The london plan,
draft affordable housing spg
Sadiq Khan has released his draft Affordable Housing and Viability Supplementary Planning Guidance (SPG) for consultation.
The highly anticipated document includes the following key measures:
- A threshold approach to affordable housing where schemes providing 35% are not subject to a viability review but those that do not meet this target are scrutinised in depth;
- Fully transparent viability assessments;
- More flexibility for local Boroughs on affordable tenure, including 30% social/affordable rent, 30% intermediate (shared ownership or London Living Rent) with the remaining 40% decided by the Borough;
- Clearly defined viability reviews at 2 years after grant of planning permission and after 75% of units are sold;
- Tougher rules on the application of Vacant Building Credit;
- Further guidance on undertaking viability assessments;
- Strong support for Build to Rent schemes with bespoke arrangements for affordable housing focussing on discount market rent.
The SPG questions established practice in the development market and developers will either need to adjust to the changes or challenge them.
Andy Haynes (Partner, Residential Development) noted that:
- Build to rent: Bidwells welcomes the recognition in the SPG that build to rent developments are delivered using a different economic model to housing which is built for sale. The flexibility offered by the SPG in viability negotiations for build to rent is welcomed, as it should incentivise good quality, privately rented housing schemes to be delivered.
- Confidentiality of information: Bidwells is concerned over the presumption that all viability information will be made public. Developers are entitled, as a matter of law, to ensure that information which could be commercially prejudicial to their interests is not put into the public domain. As such, developers are likely to resist the provisions for disclosure of viability information within the SPG.
- Clawback: Bidwells do not support the clawback provisions set out in the SPG. The requirement for developers to agree clawback mechanisms on single phased schemes is likely to be a disincentive to investment development, which will damage the Mayor’s attempt to make sure that London is “open” for business. The RICS, in their guidance note on financial viability in planning, expressly warn against the use of clawback in single phased schemes due to the uncertainty that they create. The SPG turns this on its head.
- Benchmark value: The use of the “EUV plus premium” methodology as advocated by the SPG is not supported by RICS guidance who describe it as “flawed”. The setting of the percentage premium above EUV is entirely arbitrary and does not reflect the workings of the market. Numerous planning appeals have supported the use of Market Value over “EUV plus premium” as the benchmark value and we would anticipate that this will continue, even if it means more applications being determined at appeal rather than by the LPA or Mayor.
- Growth: The SPG requires developers to set out their assumptions on growth, which can be used by the decision maker to determine whether a scheme which is unviable on current day assumptions will be deliverable (i.e. viable) during the life of any planning permission that is to be granted. It is important that Boroughs and the Mayor use these growth assumptions to determine whether schemes are deliverable, and not as a back door to leveraging more levels of affordable housing and planning gain that would be warranted by current day viability.
The new draft SPG follows through on the Mayor’s pledge to deliver more affordable housing through scrutiny of viability assessments and review mechanisms. Whilst the 50% requirement has been pushed to the end of his tenure, the 35% requirement still represents an increase on levels of affordable delivered across London in recent years. We expect local Council’s to take a strong interest in the SPG and attempt to shape the tenure requirements to meet their affordable priorities. The expectation is that the Borough's local policy will fall in line with this SPG except where they are delivering more than 35% affordable housing.
The draft is available for comment until 28th February 2017 and is available to download here:
Bidwells are well placed to advise further and help make representations on the draft SPG.