Memorandum by The Chartered Institute
of Housing, Local Government Association, National Housing Federation,
Royal Town Planning Institute and Shelter (HOU 28)
BACKGROUND
This submission sets out the views of five organisations
that are each concerned with the provision of affordable housing:
the CIH, LGA, NHF, RTPI and Shelter. A "Planning Policy Sounding
Board" of experts in housing and planning recently convened
by CIH has also been involved in drawing up the submission. Each
organisation wishes this evidence to add to, rather than replace,
the evidence that we have each already submitted for the Transport,
Local Government and the Region's Select Committee Inquiry into
Affordable Housing in May.
The submission concerns itself with just one
element of the inquiry, that of the role of planning obligations
in providing affordable housing. Whilst we are each concerned
with the role of the planning system more generally in the provision
of affordable housing, the inquiry specifically requests evidence
relating to planning obligations, and since we are of common mind
on these issues, we saw fit to make this joint submission. Each
organisation will also submit evidence on other aspects of the
inquiry individually.
We are also mindful of the fact that guidance
on planning obligations exists within a wider planning policy
framework that is in the process of being reformed. The groups
represented here are concerned about the ongoing sustainability
of communities, and are working in a wide variety of ways to improve
sustainability, including through engaging with the process of
planning reform. The organisations we represent also intend to
make submission to the Committee's Inquiry into Planning for Sustainable
Housing and Communities.
THE ROLE
OF PLANNING
OBLIGATIONS IN
PROVIDING AFFORDABLE
HOUSING
Planning obligations provide a legitimate mechanism
for securing affordable housing over and above that which can
be financed through Social Housing Grant (SHG). In some parts
of the country, where house and land prices are high, providers
of affordable housing are becoming increasingly reliant on planning
obligations to provide the necessary land. In areas where demand
for housing is low and there are plans to restructure housing
markets, planning contributions can still provide an important
source of affordable housing to meet modern aspirations. This
will be needed, for example, to rehouse those displaced when areas
of obsolete housing are demolished as part of regeneration schemes.
It is not possible to properly quantify the
amount of affordable housing provided through planning obligations
because current practice on monitoring is inadequate. Research
for the Joseph Rowntree Foundation found that statistics collected
by Government indicated that around 15,000 affordable homes per
year are being provided with the help of some planning gain. However,
the research team found that the actual level of affordable housing
constructed was lower than the figures would suggest because of
double counting, and in most cases some SHG funding was also made
available.
We believe that better use could be made of
the mechanisms to provide affordable housing and contribute to
the creation of sustainable communities. However, there are limits
to the amount of additional affordable housing that can be produced.
Even with the increased spending levels for affordable housing
announced in the recent spending review, the output that can be
achieved is still well below what is required. Planning obligations
cannot be expected to make up the shortfall and much higher levels
of funding are required if the problem is to be solved in the
long term.
We agree with the Government's objectives for
planning obligations, set out in their consultation paper in December
2001 and would urge the ODPM to maintain the impetus of reform
in this policy area. However, we believe that certain more immediate
reforms to the system would significantly improve the chances
of achieving those objectives. These are set out below.
POLICY AND
GOOD PRACTICE
Work carried out by Sheffield and Cambridge
Universities into the planning and affordable housing system found
that local authorities have difficulty in interpreting government
policy and in putting it into practice, and distinguishing between
policy they are expected to follow, and good practice guidance
that is offered to assist them in their work. We strongly recommend
that this distinction should be made clearer in future government
documents. Policy documents should set out clear, unambiguous
objectives for the achievement of affordable housing. Good practice
should then advise them as to how to go about implementing the
policy in their area.
THE DEFINITION
OF AFFORDABLE
HOUSING
PPG3 paragraph 15 supplies guidance on how affordable
housing should be defined in the local plan area (in terms of
the relationship between local income levels and house prices
or rents for different types of households). Circular 6/98 paragraph
4 states that the term encompasses low-cost market and subsidised
housing that will be available to people who cannot afford to
rent or buy houses generally available on the open market.
There are three reasons why we believe the guidance
on definitions of affordable housing needs to be changed.
Firstly, while local authorities are able to
define what is affordable, it does not allow them to ensure that
the housing actually provided is affordable in the long term.
In many cases, low cost and "discounted" market housing
is provided. Discounted housing fetches market prices on second
and subsequent purchases. This means that the property is not
affordable in the long term for those who cannot afford market
housing, but instead the benefit is pocketed by the initial buyer.
Low cost market housing on the other hand is only low cost relative
to other properties on the same site. It does not necessarily
comply with local authorities' definitions of affordable housing.
