Memorandum by CBI (HOU 39)
1. Whether funding in CSR will achieve the
target of a decent home for everyone by 2010
The Government's injection of £1.2 billion
for the provision of more "affordable" homes is welcome
and necessary, but it is addressing only one part of a wider problem
caused by the mismatch between housing supply and demand. There
are many people who earn enough to disqualify them from designated
affordable housing, but who still have serious problems with the
affordability of housing in general.
This wider affordability of housing can only
be fully addressed by increasing supply as a whole. If we do not
tackle obstacles to development and significantly increase the
total supply of housing, then we risk being locked into a vicious
cycle of ever-increasing need for greater proportions of "affordable
homes".
Current house building rates are at an historical
low—key causes are the virtual withdrawal of the public
sector from housing provision and the restrictions on development
which have made housing supply highly inelastic. The solution
must be to make it easier and more attractive to build housing.
Reform of the planning system, a greater role for the public sector
in site assembly and remediation, higher density development,
etc will all contribute.
The generally restrictive approach by many local
authorities to housing is a key factor. Many are simply opposed
to further housing development and find different ways to deter
development. Unless there is a significant culture change at the
local level it will be extremely difficult to meet the increasing
needs for housing.
Leaving this aside, the level of public subsidy
is key to delivering "affordable" housing. While funding
for Registered Social Landlords (RSLs) has increased over the
record low levels of the early 1990's, it is still at historically
modest levels despite their success in harnessing private sector
loans. The lack of subsidy is a key influence on the provision
of affordable housing.
The recent Three Dragons Nottingham Trent University
(3DNTU) Research assumed substantial public subsidy would be available
for every site—whereas some Local Plans now require the
developer to fund the affordable element in part or in full. The
3DNTU research estimated that £500-600 million funding per
annum is needed in London alone (about £150 million more
than is currently available).
As it is, much of the local authority housing
budget may be used to finance the modernisation of the assets
they already have, catching up on past backlogs, rather than actually
creating new housing stock.
It is not just levels of subsidy that influence
the delivery of "affordable" housing but the actual
procedures in place and the sometimes poor understanding of commercial
realities by local authorities. Under planning Circular 6/98 p
17, the choice of RSL is the developers but often both local authorities
and the Housing Corporation are insisting on "Joint Commissioning"
which effectively imposes one or just a few RSLs on the developer,
thus removing choice and competition. Giving more freedom to developers
to form their own partnerships with RSLs would enable greater
innovation and efficiency.
2. Balance between social housing and options
for owner occupation
There is a concern that too high levels of social
housing within a development may create perception problems for
both buyers and mortgage lenders. If this affects prices of market
housing in the rest of the development then this could undermine
its ability to cross subsidise the social element of the development.
Other forms of tenure such as shared ownership that facilitate
owner-occupation may help partly offset such concerns.
The ongoing management of mixed housing developments,
particularly with high levels of social housing, can also be very
complex. Where will the ongoing revenue stream come from to pay
for maintenance costs, and how will effective management be ensured?
These issues have knock-on effects for the market housing element
of a development.
We are concerned that in the Draft London Plan
there is a presumption towards on-site contributions and a fairly
rigid approach to the mix of housing. This can increase the difficulties
and costs of development and actually be counter-productive in
achieving the overarching objective of maximising supply. There
must be a flexible approach to take account of the many different
conditions. The focus should be on the overall attainment of mixed
vibrant communities rather than a narrow focus on individual schemes
and rigid proportions.
Also, affordable housing strategies too often
tend to focus on a narrow range of occupations—essentially
public sector employees—but private sector workers are also
significantly affected. This emphasises the need to tackle the
overall affordability of housing, including market housing, not
just to address the social housing end of the problem.
3. The role of planning obligations in providing
affordable housing
We have very serious concerns about the increasing
demands on development in terms of planning obligations. If development
is made too complex and expensive through the imposition of unrealistic
planning obligations, then less development will come forward—actually
exacerbating supply deficiencies.
Looked at separately, planning obligation requirements
may seem reasonable, but in combination (for example demands for
housing, transport, schools, or open space) they risk creating
a lethal cocktail. Development has to remain profitable, or no
developer will undertake it, and no investor will finance it.
Affordable housing requirements are only part of what local authorities
seek to achieve from developers and unless there is a more strategic
approach there is a serious risk of undermining investment.
The amount of affordable housing sought was
25 per cent a few years ago, but demands are now rising to 50
per cent or even higher. There comes a point where imposing ever
more onerous conditions on housebuilders and other developers
to support subsidised housing is likely to prevent sites coming
on stream, thus actually reducing supply, and further exacerbating
the already serious problems of affordability for the majority
who do not qualify for social housing.
With reference to London, the headline conclusions
of the 3DNTU Research have been used to suggest that 35-50 per
cent affordable housing is achievable. However, there were many
caveats even within this research and further issues have also
been highlighted in ODPM sponsored research.
For example the effect of planning gain and
remediation costs will reduce the amount of housing that can be
achieved. And in practice land values are likely to remain higher
in some locations, so simple thresholds cannot be applied inflexibly.
Such flexibility is vital. There must be proper
assessment of the economic impact of targets on a site by site
basis to determine realistic capacity. The amounts of affordable
housing/planning gain that developments can sustain vary greatly
between nearby sites and even vary on the same site over time.
We strongly oppose the extension of affordable
housing requirements to commercial development which will act
to reduce the quantity of development and undermine other key
objectives. There is already a growing expectation being placed
on commercial developers to contribute towards other things like
transport.
While we support the aim to make the best use
of available space, the additional challenges of brownfield development
cannot be ignored. Such sites are often low value and carry high
costs, risks and liabilities such as decontamination, site assembly
and realignment of utilities. Attracting developers to such areas
to bring regeneration may be difficult enough in itself (and may
require public support), without at the same time imposing additional
demands through planning obligations.
4. Ensuring good quality affordable housing
Greater investment from the public sector in
housing is an important part of this. Crucially there also needs
to be a clear focus on how to fund ongoing revenue costs and how
to ensure strong management of affordable housing.
Higher quality needs innovation and flexibility
which will mean local councils and RSLs working more closely and
co-operatively with the private sector housebuilders to harness
their expertise. It cannot be achieved through a rigid command
and control approach.
Better investment in the surrounding public
environment can also contribute—for example ensuring good
transport infrastructure to enable vibrant mixed communities to
develop.
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