UK's big developers axe thousands of affordable homes
tony at cultureshop.org.uk
Mon Nov 11 11:00:52 GMT 2013
Thousands of affordable homes axed
Councils across the UK cave in as developers
refuse to undertake building projects unless they deliver healthy profits
Mathiason, Will Fitzgibbon and George Turner
Guardian, Wednesday 18 September 2013
housing by canal social
If a developer can show that a councils
affordable housing target makes a development
uneconomic, the requirement can be reduced or waived
Housebuilders and councils in Britain's biggest
cities are failing to comply with affordable
targets, and even ripping up legal commitments to
build cheaper homes. A three-month study by the
of Investigative Journalism for Society Guardian
has established that 60% of the biggest housing
developments currently in the planning system are
falling short of local affordable housing
targets, preventing thousands of cheaper homes being built.
The investigation reveals huge cuts to the
proportion of affordable housing in one of the
largest housing projects and how none of
Birmingham's biggest housing developments meet
its 35% affordable housing target. Separately,
the investigation also shows how financial
viability assessments on behalf of a leading
housebuilder repeatedly persuaded councils that
having larger affordable housing quotas would make schemes uneconomic.
Affordable housing includes social, rented and
shared ownership for specified eligible
households that can't afford to buy or rent on the open market.
The bureau's assessment of 82 of the biggest
housing developments in 10 major cities found
just 40% complied with local affordable housing
targets. Other than Birmingham, the cities where
at least 50% of housing schemes failed to meet
local affordable housing targets were Bristol,
Bradford, Cardiff, Manchester and Sheffield.
Leslie Morphy, chief executive of the
homelessness charity Crisis, says: "With
homelessness on the rise and millions of people
languishing on housing waiting lists, we must do
more to increase the supply of affordable homes.
This is not just a numbers game, but about
creating mixed, vibrant
and avoiding ghettoisation of rich and poor."
In London, where the number of people accepted as
homeless stands at 14,812, one of the largest
developments going through the planning system
shows less than 17% of the planned 15,000 units
will be affordable. This is despite Lambeth, one
of the two councils involved in the 195-hectare
(480-acre) development in south London, stating
to its tenants council two years ago that
affordable housing could account for 35% of new units built in its section.
Pete Robbins, Lambeth council cabinet member for
housing and regeneration, says: "We are serious
about delivering a high level of affordable
housing in every new development that comes
forward in Lambeth. But this is much harder now
because of the viability tests that give
developers a chance to avoid our affordable
housing targets. We continue to work hard to
maximise affordable housing levels, but the
bottom line is that our hands are increasingly tied."
Affordable housing targets set by councils are
based on local demand and supply, the costs of
housing locally and local wages. The targets are
usually expressed as a percentage of new housing
supply. The targets are not legally binding, and
if a developer can demonstrate through a
site-specific financial viability test that the
target makes a development uneconomic, then the
requirement can be reduced or waived.
crisis intensifies, the bureau found repeated
examples of housebuilders and
consultancies winning council permission to
significantly reduce the number of affordable
homes using economic viability assessments based
on projections which state that schemes will only be marginally profitable.
The bureau's analysis of St George part of the
Berkeley Group one of the UK's most successful
developers, showed it used financial viability
assessments which repeatedly persuaded local
authorities that increasing the number of
affordable homes in its schemes would stop it
meeting "industry-standard" profit margins of
between 17% and 20%. St George's published
accounts show that in the six years to 2012 its
margins averaged 25.5% and its accumulated after-tax profits were £268m.
Michael Edwards, UCL senior lecturer in the
economics of planning, says: "There are
well-acknowledged systemic problems with the
viability system. It is not functioning in a way
that necessarily reflects economic reality. When
developers make very large profits and yet cite
viability as a reason not to build more
affordable homes, common sense tells you there is
an anomaly. And the public can't test whether the
assumptions contained in viability assessments
are fair because the assessments are confidential."
This "anomaly" arises because viability
assessments are based on a site's projected
profit, with little reference to the individual
developer's financial circumstances.
There is nothing to suggest St George or any of
its related entities has failed to comply with
planning conditions. The company says it is
committed to delivering 2,000 affordable homes,
linked to its housebuilding pipeline, and it has
already delivered thousands of affordable homes.
