In the latest talk in our 'Planning for 10 Million' series, Alex Lifschutz (Lifschutz Davidson Sandiland) and Colin Wilson (London Borough of Southwark) discussed the recent history of “Affordable Housing and the Planning System from Margaret Thatcher to James Murray.” Barry Coidan reports.
Alex Lifschutz bravely began by describing a planning/regeneration project that went badly wrong. His firm was involved in the original plans for the “Regeneration of King’s Street, Hammersmith.” On paper there was nothing wrong with it. Affordable housing along with less affordable homes with the development centred on Hammersmith Town Hall and a fine old cinema. Unfortunately, the scheme was overblown the local authority wanting to get as much out of the development (and developers) as possible. There were two plans, there was massive opposition by residents. The much loved local Cineworld cinema was at risk. The second plan, however, was approved at a stormy Council meeting and the cinema was to be razed to the ground.
New developers moved in and demolished the Cinema. Control of the Council changed hands and the new Labour administration stopped the development. Anger and disappointment followed. Planning and design had played second fiddle to commercial interests. That imbalance proved disastrous: the outcome was a much loved cinema demolished and nothing for the Community.
Thankfully we moved onto an uplifting success story. Coin Street Community Builders. Twenty years ago this area of London was bleak, unattractive, with few shops and restaurants, a dying residential community and a weak local economy. Today it is thriving mixed and balanced neighbourhood: a destination for millions of Londoners and visitors from overseas, with a thriving residential and business community benefiting from ever-expanding community facilities and services. How did that happen?
First the company was not for profit - a whole set of different incentives and priorities. The company bought the land from the GLC and the site has been developed over time building affordably for both firms and residents. At the time London’s population was declining, Coin Street was a pretty poor environment - more like Barking (sorry Barking) than a main central London site. The area was cleared over time and developed. The first thing was to put in place parks, then affordable shops etc at Gabriel’s Wharf. But this can only happen if you can activate other funds to sustain the development’s infrastructure. Also the Coin Street building on the waterfront was a difficult building to develop as it was in a very poor state of repair - was it cheaper to redevelop the site than save the building. Had the local authority the choice they’d have brought in developers and used Section 106 to secure some affordable homes. In the event the building was saved and affordable workspaces and accommodation provided. Also the restaurant on top of the Oxo Tower funds the costs of the parks etc. A major development, the new 42 storey Coin Street Tower was initially held up over la’s concern about its height. It will include a community centre and affordable accommodation - funded by the sale of the tower’s apartments - as well the Rambert Dance Centre and a swimming pool.
An example of a package development is Brent Council’s South Kilburn/Kilburn Park development using Section 106 powers. Finally, if you really want affordable housing get local authorities to do it: they have the Masterplan and the skills. That now, however, is the exception. la’s have lost the expertise - leaving it to housing associations and private developers.
Colin Wilson has form. Earlier in the year he gave an entertaining and informative talk
on London Green Belt around CrossRail 2 and how it can be used strategically to accommodate some of London’s burgeoning population as well as providing business areas and employment. This time he had Section 106 in his sights. But first some facts and figures: £8 bn for “Help to Buy”; £20 bn spent on housing benefit; A Cap on local authority borrowing; Green Belt restrictions: - Colin’s question was “Does Section 106 deliver affordable housing?”
The Conservative Government introduced in the 1990 Town and Country Planning Act planning obligations under Section 106 of the Act commonly known as S106 agreements. These are a mechanism which make a development proposal acceptable in planning terms, that would not otherwise be acceptable. They are focused on site specific mitigation of the impact of development. S106 agreements are often referred to as 'developer contributions' along with highway contributions and the Community Infrastructure Levy.
The common uses of planning obligations are to secure affordable housing, and to specify the type and timing of this housing; and to secure financial contributions to provide infrastructure or affordable housing.
But why would you need a S106 to deliver affordable housing since that’s what Councils did - build Council houses. Between 1991 -94 local government funding was cut, during the time of a major economic recession. Local authorities were no longer allowed to build affordable housing.
Department of the Environment, Transport and the Regions (DETR) Circular 1/97 set out the regime for the use of planning obligations on affordable housing specifying planning agreements as one means by which affordable housing could be secured through the planning system. These agreements usually require developers to provide a proportion of affordable units on larger residential developments. In this context 'affordable' was defined as what the authority regards as affordable and included both low - cost market and subsidised housing and emphasising the role of the authority in defining affordability with specific reference to incomes, house prices and rents.
