Amid a series of U-turns and policy leaks, it emerged last week that the government might be looking to relax the affordable homes quota for new developments. This, argues Gareth Belsham, director of Building Consultancy at Naismiths, will harm the ability of social landlords to deliver the levelling-up agenda the most
They were soon drowned out by Friday’s political maelstrom and the ensuing upheaval, but last week, several well-sourced leaks gave a tantalising glimpse of the government’s plans to overhaul housing policy.
Gone is the 2019 manifesto pledge to get 300,000 new homes a year built in England. In a move straight out of the Trussonomics playbook, that top-down target – which by the way has never been met – is to be replaced by extensive supply side reforms.
Many of these reforms focus on the unwieldy planning system, which developers tend to regard with frustration at best, and contempt at worst.
The measures, which are due to be announced officially next month by the Department for Levelling Up, Housing, and Communities, may succeed in getting more housing built – but they will do precious little levelling up.
The reason for this is the headline-grabbing suggestion that the requirement to build affordable homes as part of a residential scheme will be scrapped for many smaller developments.
Present rules dictate that developers must include provision for affordable homes as part of every scheme of over 10 homes. The reforms would see that threshold increase to 40 or 50 homes, in what would be a significant easing of the burden on small and medium-sized developers.
These developers wouldn’t be given an entirely free pass; they would still need to give a sum of money to the local authority that would go towards the provision of affordable homes elsewhere. But the thinking goes that freeing them from the requirement to build affordable homes themselves will unleash a wave of smaller schemes.
The siting and nature of the affordable homes included in a scheme can often turn into a planning flashpoint between the developer, local authority planners, and local residents’ objections. So the removal of this red tape headache is likely to get a warm welcome from developers, even if it is replaced by a financial cost.
Cash-strapped local authorities may also look more favourably on schemes which, if approved, would lead to them receiving a direct payment from the developer.
But smoothing this particular part of the planning process will fundamentally change the sort of homes that get built and send ripples through the housing sector.
“The government’s proposed planning reforms now risk choking off the construction of both new-build affordable and social housing”
The most immediate and obvious impact will be that fewer affordable homes will be built. Early projections suggest affordable housing delivery could fall by a fifth; and an analysis conducted two years ago, when Boris Johnson proposed similar measures, showed it would lead to 30,000 fewer affordable homes being built over five years.
For now, there is no clarity on how developers’ contributions to local planning authorities will be used to build affordable homes elsewhere.
But the change will also prompt a radical redesign of many schemes. Freed from the affordable housing requirement, and squeezed by the rising cost of building materials and development finance, many developers will focus on squeezing maximum margin out of every site.
Depending on the location, that could translate into more high-value family homes or more high-density, build-to-rent property. Neither of which will be of any use to the aspirational first-time buyers the affordable homes quota was supposed to help.
This stimulus is also likely to trigger competition among developers for the best sites, pushing up land values that are already very high following the post-pandemic boom in demand.
Soaring land values will make many sites unaffordable for social housing providers, and the fall in affordable home construction is likely to be mirrored by a similarly sharp fall in new-build social housing.
The government’s Social Housing Decarbonisation Fund is currently transferring £1bn to registered providers across England to help them upgrade the energy-efficiency of their existing social housing stock.
Such massive investment in the retrofitting of better insulation and energy-saving technology to existing social housing stock is welcome, but the government’s proposed planning reforms now risk choking off the construction of both new-build affordable and social housing.
For a supply-side policy that is supposed to get Britain building, that would be a strangely perverse outcome.
Yes, this policy might well get more homes built, but it could also deliver a hammer blow both to social housing providers and to the development of the affordable homes that were supposed to be the key to getting more young people onto the housing ladder and stimulating the property market as a whole.
‘Build build build’ and ‘levelling up’ are among this embattled government’s most memorable slogans. But this planning reform puts the two ideas in opposition.
Which if last week is anything to go by, is also where the Conservative Party will be after the next election.
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