Affordable housing policy is as confusing as it is political. So it should be no surprise that mayor of London Sadiq Khan is planning to propose a raft of changes to the provision in the autumn.
To help bring clarity to the issue, London deputy mayor for housing James Murray spoke to Estates Gazette about what the industry can expect from the supplementary planning guidance.
A new definition of “affordable” will be announced alongside a new, clear methodology for viability assessments and a non-negotiable fixed affordable housing tariff, giving developers the option to avoid viability assessments altogether. EG revealed last week that Khan would implement a 35% flat rate for affordable (30 July, p21).
The policy overhaul is designed to allow mayor of London Sadiq Khan to start delivering on his campaign pledge to make 50% of new homes delivered in the capital “genuinely affordable”.
Supplementary planning guidance allows the Greater London Authority to shape the existing London Plan inherited from former mayor Boris Johnson. Khan’s team has started the process of rewriting the development strategy document, but with public consultations and government approval, the process is expected to take two years.
How will Khan define affordable?
“During his campaign, Sadiq made clear that when affordable rents are set at 80% of market rates, particularly in high-value areas, they stretch the definition of affordable to a point where they are not affordable to most Londoners,” Murray said.
We want to pin down the definition of ‘affordable’, so that Londoners can trust what we actually mean , and so the development industry gets more certainty
Under the National Planning Policy Framework, established in 2012, affordable rent is defined as no more than 80% of the local market rent, including service charges.
The Greater London Authority’s definition of “genuinely affordable” will include social rent, London Living Rent and shared ownership, Murray said.
He added: “There obviously may be other products that will be genuinely affordable alongside those, but I think we want to pin down the definition of genuinely affordable more, so that Londoners can trust what we actually mean by ‘affordable’, so that it is something they would consider to be affordable and so that the development industry gets more certainty about what we mean by ‘genuinely affordable’.”
Will build-to-rent schemes be exempt from starter homes?
The government has pledged to deliver 200,000 starter homes by 2020. They will be sold at a discount of at least 20% of the market price to first-time buyers under the age of 40. However, starter homes regulations outlining details of how they must be implemented have not yet been published.
Murray said he was concerned about the viability of build-to-rent schemes made subject to a starter homes requirement.
He said: “On-site provision of starter homes or even commuted sums for starter homes would affect their viability, so we will be making the case that the starter homes requirement, should it come forward more generally, should not apply in that way to build-to-rent.”
How the response to starter homes is worded in the guidance will depend on whether the government has published the regulations in time. Murray said: “We are going to have to work out exactly how we express our responses to starter homes in the supplementary guidance, depending on how much has come forward at that time.”
How would a 35% fixed affordable housing contribution be implemented?
City Hall is consulting developers and boroughs on a 35% flat-rate affordable housing tariff, which Murray said would give developers the option to opt out of the viability process to help speed up planning permissions. He added that the exact level of the fixed rate would be confirmed in the autumn but conceded that there needed to be an incentive for developers to go for the fixed contribution, rather than the viability route.
He said: “We are going to have to have those discussions over the summer and work out exactly where the number might land. We would want to do it in a way that there is an incentive for applicants in the planning process to go for that fixed contribution, rather than down the viability route, because it is supposed to be a quicker way of getting planning permission.”
The end of viability assessments?
The implementation of a 35% fixed affordable housing contribution will not mean the end of viability assessments completely as in the current London Plan viability is central to its determination of planning applications. But through the supplementary planning guidance the mayor’s office does have powers to set out clearer guidelines for how to approach viability.
Murray said that the lack of “clarity or consistency” across London about which methodology was being used to assess viability was causing conflict between planning applicants and local planning authorities, and slowing down developments.
He said this was something he witnessed as cabinet member for housing and development at Islington Council.
“People were disagreeing about the viability methodology before even getting on to the outcome of the process,” he said. “And you could short-circuit that by saying, here is an agreed approach to viability assessments, and start having that discussion quicker about what the outcome was going to be that would be beneficial in terms of the whole process.”
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