The incoming Labour Government’s Circular 6/98 provided specific guidance on thresholds that could be adopted in local plans which effectively defined the sites on which affordable housing is sought:
- a) 25 or more dwellings or sites of one hectare or more;
- b) in inner London 15 or more dwellings on sites of 0.5 of a hectare or more;
- c) in settlements with a population of 3,000 or fewer, the local planning authority should adopt appropriate thresholds.
We entered the new millenium. The Director of the Town and Country Planning Association, Gideon Amos said around that time that the maximum possible number of housing units one could get from section 106 is about 15,000 per year. He stressed the need to recognise that section 106, which he referred to as a charge on private housing development, ‘could not solve the nation’s affordable housing need on its own.’
In 2001 Department for Transport, Environment and the Regions research found that Section 106 negotiations were time consuming to agree, with the parties involved having little understanding of development economics. Negotiations are often conducted in private, leading to charges of impropriety, a lack of transparency and a lack of accountability. In short there needed to be a better working relationship la’s housing and planning teams and stakeholders.
John Prescott’s Office of the Deputy Prime Minister consulted on proposals to speed up the process - addressing one of the criticism of the existing scheme. The new proposals actually added further complexity and confusion. The Planning and Compulsory Purchase Act 2004 introduced Regional and local plans with housing and affordable housing targets and along with Circular 05/2005 it meant that planning permissions could no longer be sold on.
In our grand metropolis Ken Livingstone was making his contribution to easing “the housing gap”. His 2004 London Plan moved away from affordable housing thresholds: not setting a Londonwide threshold of numbers of dwellings below which the affordable housing requirement would not apply.
Average rate of S106 housing in London between 2000-08 was 32.3%. In the current housing “boom” the rate is still in the low 30’s.The number of of affordable homes built in 2008 -09 was 48,000 dropping to 32,080 in 2011-12, London accounting for 52% of that total. The increase in S106 monies isn’t translating into more homes. In 2003- 04 funds totalled £1.9bn, rising to £4.9bn in 2007-08 before falling back to £3.7bn in 2011-12.
Where do the costs fall in building affordable housing. In the case of Housing Associations properties for social rent the sums they receive are less than the build cost and just above build cost for intermediate social rent. For a private developer all affordable housing is an opportunity cost. These costs have to be met by the taxpayer.
The Planning Act 2008 introduced the Community Infrastructure Levy (CIL), a charge that local authorities can set on new developments in order to raise funds to help fund the infrastructure, facilities and services - such as schools or transport improvements - which are needed to support new homes and businesses in the areas. The lack of timely delivery of infrastructure was identified as a key barrier to delivering development and in particular new housing in the 2004 Barker Review of Housing Supply. CIL was designed to help local authorities deliver the growth and housing set out in their development plans. It aimed to provide greater transparency and certainty for the development industry on the level of contributions towards infrastructure that are expected and as such should reduce delays in the granting of planning permission by removing negotiations over the amounts sought. Although the initial CIL guidance talked about the viability of the scheme, lack of viability in practice and vagueness about any relationship with affordable housing policy is a serious failing.
Despite the less than crowning success of the CIL, James Murray, London’s Deputy Mayor for Housing and Residential Development , believes fixing the CIL rates alone could deliver affordable home rates at 35% - on the way to the Mayor of London’s target of 50%. But the devil is in the detail!
What are the benefits/disbenefits of S106. It’s familiar, it does produce mixed communities and generates significant affordable housing. It does, however, drive up private sale values, so making new private sales even more unaffordable. S106 affordability isn’t free. The cost discount and societal gain achieved through S106 is negated by the societal cost of property price inflation.
There were questions from the audience. Shouldn’t local authorities build social housing. They did in the past - good, quality building. Shouldn’t “Right to Buy” be ended since that saw lots of good quality housing stock sold off at a discount not to be replaced. Colin Wilson pointed out that la expertise in planning and house building has been lost over the years of cutbacks and changes in housing policy. He agreed that the “Right to Buy” policy, which also extended to Housing Associations, delivered no gain in social housing. Alex Lifschutz, however, stressed the positive aspect - that was the cultural change in the concept of social housing. There are no longer monocultural estates being built: instead there are mixed developments. The problem was the price of land which hasn’t been resolved. An affordable housing loading of 35% does mean that the developer doesn’t lose out on land prices, but anything above that is just not, at present, financially viable.
Another questioner suggested that the Continental model of social housing would deliver, but do local authorities have the ambition and ability to adopt a new approach? Alex thought that the adoption of la local plans alongside their action plans encourages new ways for peoples to work together adding value across the whole community and not just home ownership. Community involvement, feedback and engagement is vital. Finally, what hadn’t been discussed was the role of Housing Associations (HAs) - there was considerable change taking place in the industry with the amalgamation of various HAs. That’s likely to continue and the impact of that landscape change is uncertain.