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Affordable housing – a fresh approach or more of the same – 12 weeks of Planning (episode 5)

04 September 2020

By Oliver Sargent Senior Account Executive at Newington Communications

Each week during the 12 week consultation, the Newington team will be analysing an aspect of the proposals in the ‘Planning for the Future’ proposals. 

Read our latest analysis below to understand how the proposed planning changes will affect your future projects.

Our analysis of the Planning White Paper this week focuses on how the proposals seek to address the need for more and better-quality affordable homes.

For some time now, a widening gap has been appearing between the current housing stock and the required number of affordable homes needed. The rise of demand outstripping supply has only been further exacerbated by the pandemic. Therefore the speed in which affordable homes are delivered needs to be improved, but will the proposed planning changes deliver more genuinely affordable homes?

The ‘First Homes’ impact 
The government have made it clear that ‘First Homes’ is the preferred affordable home ownership product since they launched their consultation on it in February 2020.

The scheme proposes to apply a 30% discount to market sale prices for first-time buyers, which will command a minimum of 25% of all affordable housing units secured through developer contributions under Section 106 (S106). However, understandably this has raised questions about the delivery of other methods of affordable provision such as shared ownership. As under the proposals we will see less shared ownership homes coming to market as Local Plans have to adapt to delivering at least 25% of all homes as ‘First Homes’.

The proposals suggest that the ability for these homes to be truly affordable could be helped by local authorities using their discretion, by increasing the discount of 40% or 50% in areas where property prices are particularly high, as well as price caps of £420,000 in London and £250,000 across the rest of England.

As we have seen with previous affordable housing schemes, research tends to suggest that affordable homes are not really that ‘affordable’. Initial analysis suggests that the ‘First Homes’ scheme will follow suit with most people on moderate incomes finding the homes unaffordable. This could lead to far-ranging problems for the delivery of truly affordable homes, as the people who need them, miss out under the ‘First Homes’ approach.

The new Levy that will incentivise developers.
As it stands, affordable housing is predominantly secured through the use of agreed planning obligations such as the S106 contribution. Under the new plans, these are set to be abolished, replaced by a single Infrastructure Levy to increase developer contributions, that can be employed to the delivery of affordable housing. This could be in the form of either a cash payment or secured through in-kind delivery on site.

The proposals state that registered providers will be able to purchase affordable housing from developers, at a discount from the current market rate. The difference between the price sold to a registered provider and the market rate will then be off set against the final Infrastructure Levy (IL) owed to the local authority, creating a clear incentive for developers to build on-site affordable homes.

However, there’s a trade-off to ensure that the affordable housing on-site is of a high enough quality, as the government is proposing that if no social provider wants to purchase the low-quality affordable homes built, the council could be in the position to demand a cash contribution from the developer instead.

A lifeline for smaller developers but a risk for affordable housing delivery
Finally, in a move to support smaller and medium sized housebuilders, the government has proposed a drastic increase in the affordable housing threshold for smaller sites.

Currently, developers can build developments of up to 10 homes without providing any affordable housing but under the government’s new proposals, this limit could be raised to 40 or 50.

According to government calculations, a threshold of 40 homes would lead to a reduction of between 7% and 14% of S106 affordable housing over a single year, whilst for 50 homes, this would be between 10% and 20%.

This move will mean that more sites will become viable for smaller developers, which is being described as a lifeline by the government as they look to support smaller housebuilders post the pandemic. But the fear is that in the short term, this could impact on the delivery rate of affordable housing.

The proposed Infrastructure Levy (IL) suggests that in the long term, the speed of delivering better-quality affordable housing can be achieved. The idea is a simplified and incentivised approach for developers, with the welcome bonus for local authorities of a greater overall contribution than the current system allows.

However, in the short term, the introduction of ‘First Homes’ and increasing the threshold for smaller developers, will have a detrimental effect on the delivery of affordable housing. Considering ‘First Homes’ seems to be the government’s chosen approach, and with initial analysis suggesting it will be ‘unaffordable’ for most of its target market, justified concerns will be raised that the affordable housing built, will be out of reach for those who really need it.

You can catch up with previous weeks here:

Week 1 - Phil Briscoe reviews the Planning White Paper
Week 2 - Paddy Kent considers the changes to Local Plans
Week 3 - Beth Park examines housing targets 
Week 4 - Aimee Howard looks ahead to the new Infrastructure Levy