A recent United Nations report on UK housing conditions concluded that the country is facing a critical situation in terms of availability, affordability and access to adequate housing. Indeed in England, it is estimated that 250,000 new homes a year are needed to meet demand, while figures from the DCLG show that construction was started on just 122,590 new homes in 2013. Affordable housing is described in the report as ‘especially scarce’.
The Government’s official line is that it is seeking to rigorously address the need for more affordable housing as a major priority. However the consequences of its planning initiatives, far from delivering as much affordable housing as possible, seem to be largely undermining its provision. In this article, John Bosworth, a partner at Ashfords LLP, examines why.
Community Infrastructure Levy (‘CIL’)
The introduction of the CIL charge has brought with it a possible blow to affordable housing in downgrading the importance of the Section 106 Agreement. Up to now these agreements have been used to secure both affordable housing and infrastructure contributions: in future, where an authority has adopted CIL, the section 106 agreement is most likely to deal with just affordable housing and other on site matters.
Local authorities must apply CIL to the funding of “infrastructure”, the definition of which expressly excludes affordable housing provision. Section 106 agreements in theory therefore should continue to operate alongside CIL, driving the delivery of more affordable homes. There is an obvious problem, however, in that if an authority’s CIL level is too high, the development risks becoming unviable – and affordable housing under a Section 106 Agreement will become extremely difficult to secure. With no flexibility to reduce the amount of CIL on these grounds, the result will invariably be a trade-off between CIL funded infrastructure and affordable housing, compromising provision of the latter.
The problem is exacerbated by the National Planning Policy Guidance’s stance on viability. The NPPG provides that such considerations are “particularly relevant” for affordable housing contributions, which should not be sought without having regard to individual scheme viability. Where there are issues of viability, it is affordable housing that will take the hit.
As well as the NPPG’s unhelpful position on viability, there are other aspects of national planning policy which contradict the Government’s assertion that affordable housing is a major priority.
When negotiating planning obligations, the NPPG states that authorities should be “flexible” in their affordable housing requirements and have in place a clear policy that such obligations will consider specific site circumstances.
Another concern is the NPPF’s introduction of the concept of affordable rented housing, a form of tenure which allows tenants to be charged up to 80% of local market rent. Given the current strength of the private rental market, in many areas these rates risk rendering the “affordable” tag meaningless.
New and proposed legislation
The implementation of CIL is not the only recent legal development to seemingly undermine affordable housing provision. Firstly, new permitted development rights have been introduced over the last year allowing buildings previously used for office, retail and agriculture to be converted to residential dwellings. Shockingly, no affordability requirements accompany these new rights.
Secondly, last year, legislation introduced a fast track option for the affordable housing elements of a section 106 agreement to be renegotiated (and appealed) where viability issues have arisen following the completion of the agreement. This is already leading to existing commitments being relaxed on appeal. And in the 2013 Autumn Statement, a national ten unit minimum threshold was proposed for sites before affordable housing contributions can be sought, which will undoubtedly worsen the affordable homes shortage in rural areas.
The Government has pledged to deliver 170,000 new affordable homes by 2015. However, with numerous planning initiatives hampering such provision, serious questions should be raised as to whether this target will actually be met.
John Bosworth, partner, Ashfords LLP