Memorandum by Professor ADH Crook,
Ms S Monk
& Professor CME Whitehead
Our memorandum concentrates on the planning
aspects of the issues identified in the Committee's call for evidence:
how planning gain helps in producing affordable housing; what
are the outputs and outcomes; what are the problems experienced
in negotiating contributions from developers. Our evidence covers
the amounts of affordable housing
produced in both urban and rural areas (as well as regional variations)
and the extent to which this is additional;
the evidence to date as to how the
costs of producing this housing are shared between landowners,
developers, and purchasers of market housing and between tenants
of affordable rented and low cost market housing, and taxpayers;
the processes involved in negotiating
contributions from developer, including the negotiation of S106
the extent to which the government's
proposed introduction of a standardised tariff system is likely
increase or decrease amounts produced.
HIP returns are inaccurate and may
overstate total output.
There is a north-south split in numbers
secured and in tenure.
Most s106 homes involve SHG.
Developer contributions for affordable
housing compete with other planning gain.
Very little affordable housing is
produced through RES.
Negotiations are long and complex
and as a result developers are often able to manipulate the system
to their advantage.
The gap between the need for new affordable
dwellings and the numbers of new social rented and other low cost
dwellings being produced by registered social landlords (RSLs)
and by other providers has led to attempts to get the private
sector to meet the gap. In effect, developers and landowners are
being asked to fund at least a part of the shortfall in social
Government endorsement of this began in 1979
with the rural exceptions policy, enabling rural planning authorities
to grant planning consent on sites that would not otherwise have
received permission, provided that affordable housing was produced
on it. The approach was more widely sanctioned in 1981 and subsequently
in all Planning Policy Guidance notes on housing (PPG3) issued
Developers could meet their obligations in three
ways. First, by providing affordable housing as part of sites
where the private development is to take place. Second, on other
sites, or third, by making a financial contribution to the planning
authority (commuted payment) who will then finance the provision
on another site, usually by a RSL. In 1998, the policy was slightly
amended, linking it more closely with the Government's policies
on social inclusion and urban renaissance. Off site provision
was seen to conflict with the policy to create mixed and balanced
communities and was therefore to be a last resort. At the same
time preference was to be given to achieving residential developments
on brown-field sites to maximise the regeneration of inner city
areas. Both of these new emphases potentially ran counter to the
use of planning gain to provide affordable housing since it reduced
the development values available for cross subsidy.
In the 2000 version of PPG3, the Government
made it clear that developers' unwillingness to make contributions
to affordable housing would be an appropriate reason, of itself,
to refuse planning permission. In the 2001 Green Paper on reform
of the planning system and its daughter consultation document
on planning obligations, the Government proposed to replace negotiated
contributions by standard authority-wide financial tariffs (including
calculating these as proportions of development values). These
make even more explicit than previous policy statements that the
affordable housing policy is a form of betterment tax on development
value to pay for community investment and services, rather than
a charge to reflect the costs and benefits of planning permission.
The Government collects information on the numbers
of new affordable dwellings produced through the planning system
in England by means of annual questionnaires to housing authorities
as part of the Housing Investment Programme (HIP). In 1998-99,
14,000 dwellings were stated to have been "secured"
by planning gain, while 15,500 were approved in 1999-2000. In
addition, 93 and 95 hectares of land were transferred and £43
million and £35 million of commuted payments were made in
each year respectively.
London and the South East account for large
proportionsapproximately half the dwellings secured/approved
and land transferred, and over 60 per cent of the commuted payments.
Much smaller proportions are found in the northern regions, than
their share of total households. This reflects the relative distribution
of need between the "south" and the "north";
it reflects far more the more buoyant private housing market and
the higher land values that prevail in the southern regions. Higher
land and house prices are necessary to generate the development
values required to subsidise the production of new affordable
homes through planning gain. The data also show that very few
homes were secured through rural exceptions schemes (RES): only
2,100 over the two years 1998-99 and 1999-2000.
