Draft Affordable Housing and Viability Supplementary Planning Guidance 2016
The headline in the SPG is that proposals will be expected to meet or exceed a threshold 35% provision of affordable, habitable rooms across the development (without grant). If this is offered, no viability analysis or further information is required. In this instance there is also provisions to ensure the applicant intends to build the permission with a review mechanism triggered if an ‘agreed level of progress on implementation is not made within two years of the permission being granted’.
Some schemes would not qualify for this option, including where off site affordable housing or cash in lieu is proposed, applications which involve the demolition of existing affordable housing (especially estate regeneration schemes) and applications where the applicant claims vacant building credit applies.
The SPG is under consultation between 29 November 2016 to 28 February 2017.
Developments that do not offer 35% affordable accommodation will justify this in viability assessments and be expected to include overage provisions in case the profitability exceeds that expected in the submitted viability assessments, with the LPA being a beneficiary. There will be post permission and post development re-assessments with surplus profits split 60:40 between the Council and developer.
The Mayor’s long term goal is to increase the threshold to 50%. The new London Plan is currently being developed and will incorporate this aim with a consultation to be published in Autumn 2017.
The SPG also includes a preferred tenure split target for schemes to deliver:
o at least 30% low cost rent (social rent or affordable rent) with rent set at levels that the LPA considers ‘genuinely affordable’, i.e. significantly less than 80% of market rent. There appears to be a move towards a ‘London Affordable Rent’;
o at least 30% as intermediate products, with London Living Rent and/ or shared ownership. London Living Rent is capped at one third of median gross household income in a borough;
o the remaining 40% to be determined by the relevant LPA (but would include a mixture of the above or any other products that could be evidenced as ‘genuinely affordable).
The SPG also seeks to introduce a standardised approach to viability across London. The SPG clearly sets out what information and assumptions should be included in a viability appraisal. The Mayor will use the residual land value methodology to determine the underlying land value once the costs of the development (including developers’ profit) are deducted from the gross development value.
Information relevant to planning determinations should be publicly available alongside the other application documents in order to foster a greater understanding of and trust in the planning system. Only in very exceptional circumstances there may be legitimate reasons for keeping limited elements of viability information confidential. In submitting information to the Mayor, an applicant does so in the knowledge that the Mayor may not accept the applicant’s claims that information should not be disclosed to the public.
The SPG shows the Mayor’s support for large scale and professionally managed Build to Rent schemes, and sets out a few fundamental principles for LPAs and developers to take into account.
The draft SPG defines Build to Rent as:
o a development, or block/ phase within a development, of at least 50 units;
o the homes to be held as Build to Rent under a covenant for at least 15 years (i.e. cannot be sold);
o all units to be self-contained and let separately;
o unified ownership and unified management of the development;
o professional and on-site management;
o longer tenancies offered (ideally three years or more) with defined in-tenancy rent reviews; and
o property manager to be part of an accredited Ombudsman Scheme and a member of a recognised professional body.
Where a developer is proposing a Build to Rent development which meets the definition, the affordable housing offer can be entirely discounted market rent (DMR), managed by the Build to Rent provider and delivered without. These units can be owned and/or managed by Build to Rent landlords themselves.
London Living Rent is a new type of intermediate affordable housing, and is aimed at single people, couples and other households with more than one person with a maximum household income of £60,000, without sufficient current savings to purchase a home in the local area. RP’s would be expected to encourage London Living Rent tenants into home ownership with the assumption that these units would be sold on a shared ownership basis after 10 years.
No current provision is made for Starter Homes. The Mayor will provide an update following more clarity on the Government’s position on Starter Homes and the regulations that are to follow the Housing and Planning Act 2016.
The provisions set out in the draft Affordable Housing and Viability SPG should be read in conjunction with ‘Homes for Londoners’ Affordable Homes Programme 2016-21 Funding Guidance. The Mayor’s £3.15 bn funding programme will be available to schemes delivering half or more of new homes as ‘affordable’, comprising London Affordable Rent, London Living Rent and London Shared Ownership.
Together with the draft SPG, the Mayor has also published the ‘Homes for Londoners’ Draft Good Practice Guide to Estate Regeneration. This draft guidance establishes that demolition and rebuilding, where chosen as part of estate regeneration, should only be the chosen option where it does not result in the loss of social housing, or where all other options have been exhausted. This would apply to estate regeneration projects seeking new funding from the GLA. This will be supported by policy in the new London Plan, a draft of which is expected in 2017.
HTA Comment on the draft Affordable Housing and Viability SPG:
We welcome the emphasis on real affordability for Londoners and the inclusion of a much wider range of housing products should they qualify as genuinely affordable housing. It is likely that the new guidance will have a drastic impact on sites already bought unconditionally to be delivered in the next year. For future sites, it is likely the market will adjust. It is absolutely essential that design quality is maintained for new affordable homes.
If you have any questions about the above, please contact:
HTA Design LLP