Squeezed on Housing, Sunak’s Tories Take Aim at EU-Era Water Law

Rishi Sunak is considering scrapping an environmental law dating back to UK membership of the European Union, as his government faces pressure to build more houses while fending off a voter backlash on pollution.

(Bloomberg) — Rishi Sunak is considering scrapping an environmental law dating back to UK membership of the European Union, as his government faces pressure to build more houses while fending off a voter backlash on pollution.

The prime minister’s team is looking at using his flagship regeneration bill to override a 2018 ruling that effectively bans housebuilding in areas where it risks polluting rivers and waterways, people familiar with the matter said. The proposed move comes after the Home Builders Federation lobby group blamed the “nutrient neutrality” rule for preventing construction of 120,000 homes.

Britain’s housing shortage is a contentious political issue ahead of a general election expected in 2024, with the Conservatives under fire after backing away from a manifesto pledge to build 300,000 homes a year.

Many Tory MPs in more affluent areas object to building in their districts, after seeing the previously safe seat of Chesham and Amersham flip to the Liberal Democrats in a special election in 2021. Sunak’s party faces by-elections in three seats this month after sitting Tory MPs resigned.

Still, their squeamishness on housebuilding has left the Conservatives vulnerable to the poll-leading Labour Party’s promise to boost supply. Labour leader Keir Starmer spent the weekly Prime Minister’s Questions on Wednesday trying to capitalize, telling Sunak in one heated exchange: “The ambitions of families across the country have been crushed by his failing Tory government.”

But if Sunak waters down environmental laws to try to reclaim the housing narrative, he risks drawing attention to the Tories’ poor record on pollution, which cost them votes in May’s local elections as #TorySewageParty and other hashtags trended on Twitter. It would also likely break another manifesto promise not to lower UK environmental standards below the EU’s after Brexit.

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“The subject of housebuilding crystallizes the principal electoral challenge facing the Conservative Party: do they prioritize the interests of the already propertied, or the interests of those currently unable to get onto the property ladder?” said James Vitali, a research fellow at the Policy Exchange think tank.

Set against the now-dropped 300,000 annual target, the number of homes HBF said were blocked under the pollution rule barely scratches the surface. Its impact is also localized, typically in areas close to river catchment run-offs such as Kent and Wales — though more areas of western and northern England have seen the rule applied in recent years, the lobby group said.

In Kent’s Stodmarsh catchment, a nature reserve near the River Stour about 5 miles (8 kilometers) from Canterbury, HBF said 35,000 homes are delayed — over a quarter of the total in its report. It accused Natural England, the public body mandated with protecting the environment, of using the nutrient neutrality rule to completely block building in Stodmarsh and similar areas.

Natural England’s stance stems from a 2018 European Court of Justice ruling making it unlawful to release nutrients — such as nitrates and phosphates found in wastewater or sewage — into protected sites already in an “unfavorable” condition. It disputes the HBF figure, but also insists housebuilding must be compatible with legally binding targets to improve the environment.

Read More: Home Buyers Thwarted by System That Can’t Build Enough Houses

The government’s so-called Levelling Up bill, which it is considering using to change the nutrient neutrality rule, is currently in front of the House of Lords. The proposal would also need separate legislation to scrap the law completely, a person familiar with the matter said, when asked about timing.

“The government remains committed to delivering housing in areas impacted by nutrient neutrality and is supporting local authorities and developers,” a spokesperson for the Department for Environment, Food and Rural Affairs said in an email when asked about the plan. “We recognize the urgency of this issue and have taken substantial steps to both unlock housing now and to address the underlying causes of nutrient pollution at source.”

The HBF typically represents developers who say the rule is unfairly applied. Housebuilders wanting to build on affected sites must mitigate their pollution by building wetlands or other environmental projects, adding as much as £25,000 ($32,000) per home to win permission, according to the group. The government has also set up a program offering nutrient credits to developers, working with farmers to mitigation projects.

But the group argues the nutrient neutrality rule compounds existing hurdles to housebuilding, such as supply constraints, a growing regulatory burden and an underfunded planning system, it said.

It can be especially difficult for local or smaller developers who can’t find sites for an offset project nearby. “If you’re a footloose developer with no particular ties to an area, you’re probably going to build in regions which aren’t affected by the rules,” said Andrew Watson, a planning director at broker Savills Plc. “A lot of developers do not have that privilege.”

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Tory MPs calling for housebuilding regulations to be eased are influential in Sunak’s governing party. They argue it’s central to the 2019 manifesto commitment to boost deprived areas of the country. Home ownership is also a central tenet of the party’s doctrine since the days of Margaret Thatcher.

“We need to find a way to lift this blockage,” said Theresa Villiers, who was environment secretary in the early months of Boris Johnson’s administration.

John Fuller, Conservative leader of South Norfolk District Council in eastern England, told MPs the nutrient rule could cause a “socio-economic disaster” for affected families and businesses, and that blame for polluted waterways should fall on the government and water companies. Phosphorous produced in building 40 to 50 homes could be carried in “two carrier bags,” he said.

Read More: Britain Comes to Terms With Its New Water Poor Reality

“The entire premise that stopping building a few bungalows is going to clean up the rivers is unsound,” he said in a submission to Parliament in April.

But Fuller’s pollution reference illustrates the risk for the Conservatives. Though developers and even some green charities say the biggest problem facing waterways is agriculture, the government would still risk negative headlines if it is perceived to be watering down environmental protection.

In an emailed statement, Natural England said it is also working with the farmers to reduce pollution, and that cleaning up rivers requires “comprehensive action across sectors.” 

But according to Shaun Spiers at the Green Alliance think tank, the HBF has a “long track record of resisting forward-looking regulation, whether on building regulations, affordability quotas, energy efficiency or housing density.” He said housebuilders should factor regulations into their business models, “as the best already do, and get on with building the new homes the country needs.”

The government is also under pressure to deal with the threat of water shortages, underdeveloped pipes and treatment plants, which frequently cause raw sewage to be dumped in the nation’s rivers. UK water companies apologized in May and laid out a multibillion-pound plan to curb sewage spillage into England’s rivers after months of public outcry, a move that’s likely to hit households with higher bills.

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Ministers have also proposed regulations to ensure new housing projects build soakaways and tanks to catch wastewater so it can be reused, and pledged to streamline planning rules so new reservoirs can be built more quickly.

According to Vitali at Policy Exchange, the release of nutrients is damaging biodiversity and that preventing it is a key issue. “The problem, though, is that regulators are failing to balance this objective against other equally pressing concerns, like the severe shortage in housing,” he said.

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