Our analysis suggests that the HIP returns are
certainly inaccurate and may overstate the numbers of dwellings.
When we compared the returns in each of our case study authorities
with the files on S106 agreements, we found a lot of inconsistency.
In particular, it seems that the returns from some local authorities
include new affordable homes given planning permission and secured
outside the planning gain mechanism. Equally, amounts included
each year include both new approvals and completions: ie double
Our postal survey showed that on sites where
affordable contributions were negotiated, an average of 17 per
cent of dwellings were affordable, ranging from a high of 27 per
cent in the South East to a low of 11 per cent in the North East.
However, this does not give an indication of the total percentage
of new dwellings being produced that are affordable as the sites
in the analysis exclude those where no contribution has been negotiated
and where 100 per cent of the dwellings are either open market
or affordable houses. Comparable local authority-wide figures
are still probably under 10 per cent in areas outside London and
the South East.
The amounts secured do not relate clearly to
levels of need. A key constraint is the amount of land coming
forward on which applications are submitted for private market
housing. In areas of high planning constraints, including those
with Green Belts, and, often, high need, the amounts are sometimes
very low. Moreover what is available can be on sites below threshold
where it is extremely problematic to negotiate contributions.
We also found no evidence of permission be given for housing on
a site where it would otherwise have been refused but for the
opportunity the site gave for securing affordable housing. In
urban authorities where brown-field sites were available, costs
of re-mediation often limited the contributions that could be
sought. In some areas local authorities do not expect to be able
to achieve affordable housing on brownfield sites.
As well as "north-south" split in
the numbers secured there is a similar regional split in tenure.
Both the HIP data, the data from our postal questionnaire, and
from our case study authorities and sites show that social rented
dwellings dominate what has been secured in London, the South
East and South West. Shared ownership is significant in the Midlands
and northern regions. Discounted market units have been secured
in the regions with low house prices. In other regions average
house prices are in general too high for a discount to bring them
within reach of those in need of affordable homes.
Many sites included more than one affordable
"tenure". We found variations in the way that the market
and affordable homes are mixed on sites, with "pepper-potting"
more common in northern than in southern regions. On 26 of the
32 completed sites we were able to examine in detail, the affordable
and market housing was separated. Separation was thought to make
the provision of communal areas and the setting of service charges
easier and also to ease building, marketing and management. Developers
argued that on site provision of affordable homes impacted on
the prices of market houses. Hence, as well as having to fund
the affordable homes, they also lost profits on the market houses.
The affordable homes secured through the planning
gain system will only be additional to the extent that less social
housing grant (SHG) is needed. In other words developers' contributions
offset the need for SHG in whole or in part, including cases of
expensive schemes where these contributions bring schemes within
acceptable cost limits and where the scheme is justified, despite
its cost, as it achieves other objectives.
Most s106 homes involve SHG. The HIP data show
that 72 per cent of homes were funded with SHG or local authority
SHG (LASHG). There was also a regional pattern: 43 per cent in
the North was without SHG, compared with 26 per cent in the Midlands
and 21 per cent in the South.
The fact that SHG is apparently so widespread
in its application to S106 sites means that its availability is
crucial to the success of the policy, as it is currently operated.
We found a number of instances where progress had been stalled
because of a lack of SHG, often in the case of RES sites. By contrast
we also found other examples where funding is available, but there
were insufficient sites.
The apparent widespread use of SHG revealed
in our case studies of 40 planning authorities suggests that using
planning gain to secure affordable housing is not adding significantly
to the total supply of affordable homes, although it may be changing
its location and also creating more sites with a mixture of affordable
and market housing. Its effect on total supply overall is probably
negative because of negotiations costs etc. But in some areas
the potential to achieve affordable housing may make it easier
to obtain planning permission. The more detailed examination of
64 sites where S106 agreements had been signed confirmed this
general conclusion. Of the 43 sites where there was evidence about
the availability of SHG, 33 had secured SHG. Where SHG was not
used, the majority of the dwellings on sites with social rented
homes were in shared ownership. There was also a clear "north-south"
split in the use of SHG. Most of the sites in the south have SHG,
compared with only a minority in the north.
