Memorandum by Mayor of London (HOU 02)
This submission supplements the memorandum submitted
by Neale Coleman to the earlier enquiry of the predecessor committee
and the examination held by that committee on 12 June 2002. This
submission focuses on two of the questions asked in the new committee's
request for further evidence of 26 July.
How spending of the new resources should be
balanced between social housing and options for owner occupation
for those who cannot afford to buy (including shared ownership)
and the mechanisms to be used for their distribution.
The Mayor welcomes the SR2002 announcement that
national resources for housing investment will increase by £1.1
billion by 2005-06 relative to 2002-03. Given the different pressures
in different regions in his view it may not be appropriate to
make a decision at national level on the distribution of resources
between these two categories. Such decisions should be taken at
a regional level within the context of regional housing statements.
Resources should be distributed between regions
of the country relative to housing need. The two key factors in
the relative need for affordable housing are the extent of unmet
housing need and the extent of future housing need arising from
the growth in the household population.
The backlog in unmet housing need is much greater
in London than in other regions. There are now over 54,000 homeless
households placed in temporary accommodation by London boroughs.
This figure is significantly more than the figure for all other
regions in England put together. The most recent government figures
show London as having 58 per cent of the national total. Over
70 per cent of the households placed in bed and breakfast or shared
annexes are placed by London boroughs. The Government has announced
a target of having no homeless households in Bed and Breakfast
or shared annexes by March 2004. For this target to be achieved
the major share of available investment resources for additional
housing provision will have to be invested to meet the needs of
The need for intermediate housing for key workers
is also more acute in London than in most other parts of the country.
This was recognised by the Government in the distribution of the
Starter Homes Initiative programme, with over 60 per cent of the
initial £230 million budget being allocated in London. The
average house-price in London is now over £230,000 (Land
Registry, AprilJune 2002). In a recent analysis, FPDSavills
estimated that 80 per cent of households in London could not afford
a £150,000 property. Recent research by Fordhams commissioned
by the Mayor concluded that there was a need for 51,000 "intermediate"
homes in London over the next five years"intermediate"
being defined as housing at prices or rents above social housing
rents but below full market price for reasonable second-hand housing.
London also has the greatest anticipated regional
population growth. The Mayor's most recent population estimates
project that London's population will increase by 700,000 by 2016.
It is projected that there will be an annual increase in households
of 20,700 a year.
The Mayor's draft London Plan proposes that
50 per cent of additional housing provision should be affordable.
Within this broad category, the division between social rented
housing and intermediate housing should be on a 70 per cent/30
per cent basis. These proportions are supported by the Fordhams
study referred to above. The intermediate category could include
subsidised sub-market rented accommodation as well as shared ownership
and discounted home ownership provision. The Mayor welcomes the
fact that Government is now considering mechanisms for funding
such a programme. The level of subsidy will vary depending on
local market costs, the income of the key worker group on who
the provision is targeted and the size of accommodation required.
Subsidy could operate on a revenue subsidy basis rather than as
a capital grant.
In determining distribution of investment resources,
unit subsidy requirements should be considered as well as the
number of homes required. Current average subsidy requirements
in London are for rented homes £96,300 per unit and for shared
ownership homes £49,600 per unit. Assuming sub-market rented
provision for key workers would require an average subsidy of
£40 per week, subsidy over 15 years would be equivalent to
a capital grant of £31,200. The purpose of the proposed rented
programme is to
enable access at lower income levels
than the existing shared ownership programme
provide a wider range of accommodation
for family households than that programme which generally focuses
on smaller units, and
provide medium term accommodation
for mobile households, for whom shared ownership or home ownership
is not an appropriate tenure.
On the basis of affordable housing output in
London being distributed as follows:
Rented provision: 70 per cent; Shared ownership:10
per cent; Sub-market rent: 20 per cent. Investment requirements
would be distributed: Rented provision: 86 per cent; Shared ownership:
6 per cent; Sub-market rent: 8 per cent
This is on the assumption that planning gain
contributions to affordable housing are distributed between different
types of affordable housing on a proportionate basis.
Resources need to be distributed at a sub-regional
level between authorities based on their relative housing need.
There is a strong argument for a proportion of investment resources
to be made to sub-regional borough groupings based on prior agreements
for pooling access to major development opportunities. The Mayor
is working with the Housing Corporation, GOL and other partners
to develop a framework for sub-regional allocations which both
assists local authorities in meeting their statutory duties and
ensures the most effective use of available investment resources
and the most appropriate development of available sites. There
is also a case for resources for key worker housing, both shared
ownership and sub-market rent, being allocated on a sub-regional
basis with location of provision linked to the transport access
to key worker employment locations. These may vary according to
the nature of the job and the type of provision, which is appropriate
for different key worker households.
The Mayor's draft London Plan assumes a significant
contribution is made to the provision of affordable housing through
the application of planning obligations. The Plan's assumption
is that 25 per cent of residential sites will be developed entirely
as social housing, funded primarily by Housing Corporation and
local authority social housing grant, with the remaining 75 per
cent being developed as private residential developments. Economic
modelling set out in the report Affordable Housing in London (SDS
Technical report 1, July 2001) by Three Dragons and Nottingham
Trent University shows that private residential development can
support between 35 per cent and 50 per cent affordable housing
through planning obligations. It is considered that in a few central
London boroughs this can be achieved without recourse to direct
In his previous submission, the Mayor supported
the broad principles of the tariff regime proposed by the Government.
