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Can the market deliver affordable housing in England?

Bethany Opler
Bethany Opler

Proposed changes to the planning framework in England to tackle a housing shortage, in particular affordable housing, have received a mixed reception. At the centre of the objections are the proposals’ reliance on market forces and generosity to developers.

New definition of affordable housing

First, the proposed new National Planning Policy Framework (NNPF) confines the definition of the affordable homes that developers must provide in new developments to “housing for sale”, rather than for rent. Developers must provide a tenth of houses in any development at a sale price that allows people to get on the housing ladder.

The removal of the need to build housing for affordable rent would mean that developers could recoup their costs faster.

“Whilst this shift may well be welcomed by developers, the move away from affordable rental properties to starter homes is unlikely to provide comfort to those currently without the means to buy a property,”commented Paul Wakefield, associate partner in the planning team at law firm Shakespeare Martineau.

The definitions of “social rented housing” and “affordable rented housing” have also been merged into one definition, that of “affordable housing for rent”, including homes provided by Build to Rent schemes.  

Jo Richardson, a professor of housing and social research at De Montfort University, Leicester, says this shows that planning policy alone will never tackle the problem of affordable homes. Instead, we need to “change the way we talk about housing”.

Effectively, she sees housing as a service provision, not a financial burden.

“If government gets involved – directly building property – it’s not seen as a capital investment to benefit citizens – the nation’s shareholders – but as a ‘burden’ or a ‘debt‘, in terms of public sector borrowing.”

She proposes that the English government invest in capital subsidies to build social housing, in the name of the public good.

“The Welsh government is abolishing the ‘right to buy’, and England needs to follow suit.” 

The ‘right to buy’ policy gives tenants of council and social housing the right to buy their own homes, effectively taking these homes out of the social market, where they are cheaper, and into the private market.

“The policy means homes are being built with public money, then heavily discounted and sold to private landlords, who gain the uplift in value on resale as the market values rise,” Richardsonsays.

Developer profits

Many new developments occur on the edge of settlements, on agricultural land, which has a lower value. A long-term barrier to new homes and affordable homes has been “land banking”, a practice whereby developers buy land in such places in the hope land value will rise when planning permission is granted. Often homes are never built. Land banking obstructs the building of new homes by social housing providers, community land trusts and housing co-ops and associations, who would like to build social housing on that land themselves. 

To get around this, councils can currently use their powers to designate parcels of land as “rural exception sites”. These allow homes to be built on agricultural land. Rural exception sites override the dominant policy that protects farming land. Between 2011 and 2017, just 7884 affordable homes were built on rural exception sites in England.

How many are needed? 30,000 a year since 2011, that is, 210,000 in the same period, according to The Joseph Rowntree Foundation, which campaigns on housing and inequality issues. 

But this approach depends on landowners donating or selling land just above their agricultural value – significantly below the value of land with planning permission for market-value housing.  A report by an association of landowners, Strong Foundations, puts this succinctly: “From a landowner’s perspective, the decision to pursue a rural exception site is socially motivated rather than in expectation of significant financial remuneration.” That is, policy and the market are stacked against it. 

On top of this, even when they do build, developers use a legal loophole within planning policy to reduce their affordable housing commitments. They’re supposed to make a certain percentage of homes in a new development “affordable”. But they can get out of this if they show that their profits slip below “competitive” levels – about20 per cent.

To do this they pay more than the land is worth, and later recoup the cost by building fewer affordable homes. Councils thereby become unable to force developers to deliver their fair share of affordable housing.

A recent report, Viable Villages, jointly produced by housing campaign charity Shelter and the Campaign to Protect Rural England (CPRE), found that rural sites where this happens have witnessed a drop of almost half in the delivery of affordable homes.

Entry level exception sites 

To attempt to tackle this, the proposed new draft of the NPPF suggests a new category of “entry level exception sites”. These would “comprise a high proportion of entry level homes that will be offered for discounted sale or for affordable rent”.

Exactly what proportion is unspecified. These could allow affordable homes for first time buyers and renters to be built on land next to existing settlements by offering a way for more farmers and landowners to make land available for affordable housing.

Would this solve the problem of affordable homes? At present it is unclear how this could happen. But it hasbeen welcomed by property and landowners. The Country Land Association (CLA) president Tim Breitmeyer said that tackling the rural housing crisis is a “defining challenge”, since in the countryside many homes are priced out of the reach of locals’ pockets, and land is at a premium.

“The rural economy will struggle to achieve its full potential and our villages will not survive if people cannot afford to live and work in the countryside,” Mr Breitmeyer said. 

So far so good. “If implemented correctly by local authorities, entry level exception sites strike a good balance between providing affordable homes and an economic return that motivates landowners to pursue sites, whilst ensuring sensitive design to meet the needs of the local community.”

It’s still not clear how. The Rural Services Network, an arm of the Local Government Association, which represents councils, however, denies that it is councils who are holding back development, and its assistant director, Andy Dean, argues for rural exception sites to be kept “as a delivery mechanism for affordable housing in rural areas”. In fact they have been kept in the new draft.

This solution remains fundamentally flawed, according to the CPRE, because it continues to assume that market forces will bring down house prices if more greenfield land is released for development, says Lois Lane, its research and policy advisor.

She says guidance published alongside the revised NPPF states that viability studies should be carried out earlier to inform local plans, instead of challenging them retrospectively. This should help create affordable housing targets that are seen as a clear and agreed minimum standard, rather than a starting point for negotiation. Developers will only be able to carry out further viability assessments in “exceptional circumstances” and the onus will be on them to demonstrate what has changed since the original assessment. 

CPRE hopes that these new provisions will make it harder for developers to wriggle out of building the affordable homes they have committed to, but remains “deeply worried” that the introduction of a new policy on entry level exception sites allows market housing to be built on greenfield sites that would not normally be developed.

Furthermore, currently developers are not obliged to provide affordable housing on sites with fewer than 10 homes. Given that rural developments tend to be smaller than urban ones, the 10-dwelling threshold has a disproportionate impact on rural communities. 

CPRE adds that the new NPPF needs references to “social housing” and to allow rural councils to borrow money in order to build. 

Shelter also criticises the draft. It argues that “we should aim for 100 per cent affordable housing on exception sites wherever possible” and that “decisions about the location, design, tenure, price and allocation of homes must be made with local people”, and the exception sites should apply to urban zones as well as rural.

What, no garden cities?

The draft has also come under attack from the Town and Country Planning Association and over 50 organisations – including councils, professional bodies and trade associations. They are urging the government to reinstate a reference to “garden city”principles that are in the current framework.

The current framework requires local authorities to consider whether following garden city principles would be “the best way” for large-scale developments to achieve sustainable development in their area.

TCPA chief executive Kate Henderson said: “Meeting the nation’s housing needs involves more than just delivering housing units; we need to create beautiful places which offer a wide range of employment opportunities and genuinely affordable homes, while enabling more sustainable lifestyles.

“The garden city principles can deliver all this and are underpinned by a financial model which not only enables fast delivery but puts people at the heart of delivering new places and provides resources for the long-term stewardship and maintenance of a high-quality public realm and high-quality community facilities.” 

The proposed new National Planning Policy Framework consultation closes on 10 May.  

David Thorpe’s two new books are Passive Solar Architecture Pocket Reference and Solar Energy Pocket Reference. He’s also the author ofEnergy Management in Building sand Sustainable Home Refurbishment.

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