Our postal questionnaire revealed that a large
majority (84 per cent) of planning authorities has planning policies
for affordable housing in place. Those that do not tend to be
older mining and manufacturing areas in northern regions where
the need for new affordable homes is low. Almost all (97 per cent)
seek to negotiate affordable homes on 'windfall' sites. The vast
majority (98 per cent) of rural authorities have RES policies.
So too do many urban authorities, especially those with significant
Most authorities justify their policies through
specially commissioned housing needs studies, and most of our
40 case study authorities had done so between 1996 and 1998. These
surveys are often updated using local authority housing waiting
lists. There was however little consistency in planning authorities'
needs definitions nor in how defined need was measured. There
was also a wide variation in what would be acceptable as affordable
housing: some will only accept social rented housing (especially
in the "south"), others will accept a much wider range,
especially in the "north" and on regeneration sites.
Our evidence from the 64 sites where agreements
had been signed suggests that targets tended to be achieved. Where
not, this was because of the costs associated with redevelopment,
the fact that some agreements predated current policy, and the
competition from other planning obligations, such as contributions
to additional school places (see below). The highest percentage
contributions are associated with availability of SHG.
Most authorities accept the site thresholds
set out in the 1998 DTLR circular (exceptions being rural authorities
and those relying on brown-field sites where small sites tend
to predominate). Targets on these sites tends to vary according
to the intensity of local need and range from as low as 10 per
cent right up to 40 per cent, with 30 per cent being the modal
proportion. Few authorities had site specific targets; most specify
a target for all sites.
Local councillors are in general supportive
of using the planning system to secure affordable housing. However
we did find instances where land was not allocated nor given permission
despite the existence of demonstrated need, hence limiting what
could be negotiated.
Planning authorities face a wide range of problems
when negotiating contributions. On the basis of the postal survey
the key problems are:
|lack of clarity in policy framework set by central government
|resistance by developers to creating mixed communities on single sites
|difficulty of judging what developers can afford to contribute
|problems of defining what is "affordable"
|lack of land coming forward||5
|inadequate amounts of SHG coming forward
Rural authorities are more concerned about SHG availability,
whilst urban ones about the problems of securing tenure mix on
sites. Planning authorities in pressure areas gave a higher rating
to the insufficiency of land coming forward on which contributions
could be negotiated.
Affordable housing is not by any means the sole contribution
planning authorities attempt to negotiate with developers. Other
matters include transport infrastructure, open space, community
facilities, and additional school places. On residential sites,
however, affordable housing appears to be the most important obligation
Our evidence suggests that negotiations are slow and cumbersome
and can involve many 'actors' within planning authorities as well
as outside. We have found three models. In the first the planning
departments handles almost all, involving the housing department
only in the mechanics of provision rather than amounts. In the
second, most common approach, both departments are involved, with
one in the lead. The third approach involves a negotiating team
comprising all relevant departments, including legal sections.
Planning authorities also vary in how flexible they are.
The degree of flexibility depends on the tested robustness of
policies (as revealed by appeals in the past) and on market conditions.
We found three approaches here. In the first approach, typically
of high need authorities, targets are set and authorities are
intransigent, being prepared to refuse permission. The second
is the most common with authorities starting negotiating on their
target but usually ending up with somewhat less. Third, in low
demand areas, planning authorities ask for little or nothing and
will not negotiate hard to achieve a contribution as they are
usually more concerned to ensure that some form of development
occurs and so are willing to accept this may come at a price of
having no affordable housing. Our evidence suggests that most
authorities find that developers are no longer as hostile to the
principle of contributions as thy once were, but are keen to negotiate
hard on the detail.