However, the previous submission also put forward a number of
options for improving the current regime. Given the Government's
decision not to legislate for a tariff based regime, it should
give urgent consideration to the recommendations put forward by
the Mayor. These are set out more fully in the report by Professor
Rob Lane on Planning Obligations in London, published by the GLA
in June 2002 as SDS Technical Report 7. The report includes a
proposal that Circulars 1/97 and 6/98 are revised to:
(a) provide specific encouragement of pooling
of contributions between local authorities;
(b) allow planning obligation contributions
to be used in another local authority where it can be demonstrated
that this meets local or sub-regional needs.
(c) allow local authorities to apply planning
obligations relating to affordable housing provision to commercial
and industrial developments as well as to residential developments.
(d) require local authorities to publish
the details and financial basis of section 106 agreements.
In its Planning Green Paper and in the related
consultation paper on planning obligations issued in December
2001, Ministers supported the proposal that planning obligations
to provide affordable housing be applied to commercial and residential
developments. The Government should implement their proposals
as soon as possible through changes to guidance.
The Mayor also believes that, where a development
falls within the remit of his planning powers, he should be party
to any section 106 agreement relating to the development. The
Mayor also considers that the thresholds set out in circular 6/98
should be abolished in London given the scale of need and the
large potential contribution from small sites to affordable housing.
The Mayor's draft London Plan seeks to set a
framework for the determination of the level of planning obligations
available in a specific case. The plan recognises that, in applying
affordable housing targets to planning obligations for specific
sites, targets should be applied sensitively, taking into account
individual site costs, economic viability, the availability of
public subsidy and other planning objectives. This recognises
that in some cases the local authority will have an objective
of using planning obligation contributions to support the costs
of other infrastructure requirements, and that not all the planning
obligations contribution will be available to support affordable
The potential for the operation of a planning
contributions regime to contribute to the costs of affordable
housing provision varies not just between boroughs, but is also
affected by the value and other factors relating to specific sites.
Value is also affected by external factors other than local authority
planning policy. The potential contribution of planning gain obligations
should not be overstated. Given its unpredictability, in terms
of national and regional investment planning, the contribution
from planning obligations to affordable provision should be treated
as a supplement to direct investment subsidy rather than as a
substitute for it. On this basis, there remains a need for a significant
increase in direct Government investment in affordable housing
in London. The actual contribution of planning obligations should
be monitored prior to any assumptions being made at a national
or regional level as to the potential for savings to be made in
the level of direct investment subsidy. This outcome will also
be influenced both by any revised guidance in relation to contributions
from commercial and industrial sites and the out of borough provision
referred to above.
Comprehensive Spending Review and the Decent Homes
The Mayor supports the Government's Decent Homes
targets, and the review of funding mechanisms to assist local
authorities to achieve these targets. Resources should be targeted
on those authorities where there is a funding deficit. Need for
investment is more important than existing local authority management
performance. The Government's decision to lower the performance
threshold for eligibility for Arms Length Management Organisation
(ALMO) funding is therefore welcomed. The Government however needs
to work with boroughs for whom an ALMO may not be a realistic
option to develop alternative funding mechanisms for achieving
Additional funding should not be provided for
authorities to meet Decent Homes targets through the diversion
of resources from the provision of additional housing. Given the
Government has set a CSR target to ensure all social housing achieves
the Decent Homes target by 2010, a parallel target of meeting
the housing needs backlog by 2010 should also be established.
Otherwise there is a risk that the need to meet housing needs
will be treated as a lower priority than improving the condition
of the existing stock. The Mayor also considers that the Government
should set a Decent Homes target for both the private rented and
The effectiveness of the Housing Market Renewal
As low demand is not a significant problem in
London, and the housing market is booming, the role of the Housing
Market Renewal fund is limited in London. The Mayor is concerned
at the potential use of significant investment resources to support
demolition of properties in low demand in other parts of the country,
if this diverts resources from investment in existing or additional
housing in areas of the country where it is required. Projects
seeking funding for market renewal should test the potential use
of housing by households prepared to move from higher demand areas,
such as London, prior to progressing plans which involve the loss
of fit housing stock. There is a greater potential for partnerships
between low and high demand areas, which could relieve housing
pressure in London while supporting the development of sustainable
communities in areas which might otherwise be at risk of market
or neighbourhood decline.
Ensuring quality in new affordable housing
London faces a major challengesignificantly
increasing supply while land is constrained requires higher residential
density than is currently applying in most areas of London. Higher
density must be achieved through higher quality of development
and ensuring new development is appropriate to the needs of prospective
occupants. This is especially critical for social rented housing
where most occupant households include children. High quality
higher density provision does not require high-rise development
and a return to the unsuccessful forms of housing provision predominant
in the 1960's. The Mayor's draft London Plan stresses the importance
of design of individual dwellings and environmental design. The
Architecture and Urbanism Unit at the GLA, led by Lord Rogers,
is reviewing appropriate design approaches to achieving quality
at higher density.
The GLA and its predecessor body, LPAC, carried
out significant work on the criteria for achieving successful
higher density development. In pursuit of the development of major
site opportunities, the development of appropriate social and
physical infrastructure, including public transport access, is
a critical precondition. Achievement of sustainable new communities
cannot be achieved on the cheap, and housing investment resources
must be supported by regeneration resources, especially to bring
forward the development of brownfield sites, and for transport
investment and social infrastructure.
In terms of the physical standards applicable
for the development of social housing, the Housing Corporation
scheme development standards must be maintained and extended.
The Mayor supports the provision of all new development, including
private development, being on a "Lifetimes Homes" basis.
The level of Housing Corporation grant for both rented and shared
ownership schemes should be sufficient to achieve the require
standard while ensuring that the homes provided are affordable
by the households for who they are intended.