Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Levvel Consulting (AFH 29)

  Levvel are affordable housing planning and development consultants and are actively involved in the delivery of affordable housing. In addition to frequently reviewing local authority policy on affordable housing and negotiating a range of affordable housing types and tenures on large strategic sites around the UK, we are specialists in analysing local authority housing needs surveys and needs assessments.

  We are national consultants advising a number of large house-builders including McCarthy & Stone, Persimmon, Berkeley Group, George Wimpey and Wilson Connelly and a number of medium size regional developers. In addition, we assist land owners and commercial developers in affordable housing related matters.

  We are very concerned about the trend of local authority practice in regard to negotiations for affordable housing. We are experiencing that planning negotiations are becoming much more protracted than they should be resulting in delayed housing development and often "planning by appeal". This is very frustrating, as we believe that the current planning system could work well if the process was more effectively policed by Government Office and the DTLR.

  We make our representations in a positive way to assist the Government in providing further guidance and advice as to best practice for the delivery of affordable housing.


  1.1  My name is Stuart Woodward. I am a Chartered Surveyor, (General Practice—Housing) and an Associate Member of the Association of Building Engineers and Director of Levvel Consulting Ltd. I hold a degree of Bachelor of Science, (with Honours) in Surveying awarded by the University of Reading.

  1.2  Levvel Consulting Ltd undertakes a wide range of professional development consultancy work and are specialists in the field of affordable housing. Our consultants have backgrounds from the private, public and housing association sector and have considerable experience of implementing, financing and co-ordinating the provision of the full range of affordable housing initiatives, including new-build, conversion, refurbishment, contaminated, brownfield and greenfield sites, urban regeneration, infill and rural schemes, incorporating all tenures including temporary leasing and sale, including sheltered, general and special needs. Our clients are major landowners, developers, house-builders and housing associations. We are employed to assist nationally in all planning and delivery negotiations relating to affordable housing.

  1.3  Levvel has carried out a detailed review of over 130 local authority housing and planning affordable housing policies, within the last three years. This review includes an examination of Local Plan policy, including supplementary planning guidance and Housing Strategy, Housing Investment Programme Statement, affordable housing land supply and social housing grant funding resources. In addition Levvel have carried out in-depth analysis of a number of Housing Needs Surveys across the UK and a review of local authority housing needs assessment. We have been recently commissioned to carry out a full affordable housing policy review for a local authority area in the South-West that includes a large personal interview housing needs survey in conjunction with the Housing Needs Consultant ORS, Swansea.

  1.4  In addition to the Consultancy Company, the Directors of Levvel have set up a private sector affordable housing company, Affordable Homes UK, that specialises in the delivery of intermediate, (key worker) affordable housing. Two developments have been constructed this year that will provide a discount market rented scheme and a fixed equity shared ownership scheme, both for Key Workers and neither requiring any public grant funding.

  1.5  I have structured this statement to respond to the headings identified in the Press Notice 57/2001-02.


  2.1  The issue of the definition of affordable housing is often clouded in debate at Plan Inquiry session or Roundtables by the issue as to whether low cost market housing is "affordable" housing. Confusion occurs because Circular 6/98 defines affordable housing, (paragraph 4) as either "subsidised" or "low-cost", (suggesting perhaps low cost market housing is not subsidised). This debate is not a relevant issue in the definition of affordable housing.

  2.2  Paragraph 9 Circular 6/98 identifies that "definitions should be framed to endure the life of the plan for instance through reference to the level of local incomes and their relationship to house prices or rents, rather than to a particular price or rent". Thus in simple terms, the local authority should carry out a thorough housing needs assessment, (not just an affordable housing needs survey), to identify the need for housing across all household income groups. In addition it should identify any housing stock imbalances within its limited land supply and seek to evenly address that imbalance, through new provision. Thus if there is a shortage of first time buyer properties, it should encourage the supply of such housing to reduce the number of households that will fall into the need for affordable housing because of lack of supply, (low cost market housing priced at the lowest quartile price would be appropriate). Next it must identify the household income that is required to afford to rent or buy on the open market and identify the number of households who are likely to need affordable housing. Such accommodation will need to be below the open market price and priced at a level that is affordable for such households.

  2.3  Thus, the definition of affordable housing should be defined locally by identifying first as to whether there is a shortfall in lower quartile priced housing, (low cost market housing) and second by identifying the range of households who require different priced subsidised affordable housing of any type, tenure, size or ownership. Finally, the local authority should monitor on an annual basis the supply/need for affordable housing including low cost market housing and reflect any fine-tuning in the specific housing requirements through the Housing Strategy Statement.

  2.4  In conclusion, we believe that the definition outlined in Circular 6/98 is correct as it covers a range of affordable housing solutions. It is clear however, that many local authorities and housing needs consultants do not understand or misinterpret government guidance and thus exclude everything apart from low cost social rented housing.


  3.1  Most local authorities in our experience only carry out an assessment of the need for affordable housing in the absence of assessing the market as a whole. Therefore, for example, the local authority will have very limited knowledge of the need for private sheltered housing or other special needs housing or even the need/demand for private housing. Instead and again often in our experience, the local authority will assess the gross need for affordable housing, (which often aggregates up to three to six times the total land supply) and attempt to shoe horn this figure into a very limited land supply.

