Affordable Housing – An Update for Residential Developers
There have been updates in policy regarding Affordable Housing in respect of small residential developments and the purpose of this blog is to clarify to private sector developers who are building or planning to build on a small sites what it is, when it applies, what the contribution might be and the processes involved in agreeing and delivering a contribution either on site or offsite.
Many planning authorities (and in particular the GLA) are enabling smaller sites to be developed for housing delivery by altering planning guidance to a ‘Presumption in Favour to Grant Planning’. The Mayor of London has identified through a SHLAA, Strategic Land Availability Assessment, that small sites providing between 1 and 25 homes could deliver a large percentage of the annual need for new homes in London.
This is good news for small-scale residential developments as they are far more likely to gain successful planning in the future but what is not entirely clear is whether or not there is a liability for Affordable Housing within the development, depending on the number of units proposed.
Furthermore, private sector developers are unsure, apprehensive and sometimes unclear about the impact of this legislation and what obligations it entails. Uncertainty often arises when the site size and constraints indicate an ideal layout that is potentially above the AH trigger point of 10+ new residential units.
Why we need Affordable Housing as part of private Sector housing developments and what is the definition?
Affordable Housing contributions are part and parcel of residential planning obligations. They are intended to mitigate the crisis level shortfall, UK wide, in social housing provision and to ensure that affordable housing is included in any development over a given threshold of units.
The NPPF 2018 describes AH as ‘housing for sale or rent, for those whose needs are not met by the market (including housing that provides a subsidised route to home ownership and/or is for essential local workers), and which complies with one or more of the following definitions’:
Affordable housing for rent: Housing owned by a registered provider (except where part of a Build to Rent scheme) which is rented in accordance with the national rent policy for Social Rent or Affordable Rent or is at least 20% below local market rents, with provision made for it to remain at an affordable price for future households or for the subsidy to be recycled for alternative affordable housing provision.
Starter Homes: New-build housing available for purchase by qualifying first-time buyers at a minimum of 20% below the market price, with sale prices subject to a cap of £450,000 in London and £250,000 outside London.
Discounted market sales housing: Housing for sale to eligible buyers at a discount of at least 20% below local market value, with provision made for it to remain at a discount for future households.
Other affordable routes to home ownership
The diagram above shows how new housing delivery shifted almost entirely to private sector developers in the 1980’s leaving a large gap in affordable or social housing provision.
What triggers Affordable Housing contributions in a smaller development?
Local authorities have adopted differing thresholds and different criteria to trigger affordable housing contributions and to what extent the contributions should be applied. Nationally the NPPF (National Planning Policy Framework) states the following:
Affordable housing should not be sought on residential schemes that are not major developments. Paragraph 63 of the 2018 NPP confirms the Affordable Housing threshold as 10 or less dwellings or a combined floor space of 1,000sqm, with an optional lower threshold of 5 or less dwellings in designated areas.
The paradox is that a glossary within in the revised NPPF states that major developments are designated to be 10 dwellings or more, or sites over 0.5 hectares in size. This differs from the previous PPG guidance (which has yet to be updated).
So it would seem notionally that the threshold has dropped by one unit: AH is now at 10 dwellings rather than 11 and the 1,000sqm trigger has been replaced with a site size trigger of 0.5 hectares instead.
Some local authorities may apply the 10 unit, 1,000sq m threshold. Others, however, may apply the threshold to 10 unit projects within revised policy guidelines.
Planning applications are considered by local authorities in line with the guidance contained within their own adopted Local Plan. Local Plans are based on policies set out in regional and national guidelines. The discrepancy arises when Local Plans do not comply with National Planning guidance and there has been a great deal of discussion and legal representation by councils and developers in order to challenge and clarify inconsistent policy.
How is this applied in London – The New London Plan 2019
Policy H2 of The New London Plan introduces a ‘presumption in favour of small housing developments’. Small sites are considered to be ones that deliver up to 25 homes, or are less than 0.25ha.
Policy H5 of the strategic plan targets 50 per cent of all new homes delivered across London to be affordable.
Policy H2 notes that London boroughs wishing to apply affordable housing requirements to sites capable of delivering ten units or fewer and which have a maximum combined gross floor space of no more than 1,000 sqm should only require this through a tariff approach to off-site contributions rather than seeking on-site contributions. Boroughs are strongly encouraged to provide the flexibility for payments to be collected prior to the occupation of development, rather than prior to commencement of development. The New London Plan, however, does encourage London boroughs to set policies at the local level which require cash payments in-lieu from sites of ten units or less.
However there are inconsistencies in the way London boroughs are interpreting policy, e.g.
The London Borough of Islington notes that ‘Following the publication of the revised
NPPF (2018), it will continue to seek financial contributions towards the provision of affordable housing from minor applications involving the creation of net additional residential units in line with Core Strategy Policy CS12 Part G and as outlined in the Council’s Small Sites Affordable Housing SPD (2012)’.
Islington goes on to note that, Section 70 of the Town and Country Planning Act 1990 and Section 38 of the Planning and Compulsory Purchase Act 2004 both emphasise the primacy of the Development Plan in determining Planning Applications. Whilst the revised NPPF (2018) Paragraph 63 constitutes an important material consideration, it is the Council’s position that in the light of the unique circumstances of the borough and objectively assessed need for affordable housing, that NPPF Paragraph 63 does not outweigh or override Policy CS12 Part G and the requirement for minor applications (sub 10 residential units) to provide a financial contribution towards the provision of affordable housing elsewhere in the borough.
Clearly Islington’s position is not compatible with national or regional policy and is therefore vulnerable to legal challenge.
Looking at a local authority elsewhere in the United Kingdom, Taunton Dean Borough Council have adopted Policy CP4 (2014). This aims to ensure that affordable housing is provided as integral to all development schemes which provide five or more net additional dwellings. The policy states that 25% of all new housing should be in the form of affordable units.
The NPPF notes that planning applications should be front loaded in terms of design development, this means that the liability for affordable housing is agreed during the pre-application or planning development process rather than in the decision making process post-submission. The first action is to check the status of local authority policy outlined in the Local Plan, and whether the policy is compliant.
In order to make an assessment for an initial appraisal Douglas and King follow the procedures below:
1. Assess the Local Plan to check the specific requirement for Affordable Housing contributions
2. Determine whether the Local Plan is compliant with regional or national policy
3. Check the local SHMA and SHLAA
4. Review recent locally-based planning applications to evaluate how AH policy and contributions are being applied/have been applied to similar sites
5. An Affordable Housing Contribution strategy is then built into the project’s development appraisal.
At Douglas and King we do much more at the concept design and appraisal stage.
6. Douglas and King have contacts with Housing Associations and other housing providers and are in a position to discuss and negotiate on-site provision at an early appraisal stage
7. We work with a number of AH consultants to assist with the prediction and negotiation of a suitable off-site construction contribution
8. There are obvious variations and differing interpretations being adopted by local authorities toward their individual AH policy and we identify these
Legislation and policy is in a process of change and is therefore subject to differing interpretations. We double-check policy at all levels
9. We evaluate the AH contribution carefully and take advice if necessary. Each development project should be assessed within the context of the particular local authority.