How planning created an affordability crisis

Planning and pricing must go hand in hand, writes the Member of Parliament for Dulwich and West Norwood

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Last month we celebrated the 100th anniversary of the Addison Act, the legislation that enabled the first major council housebuilding programme in the UK in the aftermath of the First World War. We celebrated the security, wellbeing and community that council housing provides for more than two million people across the UK. Yet we did so in the midst of a deep and entrenched housing crisis in which 1.25m people are on the waiting list for social housing.

In 2010, the coalition government stopped grant funding social housing. In 2012, it made it much easier for developers to argue, through a process called the “viability assessment”, that they could not build high levels of affordable housing; and in 2013, it changed the definition of an “affordable” home to include homes at up to 80 per cent of market rent – completely unaffordable for anyone on a low to median income in most parts of the country. These three political choices have brought the delivery of genuinely affordable social homes in the UK to a near standstill, while the cap on housing benefit for people living in private rented accommodation has increased housing insecurity and homelessness for thousands of people.

Over the past ten years, the number of social homes built each year has fallen from around 30,000 to a paltry 6,400. At the same time, the number of so-called affordable homes at up to 80 per cent of market rent has increased to 47,000.

What happens in our planning system has a critical impact on whether the genuinely affordable social homes that are urgently needed in so many places are delivered. The Tories’ current approach is limiting the effectiveness and fairness of our planning system, ensuring that it works in favour of landowners and against the interests of local communities.

The decision to withdraw grant funding for social housing has left councils overwhelmingly reliant on negotiations with private developers to deliver new affordable housing, set out in documents called Section 106 agreements. Council planning policy sets out what percentage of affordable homes must be delivered within any new housing development – usually 35-50 per cent. Yet the viability assessment process ties the hands of councils, enabling developers to argue successfully that they cannot afford to build affordable homes at the level required by policy.

Viability assessments were developed to encourage and stimulate building in a recession, but they have evolved to become something quite different: a quasi-scientific basis for negotiation between developers and councils, with the overt objective on the part of developers of reducing their obligation to build affordable housing. In 2012, the coalition government’s National Planning Policy Framework stated that planning applications “should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened.” This vague wording gave license to developers to argue that a council’s policy requirements are too burdensome; it essentially acts to prioritise excessive private profits over the need for social housing.

Viability arguments can justify an appeal against refusal for planning permission, and cash-strapped councils are reluctant to risk having to pay the applicant’s appeal costs if they lose. Viability negotiations are often not between equals, as councils struggle to pay for the expertise they need to interrogate developers’ figures, and they also slow down planning, often taking years to resolve, creating great uncertainty and frustration.

Within the viability assessment process, the cost of the land on which new homes are proposed to be built is every bit as important as the definition of an affordable home. Our planning system still affords existing landowners the rights to any future value of developments built on their land. This so-called “hope value” – the right to unearned windfall profit – dramatically inflates the cost of land, and inflated land prices make it much more difficult for councils to buy land in order to deliver social housing.

In a recent example in South London, a site with an existing use value of £5m was put on the market at £25m on the assumption that it could be developed for housing. It was later withdrawn from the market on the expectation that the value would rise even further, setting back the delivery of any housing at all on that site by years and making it almost impossible to deliver affordable housing, even by the current broken definition. This inflation of value either places sites far beyond the reach of councils and housing associations or requires a significant quantity of private homes to be built to cover the costs – homes that can push up density to levels that are unacceptable to the community or are built at the expense of genuinely affordable homes.

In this example our planning system acts to prioritise the right of a single landowner to a £20m windfall over the urgent need for genuinely affordable homes for local people – and that is a profound injustice.

Earlier this year, I introduced a Ten Minute Rule Bill which would re-establish the link between the definition of “affordable” and income, replacing the current definition of up to 80 per cent of market price with “no more than 35 per cent of net household income for lowest quartile income groups in each local authority area”. My bill also sought to remove “hope value” from the planning system, which would enable land to be bought by councils at a price much closer to its use value.

It is vital that our planning system provides certainty and transparency, and puts an end to the speculation on land values that prevents land from being used to deliver new homes. While landowners should receive fair compensation, coded in law, the planning system should not recognise any right to speculative profit that does not arise from any action or investment on their part.

While our planning system includes strict obligations in relation to consultation, in reality it overwhelmingly gives voice to the views of existing homeowners. In order to ensure a more representative range of voices are heard in the planning system, I believe there is an argument for the statutory consultation process on any planning application for housing to have to capture the views of people on the local council’s housing register who are by definition in housing need. Ensuring that the views of those who desperately need new homes, as well as those who are already well housed, are factored into the planning process will help to ensure that a representative range of views inform democratic decision-making.

Our planning system needs urgent reform to enable genuinely affordable social housing to be built at a scale capable of addressing the housing crisis. Communities must be able to trust the planning system and have confidence that the promises made in local plans and in planning applications will not be watered down later on the grounds of viability, or in terms of quality and sustainability.