  3.2  The DTLR Guide "Local Housing Needs Assessment: A Guide to Good Practice" provides detailed advice as to how to carry out a robust housing needs assessment. This is regularly ignored or amended by local authorities/housing needs consultant, with a consequent result that the outcome from some housing needs surveys is a recommendation for all social rented housing, (ignoring other affordable housing types/tenures) at a percentage identical to the Regional indicator, (see section 7).

  3.3  Reasons for the poor quality of local authority housing needs assessment are likely to be lack of resources, (financial and suitably trained staff), over reliance on external housing needs consultants and lack of understanding of the methodology of housing needs surveys, (including local authorities, Planning Inspectorate and the house building industry as a whole).

  3.4  Sufficient government guidance exists to allow the system to work correctly if actually understood by all participants. A better way forward is to encourage private/public sector housing needs assessments, funded by both sectors, to enable ownership and acceptance of affordable housing policies on both sides of the fence. Assessment should also inform the top down assessment for the need for housing overall in the respective regions.

  3.5  In conclusion, there is without doubt a need for affordable housing. However, until housing needs assessments are carried out correctly in line with Government guidance and the full range of housing needs considered, it is difficult to comment on the actual scale and location of the demand for affordable housing in the UK.


  4.1  The house-building sector sets high standards for development, adequately controlled by local authority design and amenity standards. Affordable housing should be built to the same standard to ensure it is identical to adjacent private market housing. This also provides additional cost benefits as the developer will provide their standardised house types.

  4.2  The quality of existing affordable housing should be reviewed regularly by local authorities to ensure that any difficult to let or vacant stock is either refurbished/redeveloped to suit changing household needs. It is not uncommon for local authorities to seek high percentages of affordable housing from new development, when a large percentage of the existing public and private sector stock is vacant.

  4.3  Developer financial contributions, in lieu of on-site provision, particularly on smaller marginal sites, should be encouraged to fund such initiatives.


  5.1  The existing supply of affordable housing is inadequate, (predominantly in the South of England and Midlands) and/or the wrong type/tenure, (Midlands/North England), leading to a surplus of affordable housing stock in some areas.

  5.2  The reasons why there is an increasing need for additional affordable housing in some areas are:

    —  insufficient land being released for new housing to meet new household formation—demand and supply are out of balance;

    —  increasing house prices due to low interest rates and shortage of new homes;

    —  there is a shortage of new homes because of the belief that building on greenfield sites is discouraged. Complications arising from developing brownfield sites mean that the supply of all housing is being slowed down;

    —  there is a shortage of new homes because the planning system is taking too long to determine planning applications, (partly due to unreasonable high demands of affordable housing—if the local authority doubles the amount of affordable housing required and expects nil land value, the land owner/investor will not release the site);

    —  increasing house/land prices, (caused by the undersupply), excludes housing associations from competing for open market land because Housing Corporation Total Cost indicators have not kept pace with the price inflation; and

    —  Right to Buy and Right to Acquire Council and Housing Association properties is decimating the affordable housing stock, particularly in high value areas.

  5.3  The reasons why there is surpluses of affordable housing stock in some areas is because:

    —  local authorities have not properly assessed the nature of the existing housing stock;

    —  local authorities have not properly assessed the nature of the housing needs in the area including the need for different types of affordable housing; and

    —  insufficient funding is made available to local authorities with large vacant/difficult to let public and private housing stock to enable larger programmes of refurbishment/redevelopment to take place.

  5.4  There is a significant under provision of Social Housing Grant funding being made available by Government to provide more social rented housing. Despite a doubling of the Social Housing Grant programme, any benefit has been mainly absorbed due to increased grant rates, (due to rent restructuring) and increase in house prices. In the last dozen or so Local Plan Inquiries we have attended we have determined that the authority concerned has barely enough Social Housing Grant funding available, either through the Housing Corporation or through Local Authority Social Housing Grant, to fund a quarter of their new anticipated affordable housing target.

  5.5  The supply of land for affordable housing has dramatically reduced because:

    —  significant increase in land prices, (due to shortage of available land);

    —  an insufficient increase in the Registered Social Landlords price capping set by the Housing Corporation, (Total Cost indicators);

    —  a move to develop more brownfield sites that have other significant costs, (eg decontamination); and

    —  an increasing planning gain shopping list from local authorities, many of whom would not have carried out a thorough economic assessment on the ability of sites to provide significant increases of planning gain.

  5.6  Direct market intervention by asking for large percentages of affordable housing has such significant impact on land values that such requests will be strongly resisted. This is starting to lead to a huge number of planning appeals as the validity of new Policy is questioned by both land owners and developers.

  5.7  A better system would be one where affordable housing providers including RSL's could compete on the open market for some sites, (as the 1990s) and some of the affordable housing supply being provided on large sites is set at a maximum of 25 per cent provision, with allowance to reduce this percentage where there are demonstrable abnormal/particular costs.


