UK: The Fight For Affordable Homes

Last Updated: 27 August 2014
Article by Michele Vas

A year on from the introduction of S106BA, which allows developers to apply to Councils to modify affordable housing obligations on viability grounds, there have been seven appeals to the Secretary of State pursuant to S106 BC of the Town and Country Planning Act 1990.  How does that help to solve the UK's housing crisis?

Of the seven appeals only 1 has been dismissed.  The others have been permitted with the original affordable housing requirement being reduced for a three-year period.  The appeal decisions demonstrate the Secretary of State's mandate to maintain momentum in the delivery of housing even though the sacrificial lamb is affordable housing. Even in the one appeal which was refused, the Inspector acknowledged the national need to boost housing delivery, but concluded that, as the developer had an outline permission, it was premature to base a viability assessment on a scheme where the final development could be different to that assessed.

The appeal decisions illustrate that local authorities, when faced with an appeal on purely viability grounds, are not sufficiently resourced to properly interrogate both the viability evidence relied on by the developer nor properly justify their own viability case. In some instances the appeal forum has become a form of mediation, where the parties seek to agree elements of the viability appraisals rather than carrying out the exercise of challenging each element of the other's appraisal.

One has to question how reducing affordable housing provision is a sustainable approach in the long term, particularly in a rising housing market in which values continue to increase and the availability of grant funding for affordable housing is increasingly difficult to secure (and, perversely, if at all where affordable housing is required as part of the Section 106 package of obligations).

Appeals permitted under S106BC impose an arbitrary three year period within which the reduced level of affordable housing can be "banked" and subsequently built out within that three-year period.  The reasoning behind this is to incentivise developers to get on and build the housing. This provision fails to recognise that in a rising market the viability of the development could improve radically within those three years, but with no reverse mechanism enabling viability to be reassessed if certain thresholds are met (or retrospective review at the end), the local authority has lost the opportunity to recover any affordable housing provisions that would otherwise have been properly required.

Although viability is fundamental to delivery, there is a range of other factors affecting viability - other S106 contributions, CIL, and design and sustainability standards (to name a few).   Other ways of assisting the viability of a scheme could include taking a more flexible approach over affordable housing tenure mix, allowing for affordable housing 'holidays' to enable a sufficient amount of market development to get under way early on, or setting minimum levels of affordable housing provision subject to viability testing at an appropriate stage of the development.

Councils should take a more proactive approach to viability of development from the start.  It is not in a Council's interest to push developers into using the 'developer-friendly' S106 tools.  A negotiated approach to viability is always going to secure a more acceptable outcome than one that might be imposed by a Secretary of State on a crusade to boost housing delivery.

This article was published in The Planner, August 2014

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