The second reason relates to the fact that public
policy is already embracing the need for various types of "intermediate-priced"
housing to meet the needs of those who, whilst unable to afford
market prices, would not normally qualify for social housing.
For example:
— The Starter Home Initiative and recently
announced "challenge fund" for providing housing for
key-workers.
— The London Plan specifically sets
out a requirement for 15 per cent "intermediate" housing
(in addition to 35 per cent affordable housing).
— The identification by the Countryside
Agency of a need for a range of housing for people on low and
modest incomes to live in rural areas, including subsidised and
some low cost sale housing.
The third reason relates to both of the above
points. Local authorities carry out assessments of need for different
types of sub-market housing to meet needs, but are unable to specify
the type of affordable housing that should be provided to meet
these needs. Two cases serve to demonstrate the contradictory
decisions that have been made on the issue.
In Wychavon D.C. v Westbury Homes
(Holdings) Ltd, the developer failed to provide the particular
type of affordable housing specified by the council, based on
its assessment of needs in the area (houses to rent through an
organisation acting as a social housing provider). The court ruled
that providing housing for sale at a discount instead was unacceptable,
as it did not meet the needs of the area. In another instance,
the Planning Inspector's judgement went in favour of the developer,
Laing, who was offering a type of key-worker housing as the affordable
housing contribution. The local authority, St Albans D.C. wanted
social rented housing although this was not stated in the outline
planning permission. The Inspectorate decided that since housing
was also needed for key-workers in the area, this was an acceptable
way for the developer to meet the planning obligation.
These cases clearly demonstrate the predicament
local authorities find themselves in when trying to meet demands
for affordable housing. Whilst the first case seems to imply that
authorities may be able to specify the type of affordable housing
to be provided, based on assessments of needs, the guidance does
not make this clear. Where there is a need for both social rented
housing and housing for other groups that may not be able to afford
housing at market levels (such as key workers), local authorities
are unable, currently, to make the judgement that the need for
one type is greater than another and require developers to provide
accordingly. Clear mechanisms that enable councils to specify
which types of affordable housing should be provided on particular
sites, to meet assessed local needs, are required.
All our points could be dealt with by distinguishing
between two different types of affordable housing. Only housing
that meets one or other of these definitions should be counted
as affordable for the purposes of planning obligations. Local
authorities also need to be able to specify which of the two types
of affordable housing, or the mix of the two, are to be built
on any site. This should be enshrined in Government policy in
the appropriate place (possibly a future version of Circular 6/98).
The two definitions would be:
Definition 1: homes for rent provided through
a regulated organisation
This definition would include housing to rent
that is provided through a local authority or housing association
that is regulated by an appropriate government body (including
regulation of rent levels).
Definition 2: homes available in the long term
to meet "intermediate" housing needs
This definition would embrace the full range
of tenures (housing for rent, shared ownership, low cost home
ownership and for sale at a discount from the market price) where:
(i) the cost is affordable to working people
who cannot afford market prices in the area, according to a locally
defined definition based on the relationship between local income
levels and house prices or rents for different types of households;
and
(ii) a planning covenant (in the case of
housing for sale) or involvement of a regulated organisation (in
the case of housing to rent) ensures that this housing remains
affordable in the long term to people identified as being unable
to afford market housing.
LEVEL OF
AFFORDABLE HOUSING
CONTRIBUTION TO
REFLECT FINANCIAL
REALITIES
A major deficiency of the current system of
planning obligations is that contributions of affordable housing
sought are usually defined in terms of a target expressed as a
percentage of total housing on the site. Research carried out
by ENTEC, Nottingham Trent University and Three Dragons suggests
that these targets are often set in a fairly arbitrary way. Officers
tend to defer to tradition when entering negotiations (often asking
for 25 per cent or 30 per cent contribution), but it would be
preferable for them to have a full and proper understanding of
the financial realities of developing sites.
This lack of linkage between actual costs and
the contribution being sought, coupled with a lack of knowledge
leads to difficulties when authorities and developers negotiate
the planning contribution. If authorities ask for too much, then
developers will withdraw, but equally, developers have been known
to exploit this lack of knowledge and achieve very small contributions
as a result.
A contribution based on a fixed percentage of
total housing ignores the financial realities of site assembly.
It obscures the issue of whether or not the contribution imposes
an acceptable financial burden, and adds to the lack of transparency
and unpredictability associated with planning obligations. It
also assumes that the same proportion of affordable housing is
required in all parts of a local authority rather than varying
numbers of such housing being required of different sites, to
reflect varying needs.
