Sue Brownill, , Youngha Cho, Ramin Keivani, Dave Valler, Penny Bernstock (UEL)

Department of Planning, Oxford Brookes University.

HSA Conference, York; April 2015.

DRAFT NOT FOR QUOTATION

PLANNING OBLIGATIONS AND AFFORDABLE HOUSING DELIVERY IN A CHANGING CONTEXT.

PLANNING OBLIGATIONS AND AFFORDABLE HOUSING

Draws on recent research for JRF’s Housing and Poverty Programme on re-examining the role of planning obligations in providing housing for those on the lowest income; rebalancing affordability and numbers

From 1990 planning obligations became a major funder of affordable housing but impact of changing context

Recession and budget restrictions Deregulation and marketisation of planning Localism; alternatives?

Raises wider questions about nature and purposes of planning, how to respond to the current policy situation and prospects for a more progressive localism

WHAT ARE PLANNING OBLIGATIONS AND WHY ARE THEY SIGNIFICANT?

• Planning obligations are contributions towards infrastructure (including affordable housing) negotiated between Local Planning Authorities (LPAs) and developers/ landowners

• Extracts some of the uplift in value due to state granting planning permission; betterment

• Also called Section106 from 1990 Town and Country Planning Act

• Useful because combined land and finance for affordable homes at a time when both were under pressure

• By 2007/08 contributed to almost two thirds of affordable homes completed in England

A GOOD THING OR THE LEAST WORST OPTION?

Considerable debate about whether they are an appropriate way of providing affordable homes

Successful and accepted form of betterment versus symptom of marketisation of planning; issues of social and spatial equity, transparency and inefficiency

Cook and Monk 2011 note a fundamental contradiction in addressing affordability through mechanisms dependent on rising prices and scarcity

Development industry questions of whether essential infrastructure and viability; planning getting in the way

However uneasy consensus and a pragmatic acceptance of ‘least worst option’ and if it works why fix it?

RESEARCH METHODS

Analysis of DCLG, HCA and GLA statistics for England

Case studies of 6 areas/typologies; London (Islington, Southwark, Tower Hamlets, Croydon); Cumbria (rural); Newcastle (regional centre), Birmingham (industrial centre), Oxfordshire (prosperous England), Peterborough/Cambridgeshire (new and expanding towns).

Exploring operation of S106 and alternative provision

‘Backcasting’ workshops in 6 areas

National workshop

BUT IS IT WORKING?

Source: HSSA Section N, HCA and DCLG Live table 1011

15,642 homes were completed through s106 in 2012/13

Down 50% from 32,286 in 08/09

Set against an estimated need for 83,000 social units pa (Holmans,2012)and a backlog of between 180,000 - 300,000 (Shelter, 2008 Centrepoint, 2012).

FIG 2 TRENDS IN AFFORDABLE HOUSING COMPLETIONS IN ENGLAND (2004Q2-20123Q1)

LINKING PROVISION TO VOLATILE MARKETS LEADS TO VARIATION OVER TIME

S106 completions as a % of Total Affordable Housing (2004Q2-2013Q1)

But S106 is still significant. CLG research showed that in 2011/12 £2.3bn for housing in s106 agreements

AND SPACE

Newcastle

Oxfordshire

London

Birmingham

Cambridgeshire + Peterborough New and Growing town

Cumbria Coast & Countryside

Cambridgeshire + Peterborough

Cumbria

.

This raises questions about the reasons behind these trends, whether it’s possible to deliver more through s106, what alternatives there are and what the impacts are for those in lowest incomes.

WHAT’S BEEN DONE TO ‘FIX’ S106Changes in definitions of affordable housing in the National

Planning Policy Framework; requirement to provide for eligible households ‘at a cost low enough for them to afford’ that appeared in previous planning policy removed.

Affordable housing is now anything below market value (regardless of who it is affordable to) and a ‘product’ (which the planning system can supply) separated from ‘affordability’

Example, London Plan amendments. 9 Boroughs challenged on basis could not specify targets for social rent . Inspector agreed with GLA that use non-planning mechanisms to ‘steer households to properties they can afford’. GLA officer ‘you shouldn’t use the planning system to get social rented housing’

THE IMPACT OF VIABILITY; ‘A BATTLE FOR THE HEART AND SOUL OF PLANNING’

Viability an issue since mid 2000s but NPPF required viability assessments to be carried out and 2013 Growth and Infrastructure Act allowed renegotiations if planning obligations made a scheme unviable

Research by Mathiason indicates up to 30% reductions on agreed levels through re-negotiation

Our case studies typical response’ it’s hard to say because of confidentiality but the average contribution compared to five years ago is10-15% less’

THE IMPACT OF VIABILITY

Eden (Cumbria) developer asked to modify the existing S106 agreement from 100% to 30% affordable. Council tried to negotiate but accepted 35%, based on the applicant’s viability assessment

Site for 1500 homes in Hampton, Peterborough was renegotiated to 5% AH on basis of remediation and infrastructure contributions, whereas 30% AH was successfully secured in previous phases on the same site.

