Affordable H ousing P olicy , Funding and Delivery , and the Role of Planners

1. Affordable Housing Policy, Funding and Delivery, and the Role of Planners Laura Welch Three Dragons 9th December 2015

2. Presentation key themes • Affordable Housing Delivery - Economic climate - Existing viability issues - Stalled sites • New Regime - Budget 2015 - Housing & Planning Bill - Spending Review 2015 • How should planners respond?

3. Affordable Housing • Always a trade-off between Affordable Housing and other elements of a scheme • Often easiest element to lose is Affordable Homes • Can be exacerbated by CIL • And the need to give planning permission so targets can be met • Affordable Housing important • Housing not a perfect market and there will always be those that need an affordable home • Shared ownership requires steady income around 20K to 30K – double for Help-to-Buy • Private rented sector growing & changing but can’t meet all needs • Chance to create balanced communities

4. Definition of Affordable Housing • Social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market. Eligibility is determined with regard to local incomes and local house prices. Affordable housing should include provisions to remain at an affordable price for future eligible households or for the subsidy to be recycled for alternative affordable housing provision.

5. Trends in Supply of Affordable Housing (from DCLG)

6. Housing starts fall and so does revenue from planning obligations • Comparing 2011/12 with 2007/08 • House prices unchanged – had been bit of a fall in between (minus 4% England 2008/09 trough) • housing starts down 39% • Value of planning obligations down 25%

7. Value of S106 obligations by type of obligation • Affordable housing and education are the most expensive items – • thoughaffordable housing has fallen the most – fewer deals and lower average value per deal • But transport and infrastructure are catching up

8. RE-Negotiating S106 • Section 106 affordable housing requirements : Review and Appeal (DCLG April 2013) paved the way for re-negotiating the affordable housing contribution on stalled sites where this could be supported by viability evidence (S106 BA and BC) • “The test for viability is that the evidence indicates that the current cost of building out the entire site (at today’s prices) is at a level that would enable the developer to sell all the market units on the site (in today’s market) at a rate of build out evidenced by the developer, and make a competitive return to a willing developer and a willing landowner “ (para 10) • If affordable homes are lost then resultant S106 should include mechanisms for review including clawback where estimated costs are reduced once on site

9. RE-Negotiating S106 • Evidence gathered by Three Dragons prior to 2013 indicates that re-negotiations are more likely to take place in rural areas but less likely in London or Urban England • London has 52% of all affordable housing – but only 22% of all housing starts • Strength of market key to delivery of affordable and market housing

10. Total development value Minus Development costs (incl. build costs and return to developer) = Gross residual value Minus CIL + planning obligations (including AH) = Net residual value (available to pay for land) RV approach – quick overview

11. Stalled Sites • Results from DCLG study into S106 obligations 2011/12 • Urban extensions accounted for 71% of all dwellings in stalled sites • The planning system is not the prime factor influencing housing delivery. Market strength is much more important. • Three Dragons, Reading University, UCL, David Lock Associates, Hives Planning and DLA Piper • www.gov.uk/government/uploads/system/uploads/attachment_data/file/314066/Section_106_Planning_Obligations_in_England_2011-12_-_Report_of_study.pdf

12. Why are sites stalled It’s not the planning system

13. Financial Changes 2015: Rents • Budget July 2015 - social housing rents will be cut by 1% pa for 4 years (even though providers will have costed for CPI+ increase) • Survey of Registered Providers: - increase of intermediate units at expense of rented - increase of units for open market sale - reduction of offer prices on S106 sites • Affordability – welfare benefit freeze could mean more will need affordable rented homes • Spending review November 2015 – social housing providers will have to ensure rents for new tenants are not higher than LHA rates - How will they provide for the most vulnerable under 35s - LHA rate £63.50 Huntingdon; £52.24 Northampton - Affordable Rents in region of £90 pw – who pays?

14. Financial and Legislative Changes 2015: Emphasis on Home Ownership • Housing & Planning Bill - Starter homes at 80% of market value for 1st time buyers under 40 – up to £250,000 (£450,000 in London) after discount • To be delivered as Affordable Housing even though discount does not appear to be recyclable after 5 years of occupancy • LAs will need to include 1st time buyers in OAN • Bill likely to be implemented Summer 2016

15. Financial and Legislative Changes 2015: Emphasis on Home Ownership • Budget 2015 – sale of high value local authority stock to finance Right to Buy • Spending Review - boosted shared ownership and increased equity loans for London - Rent to Buy - 8,000 new homes for older and disabled people • OBR predict that Housing Associations will build 34,000 fewer homes as a result of these changes (Nov 2015)

16. How can Planners Respond • Work with housing team • Query viability statements • Be flexible • Be informed • Be open to innovative solutions

17. Questions and contacts • Three Dragons: www.three-dragons.co.uk • Laura Welch: laura.welch@talk21.com