However negotiations are too long and complex. The main problems
tensions within local authorities, especially
between planning and housing departments over the amounts of affordable
housing to be secured;
insufficient expertise to conduct negotiations
with private developers about what level of contributions can
be afforded on specific sites;
conflicts within authorities (and between district
and county authorities) about the balance between affordable housing
and other types of contribution;
developers' exploiting inconsistencies between
neighbouring authorities with very different policies; a gap in
sub-regional strategies was evident;
RES negotiations tend to be very protracted; funding
is not the main problem, but the time taken to locate and process
appropriate sites tends to be lengthy, including getting local
residents to back schemes.
RES policies are fairly similar throughout England. They
tend to specify small-scale development within or on the edge
of settlements. Occupancy restrictions are standard. Rural authorities
are more concerned by a lack of SHG. Rural councillors were particularly
keen to see evidence of need arising within the parishes where
sites had been identified.
The Government has recently proposed replacing obligations
with standardised tariffs. It hopes this will bring greater certainty.
At the moment policy success depends upon planning authorities
and developers negotiating contributions in relation to the circumstances
of individual sites, but within an overall policy framework that
sets out needs and the overall targets required. The proposed
policy shifts the emphasis from site specific negotiations to
the setting of standard tariffs for each local authority, with
departures permitted depending on individual site circumstances.
The tariff "income" can then be used for a wide variety
of purposes within the local authority (of which affordable housing
will be only one), including the potential to "export"
it to another authority so that the need may met in an alternative
Some of the proposals are to be welcomed, including the proposal
to include small sites and non-residential sites within the scope
of policy. There are however, some difficulties that can be anticipated:
a standard tariff ignores the big variations between
sites in what can be achieved; this might mean that fewer affordable
homes will be secured;
the certainty may prove to be illusory; it is
likely that site specific negotiations will continue on many sites,
especially if provision is to be on-site; and
negotiations within the authority about the proportion
of the tariff income that will go to affordable housing;
The policy was last changed in 1996. There is some evidence
hat it is now "bedding" down. Our evidence shows that
planning authorities do tend to achieve their targets on sites
where planning gain has been negotiated. And RES sites do succeed
after lengthy negotiations although not in producing large amounts
This however does not mean that there is no case for some
reform. This is because:
the amounts produced are small in relation to
needand by no means all are additional;
the limited supply of land for market housing
of above threshold sizes in the high pressure areas is a key factor
inhibiting more success; and
the time consuming and difficult nature of negotiations
also inhibits success; there are problems of consistency within
authorities and between neighbouring authorities with the same
Introducing standardised tariffs will not address these issues,
except at the margin, especially as negotiations are likely to
be crucial under a tariff as well as improved existing approach.
Our evidence is largely drawn from a major research study
of the impact of the planning system on the production of affordable
housing. This is being undertaken by a joint team at the Universities
of Cambridge and Sheffield and we gratefully acknowledge the contribution
to the research of our colleagues (and former colleagues) Mr.
Alastair Jackson, Ms Jenny Curry, Dr Steven Rowley, and Ms Kerry
Smith. The project is co-funded by the Joseph Rowntree Foundation,
The Housing Corporation, the Countryside Agency, the RTPI, and
the RICS. The evidence comes from a postal survey of a representative
sample of English planning authorities, case studies of policy
and practice in 40 authorities, detailed site-specific information
on 64 representative sites with S106 agreements in 17 of these
that had been signed between 1998 and 2000, and focus groups with
key "players" at the regional level of both government
and private sector organisations.
Professor Tony Crook is Pro-Vice Chancellor & Professor of
Town & Regional Planning at The University of Sheffield. Back
Ms Sarah Monk is Deputy Director of the Centre for Housing &
Planning Research (CHPR), Department of Land Economy, at The University
of Cambridge. Back
Professor Christine Whitehead is Professor of Housing, Department
of Economics at the London School of Economics and also Director
of the CHPR, University of Cambridge. Back