Clay and Glebe Farm development on the Southern Fringe of Cambridge the developer suggested a phased viability approach to reduce AH components in the early stages and to increase it in the later stages. Cambridge City Council insisted on 40 % affordable housing in all phases

Saffron Square Croydon stalled in 2009. Affordable numbers were subsequently reduced by negotiation. However as market conditions picked up the developers were able to argue that it was one of their most profitable sites. Croydon Council negotiated an overage whereby if later phases are more profitable than on the viability assessment

greater contributions will be made to affordable homes at this stage.

CONCERNS ABOUT

The parameters and indicators used in the assessments; planning officer in area with 50% affordable housing policy and prices rising 30% per year ‘this should suggest that schemes are viable but with the NPPF and the RICS Guidance every major viability assessment has come in lower than 50%’

Assumptions that viability is fixed in time and space whereas it can vary for particular schemes as market conditions and costs change

The lack of skills in some LPAs to interpret and carry out viability assessments

Lack of political support for AH v other forms of infrastructure Variable quality of agents/consultants advising LAs Lack of transparency and scrutiny

THE INTRODUCTION OF CIL• Community Infrastructure Levy replaces S106 for all

infrastructure apart from affordable housing• Only one of our case study areas had introduced and started

to charge CIL although a number were in the process of setting it.

• Opinions varied on its potential impacts• if CIL charges are drawn up in the context of robust

planning policies and set at a level to ensure affordable housing numbers can be delivered the impact should be minimal v

• CIL could make affordable housing the ‘soft underbelly’ of planning obligations.

• Some LPAs were considering not introducing CIL or seeking exemptions on some sites precisely because of its impact on affordable housing provision and the ability to provide site-specific infrastructure.

OTHER ISSUES

Replacement of Regional Strategies ( and their housing targets) by an informal duty to co-operate not providing strategic framework everywhere; Oxford v Cambridge

Further ‘relaxations’ of planning obligations after research finished; Increases in thresholds for off-site106 from 3-10 dwellings. Islington, £2.3m in 6 months through

small sites towards affordable homes programme Change of use from eg office to residential exempt from 106 Vacant building exemptions; £20,000 discount

Therefore even as the market revives won’t be back to ‘business as usual’ but

Local flexibility in NPPF welcomed

IMPLICATIONS FORHOUSEHOLDS IN POVERTY

Numbers going down

Correlation analysis at LA level shows that s106 is delivering to more deprived areas ; but London impact

At project level issues of allocations, ‘filtering’, type, tenure and rent levels.

But levels of social rent however still high on some schemes (e.g. Oxford)

Total S106 by Type of Affordable Housing

Source: Total S106: HSSA

RESPONSES; MODIFYING OR PERFORMING VIABILITY?

Specialised viability officers or teams in planning departments Training in viability for officers and members Freedom of information and other action to make appraisals public Off-site gain. London Borough of Southwark £29m as part of a s106

on One Blackfriars Clawback and overage; in Saffron Square Croydon and Iknield

Loop , B’ham review mechanisms have been agreed at stated stages.

.Setting VA parameters which allow for the extraction of an appropriate amount of the uplift in value resulting from the granting of planning permission (eg existing use value not market value of land). Islington Supplementary Planning Document

The use of SPDs and 106s to specify rents.

TOWER HAMLETS COUNCIL AFFORDABLE HOUSING SPD

Affordable rent calculator developed by POD partnership guided by affordability criteria that 33% of income should be spent on rent and combined this with data linked to 50% median income.

Model indicated a one bedroom property would be affordable at 65% of market rent; two bedroom at 55% and three bedrooms or more at 50% of market rent.

These findings have been translated into a strategy underpinned by a commitment to what are termed Pod rents and these levels are reviewed annually.

They also introduced Policy AH3 that provides supplementary guidance on setting appropriate rent levels for affordable housing and this is enforced through the planning system by these rent levels being specified in s106 agreements. However affected by changes of definitions of affordability in NPPF and London Plan

RESPONSES; ALTERNATIVES TO S106

Finance Greater public sector investment through

increased government grant and greater freedoms for local authorities

Non-grant funding Housing banks or revolving funds 

Planning and Land AssemblyPlanning obligationsAllocating more land through the planning system. Designating Housing Zones or Garden Cities Alternative land value capture mechanisms Incentives or measure to bring land forward for development e.g. CPOs Green belt swaps/releaseDrawing on examples from abroad e.g. Vinex

LocalismNeighbourhood Development Plans and Community Land TrustsCity Deals and LEPs Greater powers and resources to local areas for strategically led housing and planning programmes 

Governance and deliveryNew partnerships and SPVs including partnerships between the public and private sectors and social enterprisesAlternative delivery models within the housebuilding industrySkills upgrade and culture changeStrategic leadership and co-operation

EMERGING LOCALISEDRESPONSES USING S106 AND ALTERNATIVES

Newcastle Oxfordshire

Birmingham Cumbria

THE GOLDEN TRIANGLE

A combination of land, finance and leadership/governance seen as key in all areas in getting from where we are now to where we need to be. A range of ways of doing this exist or are possible.

