Taking back affordable housing

There is an affordable housing crisis in England: asking prices for homes rose a record amount in February. Almost half of all affordable housing in the UK is provided through section 106 (S106) obligations: requirements that local authorities place on housing developers when they grant planning permission. But developers can use financial viability assessments to argue that they will not turn a profit if they are required to provide affordable housing. This means not enough affordable housing is being built, so private developers can make bigger profits.

Fortunately, some innovative local planning authorities across England have started to tackle the threat of financial viability assessments to affordable housing. These approaches can be replicated in other areas or integrated into national legislation. If activists advocate for these approaches, they could gain substantial changes to the way their local authority provides affordable housing. Across the country, this would add up to a healthier, albeit still flawed, planning system and demonstrate that there is appetite for change.

With S106, affordable housing is delivered via the success of private housing developments. This means the existence of affordable housing is tied to the market and dependent on local housing demand. Within a local authority, areas with higher house prices can host more profitable developments, while developing challenging sites like contaminated brownfield means higher development costs and less profit for developers. Despite this, councils still set a single level of affordable housing requirements for the whole area, often based on areas with lowest demand. This means that they neither take advantage of the potential of higher value areas to provide more affordable housing, nor accommodate for the challenge of difficult sites.

But councils like Eastbourne, Leeds and Ashford use a different approach: a ​‘zoned’ affordable housing policy, with different levels of affordable housing required in different areas, capitalising on areas with high demand and making allowances for areas with low demand. This makes it harder for developers to use viability assessments to challenge affordable housing requirements, and improves the amount of affordable housing built.

“… not enough affordable housing is being built, so private developers can make bigger profits.”

Typically, S106 negotiations take place behind closed doors. This lack of transparency means campaigners cannot hold the local planning authority accountable for its decisions. Planning authorities should release the details of viability assessments and negotiations, which is already done in councils like Ealing.

Many profit-hungry developers, if developments look like they won’t make the money they expect, try to renegotiate S106s to provide less affordable housing. Even though the allowance for a developers’ return in viability assessments factors in the risk of underperformance, there is still a culture of reneging on S106 commitments. But what happens when developments overperform, after developers argue for lower levels of affordable housing? Currently in most places, nothing. The developer pockets the extra profit, which should have been used to fund affordable housing. However, planning authorities can attach a ​‘clawback’ mechanism to S106 agreements, which is already done in Salford. The clawback captures the financial gains of overperformance to spend on affordable housing. Not only does this encourage developers to be accurate in their initial viability assessments, but it also protects against S106s based on unrealistic assumptions.

Another option for planning authorities is to enforce affordable housing policies universally, leaving no scope for negotiation or viability assessments. Cambridge has used this approach effectively, refusing applications that do not comply with affordable housing obligations. New norms between developers and landowners develop, where affordable housing contributions become expected, rather than perceived as optional. Land values begin to reflect this by lowering and, in turn, developers return to the local planning authority with schemes that comply with affordable housing policies. Of course, these norms take time to develop and, in part, rely on high demand for market housing, where developers will be attracted to development no matter the obstacles.

So far, the majority of solutions hinge on empowering planners in the dynamic between planning authorities and developers. The Mayor of London has opted for a different approach: forge positive relations by privileging developers who want to provide affordable housing. Developers are offered a fast-track through the planning system if their scheme can demonstrate compliance, in this case by providing 35% affordable housing. For developers it makes the development process easier and less risky, as well as removing the cost of the viability process. A positive culture of compliance has begun to emerge, improving affordable housing delivery in London.

For civil society, achieving different solutions requires different types of campaigns. Policy-based solutions like zoned affordable housing can only be implemented when local plans are being created or amended, which typically only happens every five years. Non-policy solutions, like creating a culture of compliance, can be implemented whenever, but may be slow to embed. Rallying campaigns around specific developments and targeting associated councilors could help maintain energy and direction, as well as animate demands for local residents.

There is space for local authorities to innovate and hold developers to account. But activists need to push planning authorities to improve. Once implemented, the positive evidence of these changes should boost demand for national reform, paving the way for wider improvements across England. Ultimately, the only sub-set of affordable housing that is genuinely affordable is social housing – which we need lots more of. Stay tuned for our new campaign for more social housing that mixes on-the-ground organising with an education programme and national lobbying, funded by the Oak Foundation.

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