In addition, it has contributed £76m to local
infrastructure beyond the supply of affordable
housing, such as roads, schools and green spaces.
The company says anticipated profit figures are
only one factor in deciding viability and are
independently assessed according to industry
benchmarks. It believes it is wrong to compare
overall pre-tax profits with the development
margin on an individual site. Greg Fry, chairman
of St George, says: "Councils independently
assess the viability of a project based on the
site in question, regardless of who might develop
it or how profitable they are. The profitability
of the developer has no bearing on the level of
affordable housing required on a site."
Sir Edward Lister, deputy mayor of London
responsible for policy and planning, says that
while the priority is to get new schemes off the
ground, the mayor would intervene in future to
raise affordable housing numbers if it was shown
that developers were making disproportionately
large profits: "I'm not trying to defend the
property industry, but I do believe they have
been through a bad time and I believe it's more
important to get building moving. Fifteen or 20%
of something is better than nothing."
In Birmingham, not one of the nine biggest
schemes assessed by the bureau meet the 35%
affordable housing target. In one planned
353-unit project, even the allocation of 12
affordable units just 3.4% of the scheme is
considered "unviable" by planning advisers representing the developer.
Councillor Ian Ward, deputy leader of Birmingham
city council, says affordable housing targets
haven't been met because major developments in
the city centre focus on affluent urban
professionals. "Requirement to provide affordable
housing is lower in this area than for other
areas of the city, as there is less demand for
family accommodation," he points out.
But freedom of information disclosures obtained
by the bureau show that over five years more than
2,300 affordable homes have been axed from
housing schemes across the UK even after builders
and councils signed off section 106 legal
agreements specified these homes must be built.
Section 106 is a clause within the 1990 Town and
Country Planning Act that provides a mechanism to
recoup contributions from developers for
infrastructure requirements to enable a scheme to
go ahead. It has become the main way affordable
housing is delivered. But under new legislation
that came into force in April, developers now
have the ability to fast track challenges against
a "section 106" if it can show that building the
low-cost homes required makes a scheme unviable.
In Cheshire, a council decision to allow a
consortium of leading housebuilders to axe 252
affordable homes in the 1,200-unit Winnington
Urban Village in Northwich after legal sign-off
has "opened the floodgates" to developers
requesting similar reductions, says Labour
councillor Brian Clarke. Cheshire West and
Chester council says that under the revised
arrangement, money for affordable housing "will
be available if the development can afford it".
In south Devon, research by the bureau shows that
109 affordable homes have been scrapped after
legal sign-off. Anne Fry, an independent
Teignbridge district councillor, warns:
"Developers are just picking us off at the
moment." She says she and her colleagues struggle
to cope with the technical demands of developers
seeking to reduce affordable housing contributions.
The district council states: "Teignbridge has not
lost 109 affordable homes through the s106
process those homes would never have been
provided because the developments were not
viable. By demonstrating flexibility and an
awareness of market conditions, Teignbridge has
ensured the delivery of a viable level of affordable housing."
Councils are bracing themselves for a big
increase in retrospective appeals by
housebuilders. Ten of the biggest builders
which between them own enough land to build more
than 300,000 homes together made pre-tax
profits of £1.1bn last year, according to bureau analysis.
The burden to maintain low-cost housing supply is
increasingly being left to housing associations.
Yet Chancellor George Osborne's spending review
in June announced that housing associations would
receive only £3.3bn in the three years from 2015,
which amounted to a cut of 2.2% on top of the
overall 63% funding reduction made in 2010.
There are 1.85 million people on council waiting
lists in England up 69% in 10 years and, as
of last June, there were 56,210 households in
temporary accommodation, up 9% in the past 12 months.
in June showed the number of affordable house
building starts backed by the government-funded
Homes and Communities Agency and the Greater
London Authority in the financial year to 2013
was 36,206 33% lower than when the coalition came to power.
"In high-value areas the problem social landlords
face is access to land, and section 106
agreements gives them access to these sites,"
says Rachel Fisher, National Housing Federation
head of homes and land. "Local councils therefore
have a responsibility to their communities. They
must ensure that the planning system continues to
take into account what local people and families
need and be committed to delivering these homes."
Additional research by Victoria Hollingsworth
and Jude McArdle at the Bureau of Investigative Journalism
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