The key factor that determines the profit margin
in developing a site, and therefore the size of the contribution
that could realistically be made, is the relationship between
the cost of development and property value. We suggest, therefore,
that authorities should be encouraged to collect information on
financial viability and to take this into account when seeking
to determine both the level of affordable housing required and
the need for public subsidy. Any such calculation should include
reference to wider planning obligations and to abnormal costs
such as decontamination. We believe that new good practice guidance
is needed to assist local authorities in this task.
The form of the affordable housing contribution
should be typically in kind (rather than cash) and provided on
the same site. This will help to promote community sustainability
by ensuring that house types and tenures are mixed. Certain circumstances
could warrant an exception to on-site provision and the payment
of a cash sum, as is the current practice. Retaining this small
amount of flexibility will give local authorities scope for redirecting
some of the cash and provide affordable housing on other sites
where needs are great but costs of development may restrict the
amount of affordable housing that can be delivered. We suggest
that Circular 1/97 should be more specific in regard to on-site
provision and use of commuted sums.
Changes of this nature would have the following
benefits:
— the system would be more understandable,
transparent and predictable;
— negotiations would be more focused—on
how the specific case deviates from the financial assumptions
used;
— the system would be fairer, the scope
for developers being over-burdened would be reduced, and local
authorities will be better equipped to negotiate an appropriate
contribution; and
— the link between the contribution
and the needs of the site being developed would be maintained.
SITE THRESHOLDS
IN CIRCULAR
6/98
Circular 6/98 states that in practice, affordable
housing policies should normally only be applied to housing developments
of at least 25 dwellings or 1 hectare (15 dwellings/0.5 hectare
in London), in all settlements with a population of more than
3,000. Settlements with a population of less than 3,000 are exempt
from thresholds.
This group of organisations believes that there
is no justification to continue to apply this threshold on site
size. We suggest that this should no longer be a matter for government
policy. Many sites in both urban and rural settings are small
and below these thresholds. The sequential approach to releasing
sites to maximise brownfield development has already had the effect
of reducing the size of sites becoming available for development,
and this will continue as long as the policy is in place. We understand
that many constrained urban authorities in the south of England
now face the "inner London problem" that they have no
sites above the threshold and are dependent on small windfall
sites. In rural areas, the provision of just two or three affordable
houses on a small site in a village or market town could make
a significant difference to local people who need access to affordable
housing, but the threshold prevents this housing being provided
except in settlements below 3,000.
When seeking an affordable housing contribution,
it is acknowledged that smaller sites may sometimes offer lower
margins. Setting the contribution sought at a level that reflects
the difference between the development costs and property price
(taking into account the higher development costs on smaller sites)
would simply result in a lower contribution being sought. The
argument that site size precludes development of affordable housing
is not, in our view, justified and in exceptional circumstances
where this could be demonstrated, developers should be required
to offer an appropriate financial contribution.
ALLOCATING SITES
SPECIFICALLY FOR
AFFORDABLE HOUSING
The scope for delivering affordable housing
through planning obligations is less in rural areas where sites
are relatively small. Even in settlements of less than 3,000 population,
where the thresholds do not apply, the relatively high cost of
land and of developing small sites provide a barrier to affordable
housing provision. More fundamentally, planning obligations will
only work where sites are already available for development of
market housing. They will not in themselves bring forward land
suitable to meet local housing needs.
This group of organisations therefore supports
the suggestion (in the original consultation on planning obligations)
to allocate land solely for affordable housing where there is
a demonstrated need and where it is needed to increase social
diversity in the area. We suggest that there could be a maximum
limit on the size of such sites to, say 15 units.
THE NEED
FOR BETTER
MONITORING
As explained earlier in this submission the
arrangements for recording affordable housing provision, including
that provided through planning obligations, are not adequate for
proper monitoring. A better approach is required and we suggest
that boroughs might be expected to measure the following indicators
in the future:
— The number of affordable housing
units granted permission per annum, broken down by type (social
rented, shared ownership, low cost ownership).
— The number of affordable units completed
per annum broken down by type.
— The proportion of the above provided
on s106 sites (and therefore the remaining proportion provided
as 100 per cent affordable housing schemes).
— The number provided as "off
site" units.
— The amount of cash in lieu received
per annum.
— The amount of cash spent per annum
and the number of resulting additional units provided.
— The number of affordable units approved
and constructed indicating the amount of Social Housing Grant/Local
Authority Social Housing Grant that was included.
— An assessment as to whether the affordable
housing target set in the local plan has been met (as a proportion
of the overall housing completion rate).
— The number of empty homes brought
back into use per annum, broken down by type.
| 
