Addressing the Local Authority Development Impasse

Recently, Carter Jonas has marketed development sites which have attracted multiple bids, higher offers than had been anticipated and very little variance between conditional and unconditional offers.  

This is indicative of dire undersupply in the land market. Throughout the country, developers have diminishing landbanks and are increasingly prepared to compromise on site size, conditions and locations, or accept overage clauses which would have made a purchase an undesirable just a year ago.   

From what I have seen and heard, I believe much of the land with the best potential is locked into local authority ownership and has become inaccessible due to a plethora of issues, mostly relating to funding and resourcing.  

 

Local authority financial and housing challenges 

In November last year the County Councils Network and Society of County Treasurers conducted a survey of 41 of county and unitary authorities which found that 10% are not confident that they can balance their budget in 2023. The figure increased to 40% in 2024 and 60% in 2025, due to combination of stubbornly high inflation, rising demand and ‘broken’ provider markets for children in care. Furthermore, research by the Local Democracy Research Centre found that only 14% of senior staff in English councils are confident about the sustainability of their council finances. Across the sector, local authorities are increasing council tax while cutting services to the bare minimum and dipping into reserves year on year. Despite this, there has been an unprecedented rise in councils issuing Section 114 notices.  

And last June the Chartered Institute of Housing warned that 44% of local authorities were reducing housing programmes, while a quarter had already halted development – with a devastating impact on the supply of social and affordable housing.  

Council house building has reduced sharply in recent decades. Over than 100,000 homes were built annually during the 1950s, 1960s and 1970s, but this has dwindled to just a few thousand in recent years.  

A recent investigation by The Independent found that the majority of local authorities have failed to build a single council home in the past five years, and that although there are more than 1.2 million families on the housing waiting list, in 2021/22 only a third of England’s local authorities built a new home.  

There is a sad irony that Birmingham City Council completed the most new homes (185 properties, 97 of which were for social rent) – but is also the most high profile council to have issued a Section 114 notice, with a projected gap of £87m between income and expenditure for the 2024/25 financial year.  

 

Central Government's role and challenges 

Councils struggle to build homes – specifically social and affordable housing – primarily because of a lack of funding from central government – and yet in 2023 the Department for Levelling Up, Housing and Communities (DLUHC) handed £1.9bn of housing funding back to the Treasury after reportedly struggling to find projects to spend it on.  

So we have an impasse on several levels: councils short of funding, but Government unable to find a means of spending its housing budget; those local authorities which do provide housing suffering financial consequences; and, as a result, much-needed land locked into the ownership of councils unable to deliver.  

 

Public/Private partnerships as a solution

Fortunately there is a solution - one that Carter Jonas has implemented successfully across the country, and which I delivered on behalf of local authority clients in a previous role. Public / private partnerships enable the ideal combination of publicly owned land and local authorities’ unique understanding of a location and its demographic make-up, together with private sector expertise, financing and ability to take on risk.  

The involvement of the private sector also addresses the situation whereby local decision-making is invariably compromised by politicians who are, understandably, motivated by achieving electoral support within a specific political cycle. As a result, housing development in local authorities tends to forward as short-term successes, rather than the longer-term approach that strategic investment requires.  

 

Differences in approach 

Clearly there are differences in approach between the public and private sectors. One such example is legacy: local authorities quite rightly view their landholdings as investments and require a good return both during and following the development process, whether through residential or commercial properties let to private tenants, or creating value through community facilities and open spaces. With a history of working for both large-scale private landowners and public sector, Carter Jonas has had a role in the evolution of legacy-inspired development, and implemented solutions which deliver a scheme from which the original owner can benefit long term through patient capital, while also being justly proud of the development that has been created.  

There are some very good examples of public / private partnerships in West Midlands, specifically in Coventry, Nuneaton and Warwick. But the potential is considerable, particularly for brownfield sites in city centres. Should the Labour party win the general election and realise its ambition of allowing local authorities to buy up land for housing through compulsory purchase, the potential – along with the need for local authorities to call on private sector expertise – will increase exponentially. But we cannot allow politics to dictate the timing of much needed housing development: in the meantime there is considerable potential for innovative partnerships to turnaround disused land and deliver much needed homes.