  6.1  The maximum subsidy available to a developer to provide affordable housing is the total open market value of the affordable housing land. Therefore, the maximum contribution a developer can make is to provide the affordable housing land at nil cost. If further subsidy is required, such shortfall must be made good with additional Social Housing Grant. Any additional subsidy requests in addition to other planning gain requirements are unlikely to be accepted, particularly if the site has an alternative use, (with no affordable housing requirement).

  6.2  Therefore, local authorities that seek eg 50 per cent affordable housing with no Social Housing Grant are in our experience asking the developer/land owner to provide between 60-70 per cent of the site value at nil value. If the site is burdened by other abnormal/particular costs such as decontamination or piling and the local authority seeks other planning gain from the developer for community benefit, eg parks, education, highway contributions etc, this effectively removes most/all of the residual land value of the site as a whole. Thus land owners will decide not to sell the site. This will further constrain land supply and new housing provision resulting in further increases in house prices.


  7.1  The mix and quantum of types of affordable housing (for sale or for rent) will change throughout the period of the life of the Local Authority Plan. Thus the local authority should carry out a thorough assessment of housing needs and update this fully every year through proper monitoring.

  7.2  It is our experience that this is rarely done correctly or adequately. Therefore, local authorities often have a misconception as to the housing needs of their area and instead continue focussing on their statutory obligations which is to provide sufficient housing for the homeless and provide only social rented housing for those homeless households moving from temporary accommodation.

  7.3  Social housing grant is required where social rented housing is to be provided, (see above). Social housing grant however, should rarely be used to provide shared ownership housing, (or any similar affordable housing sale scheme), as it is not required to provide affordable "intermediate" sale housing. A number of private sector affordable housing schemes have been developed around the UK on this basis and are successful. Active encouragement of the private sector to build and manage non-grant funded shared ownership or equity shared housing, (fixed or with limited stair casing) should be a priority of the Government. Affordable Homes UK has successfully pioneered several schemes in the last year and these could be used as examples of good practice by the DTLR.


  8.1  Regional Planning Guidance targets are not appropriate because they are derived from a top down assessment of housing needs overall. Regional "guestimates" of the need for affordable housing are often based often on inadequate local assessments of housing need.

  8.2  We have experienced in a number of affordable housing Roundtables at Local Plan Inquiries, that local authorities are automatically setting their revised affordable housing target identically to the Regional Planning Guidance, without having carried out a thorough assessment of housing need. We also believe that some Planning Inspectors are heavily influenced by Regional targets in assessing local authority targets, irrespective of local housing needs assessments, (which of course should be robust).


  9.1  No, certainly not in the next few years. The sole reason for this is because the fact that not enough land is being made available for all types of housing, (meeting the full range of need), including affordable housing.

  9.2  I have outlined above the reasons for the lack of supply of affordable housing that can be summarised as:

    —  lack of Social Housing Grant funding to meet social rented housing need;

    —  reduced Total Cost Indicators;

    —  lack of understanding by local authorities on the full range of housing needs in local authority areas;

    —  misinterpretation and abuse of the planning system resulting in increasingly unreasonable demands being made of developers for very large amounts of affordable housing, often in the absence of any social housing grant funding;

    —  lack of understanding by local authorities about how affordable housing can be delivered by the private sector as intermediate affordable housing which does not necessarily require public subsidy;

    —  loss of existing affordable housing stock; and

    —  under utilisation of existing private and public housing stock.

  9.3  However, we do believe the current system can work if further stricter and clear guidance is provided by government to local authorities as to how to interpret existing planning and housing guidance on the delivery of affordable housing. In addition, much more work and encouragement is needed to engage the private sector in partnering in the process of carrying out housing needs assessment and analysis of housing need/demand.


  10.1  Yes, on large sites, where local authorities have the appropriate commercial experience in assessing what a development locally could reasonably provide to satisfy the full range of local housing need. But no, where local authorities are attempting to shoe horn private and affordable housing on very small sites. The crucial test, outlined in circular 6/98, is to ensure that any proposed housing mix will lead to a successful housing scheme.


  11.1  Categorically yes—we are not building enough homes to meet the full range of housing need. In addition, Greenfield development provides greater opportunity to share the benefit of increased value of the site with the community. The Government should be brave and acknowledge the housing problem the UK is facing and implement policies that quickly bring forward major new sites that could include major new settlements.


  12.1  The cost is high to all:

    —  individuals suffer, as they will become convinced that they may never be able to achieve the opportunity of living in a decent home that will meet their need that they usually aspire to own;

    —  the business sector will suffer, as it may not be able to sustain existing businesses or develop in other areas if house prices are beyond the reach of most of their employees;

    —  the public services will suffer, as they will struggle to recruit and retain essential workers. In addition, rigid pay scales prevent ability to provide further incentives to employees to assist purchasing/renting a private market home; and

    —  the economy will suffer, as employees will demand higher wages to meet continually rising housing costs. This will feed inflation in the economy and generate an un-competitive environment, not only in certain areas of the UK, but also internationally.

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