The study underpinning the mayor of London’s affordable housing policy is flawed, according to a government-commissioned report.
The report, drawn up by ATIS Real Weatheralls, claims that the “Three Dragons” formula is not sophisticated enough to correctly assess the commercial viability of meeting the mayor’s 50% affordable housing target in all developments.
The report is due to be published by the Office of the Deputy Prime Minister later this month.
Douglas Birt, director of the key worker team at Weatheralls, said: “The Three Dragons method is a very clever financial model, but no financial model can be accurate enough to determine affordable housing levels.
“The Three Dragons method cannot and should not be used to set levels of affordable housing, but it has become the cornerstone of the mayor’s policy agenda.
“It is not an appropriate way to set policy.”
Although the report recognises that the Three Dragons study would be “a useful tool” for the provision of affordable housing in London, it raises concerns that the formula does not accurately identify the residual land value.
The Three Dragons study also claimed that developments in wealthier London boroughs, such as Westminster, the City, Kensington & Chelsea and Hammersmith & Fulham could provide 50% affordable housing without public subsidy.
In other boroughs, it stated, the targets could be achieved with subsidy.
Birt added: “The other problem is that the Three Dragons formula assumes that the housing will get full subsidy, but that isn’t the case.”
The Three Dragons study was used by mayor of London Ken Livingstone to support his call for developers to supply 50% affordable housing on central London developments, and has been fed into the draft London Plan.
Although the London Plan will not be finalised and made law until late 2003, the 50% target has already been adopted by several London boroughs.
EGi News 27/08/02
