remediation (such as decontamination), narrow strips of land which had no other use, and land with contractual conditions attached. Most of the sales involved small properties but five transactions involved sales of sites bigger than 10 hectares (one hectare contains about 2.47 acres). Homes England, which manages land disposals for MHCLG, has provided the NAO with some information to explain these sales.
The Cabinet Office is responsible, at an aggregate level, for the £5 billion proceeds target while departments are responsible for individual sales. The Cabinet Office publishes the data it receives from departments on individual disposals. It does not analyse data at the programme level to assess, for example, the types of buyers attracted to certain government properties, whether departments are selling land to the same buyer, and the use to which the land is subsequently put.
Sales proceeds from land and property sales are expected to make up departmental income during the 2015 Spending Review period. If disposal proceeds are less than expected, departments face a shortfall in their budget and they may need to amend or defer their spending plans. Departments told the NAO that any shortfalls have so far been manageable. HM Treasury said that it has discretion to provide additional funding in these cases, although it would take into account how well a department had managed its resources, and any factors outside the department’s control.
There is insufficient data to say with certainty on a government level where the sale proceeds have been spent. It would be a concern if departments are selling land and property to support day to day running costs, rather than to invest in refurbishing existing assets or purchasing new ones. The government has not collected aggregate data on how government as a whole has used proceeds from disposals, so the NAO cannot say whether this is the case.