NEW SETTLEMENTS IN CAMBRIDGESHIRE

NEW VEHICLES; BIRMINGHAM MUNICIPAL HOUSING TRUST

Company setup by City Council using Housing Revenue Account borrowing thresholds

Will deliver approximately 200 new affordable homes per year from 2013-14 rising to 300 in 2018 when the borrowing threshold rises.

£14m HCA investment in September 2009.

BMHT works with 12 local contractors through an agreed Contractors Framework to both boost the local economy and skill levels and develop appropriate delivery models.

Contractors have to build to the BMHT External Work Guide and as such cannot distinguish between housing built for sale or rent on mixed tenure sites.

Many similar companies and joint ventures used to bring forward public sector land eg Newcastle

Community Rights. Neighbourhood Development Plans and CLTs in Cumbria and London

• St Clements former hospital site • 250 units being developed of which 35% are affordable• 70% of the affordable units social rented, 23 homes (30% ) will be ‘affordable’ shared ownership owned by CLT and priced at what is affordable to someone on the median income in Tower Hamlets; £125k for a one-bed flat and £240k for a 3 bed house (compared to £300k and £450k at 2014 market prices)

THE LOCALISM AGENDA. CAN LEPS ANDCITY DEALS DELIVER?

GLA has greater devolved finances and powers than any of our other case studies eg HCA funding devolved London Housing Bank Housing Zones

LEPs and City Deals increasing attention to housing eg Oxford HRA but generally do not

Other places attracting new forms of finance eg pension funds

Case for further devolution of finances and powers?

CONCLUSIONS

Planning obligations occupy a contradictory position as evidence both of the marketisation of planning and its redistributive function; but recent further shifts to market

Despite this S106 is still a significant mechanism to deliver affordable homes in some places at some times and evidence of actors ‘working the spaces of power’ (Newman) and responses combining s106 with alternative mechanisms appropriate to particular localities

Report concludes that to better balance numbers and affordability a dual approach is needed combining the strengthening of the operation of s106 with the empowering of local authorities and their partners to supplement s106 provision through locally driven strategies for affordable housing provision.

But some wider questions about appropriate forms of betterment taxation and/or affordable housing subsidy

And time to reaffirm social sustainability and equity as key aims of planning.

THANKS

sbrownill@brookes.ac.uk

SOME CHANGES TO ENABLE MORE AFFORDABLE HOMES TO BE PROVIDED THROUGH 106 WITHIN CURRENT PLANNING PRACTICES.

Modifying viability procedures eg by: More training of planners and local councillors in viability assessments. Open book accounting and greater scrutiny of viability assessments. Setting VA parameters which allow for the extraction of an appropriate amount of the

uplift in value resulting from the granting of planning permission (eg existing use value not market value of land).

Enabling LPAs to set their own parameters for viability assessment based on their local knowledge and experience. This could be by SPG.

Moving towards a dynamic conception of viability; use of review, cascade and claw back mechanisms

 The emerging impact of CIL on the ability to negotiate S106 agreements needs to be monitored.

 More robust systems need to be put in place to collect reliable data on s106 delivery. 

Does this reinforce the performance of viability?

CHANGES TO PLANNING POLICY

the definition of affordability in the National Planning Policy Framework (NPPF) should be revised by reinstating the Planning Policy Statement 3 (PPS3) definition. In addition

 Local plans and s 106 agreements should be able to set and secure levels of affordability which reflect local circumstances. This may be set at a percentage of gross incomes.

 LPAs should be able to specify the proportion of social rent, affordable rent and Low Cost Home Ownership units in their plans where this is demonstrated by appropriate evidence.

 The decisions to raise thresholds and exempt some developments from S106 should be reversed.

 

 MEASURES TO INCREASE ALTERNATIVE MECHANISMS

Greater investment through a variety of sources in affordable and socially rented housing including;Higher levels of government grant (including a shift from housing benefit to bricks and mortar).Increase the capacity of LAs to invest for example increasing HRA headroomsenabling/promoting non-grant funding including asset based borrowing, institutional and pension fund investment and ethical funds. Consider a range of alternative land value capture mechanisms Greater devolution of resources to the local level

MEASURES TO INCREASE ALTERNATIVE MECHANISMS

Land/Planning Ensuring that affordability is a key requirement of initiatives such as Garden Cities

and Housing Zones rather than just numbers Greater powers of land acquisition and assembly Better use of public sector land – not just sold at highest value

Governance and Delivery Political commitment to the need for affordable housing for those on lowest

incomes at the national and local level is needed A new form of localism: more powers to local agencies to form strategic

partnerships strengthening the strategic co-ordination of needs assessments and delivery

Expanding the potential of LEPs and City Deals to address issues of affordable housing