Will the Mayor’s SPG Delay Delivery of

Affordable Homes For London?

A new approach to delivering more affordable homes for London has recently been put forward by the new Mayor for London, Sadiq Khan. So what is being proposed and how will this help with the delivery of housing?

In the highly anticipated ‘Homes for All Londoners – Draft Affordable Housing and Viability Supplementary Planning Guidance (SPG)’ Khan insists that any proposal for less than 35% affordable housing – or that offers 35% affordable housing but not at the correct tenure split (to be defined by Local Planning Authorities) – must be accompanied by a viability appraisal.   

Not only that, but two further viability reviews will then be required for schemes that deliver a surplus above the initial agreed profit level.

Very importantly, the viability process is to become transparent.  It is no secret that many within and outside the property industry consider the viability process to be one veiled in secrecy and, sometimes, resulting in lower levels of affordable housing without proper scrutiny. 

However, all viability appraisals are currently independently reviewed by an external party appointed by the Local Planning Authority – but paid for by the applicant.  

So the final consents are derived via a thorough and independent review of a scheme’s viability. The amount of affordable housing deliverable is one agreed by both parties based on expert advice.

Now though, the Mayor is advocating that the GLA also reviews them and they are to be publicised when submitted so that third parties will be able to see what is currently accepted as confidential information. 

Drilling into some of the detail, the SPG sets out that the Benchmark Value methodology used in viability appraisals should be ‘Existing Use Value plus premium’, an inclusion not supported by RICS, which describes it as ‘flawed’. The Mayor will no doubt receive numerous representations on this aspect.

How this will speed up the delivery of housing and secure more affordable housing is questionable.  Applicants have the right to request that parts containing confidential information remain redacted, but it is then at the Local Planning Authority’s discretion whether to allow this. A tug of war will no doubt ensue on the level of redaction from submitted viability toolkits before one is even independently reviewed, ultimately delaying the determination date for planning applications.  

The overall review process will also be lengthened and undoubtedly the additional scrutiny at the GLA will add further time and uncertainty at application stage – and possibly without securing more affordable housing than the current regime enables. 

The proposed new viability mechanism therefore raises concerns on the speed and certainty of new housing delivery moving forward. It will be interesting to see how these matters are addressed following the SPG consultation. 

On a positive note, the SPG does recognise that LPAs can impose greater flexibility on tenures and there is a push for build-to-rent homes. This is to be welcomed along with the flexibility offered by the SPG in viability negotiations for build-to-rent proposals. 

Consultation on the Mayor’s SPG concluded on 28th February 2017 – so we shall see what happens in the months ahead.

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