Greens expose unviability of London Mayor's 'viability team' on affordable housing

Sian Berry London Green Party Assembly Member has revealed that the London Mayor’s new ‘team of viability experts’ will consist of only two people, which is not enough to challenge the huge resources of developers.

The new team will be based in City Hall and will examine figures submitted by developers when they fail to meet the Mayor’s targets for affordable homes.

However, in response to a written question from Sian Berry, the Mayor has said the ‘team’ will be made up of just two people.

He also failed to give reassurances that they would be permanent staff and not on short term contracts that allow them to move back and forth between public and commercial work that could bring conflicts of interest.

Sian Berry said:

The Mayor promised a team of experts and Londoners need more than two people in these posts if the Mayor’s goal of challenging developers is to be viable. I am very concerned that two people, however talented, will be stretched beyond capacity and unable to make a real difference.

There’s already too much of a ‘revolving door’ for consultants between big developers and Council regeneration schemes, and it’s vital that these experts do not also have commercial interests while working on behalf of Londoners.

The new team needs to be expanded quickly and this should not be done by hiring in consultants on short term contracts, but by building up a dedicated and permanent expert team that works only in the public interest.

Sadiq Khan is currently consulting on draft Affordable Housing and Viability Supplementary Guidance (consultation ends 28th February 2017) LINK

It is clear from the draft extracts below that more than two experts will be required to give close attention to schemes when developers argue that they will only be 'viable' if less than 50% of housing is 'affordable'.  In truth two people would hardly be adequate for developments taking place just within Brent in Wembley Park, South Kilburn and Alperton. The problem that 'affordable' is not really affordable and Brent  regular backs down in the face of viability assessments has been covered on this blog LINK and reported on Get West London website LINK

VIABILITY ASSESSMENTS

14 The third part of the SPG (Supplementary Planning Guidance) provides detailed guidance on viability assessments, aiming to establish a standardised approach to viability. The SPG clearly sets out what information and assumptions should be included in a viability appraisal. It builds on the London Borough Development Viability Protocol and aims to provide a clear approach that can be consistently applied across London.

15 It sets out the Mayor’s expectations when it comes to the publication of viability information, requiring all information to be made public, including council and third party assessments. Applicants will have the opportunity to argue that limited elements should be kept undisclosed, but the onus is on the applicant to make this case.

16 The SPG is explicit about the Mayor’s preference for using Existing Use Value Plus as the comparable Benchmark Land Value when assessing the viability of a proposal. The premium above Existing Use Value will be based on site by site justification reflecting the circumstances of the site and landowner.

THE MAYOR AND REFERABLE APPLICATIONS

1.16 Given the strategic importance of affordable housing delivery and the significant impact of reduced levels of affordable housing on the delivery of the London Plan, the Mayor will consider directing that he is to be the Local Planning Authority for the purposes of determining an application (often referred to as a ‘call in’) or directing refusal when:

•       he is not satisfied with the viability information submitted by the applicant, the assumptions that underpin the information, or the level of scrutiny given by the LPA; 


•       he considers the viability information submitted may suggest a higher level of affordable housing could reasonably be provided; 


•       the chance of significant contribution to affordable housing could be forgone due to other grounds and the Mayor wants to review the weight the LPA has given to competing planning objectives. 


Will Affordable Housing Position Statement address Planning Committee's concerns?

The Planning Committee of July 23rd (the meeting where the Minutes were mysteriously unpublished for weeks before pressure finally got them unearthed or created LINK ) considered a wide range of issues. The most prominent was a report on affordable housing which reflected concern over whether the Council was achieving a sufficient level of affordable housing in developments and in particular developers' practice of reducing the amount of affordable housing once development was underway through viability assessments. Essentially the assessments claim the developer is not making a sufficient return on the development and that the only way this can be addressed is by increasing the proportion of market price/rent housing in the scheme.

The next Planning Committee on October 14th will discuss a 'Brent Affordable Housing Position Statement' (see below) that if approved will be posted on the Brent Council website and made available to developers.

The accompanying Officer's Report by Stephen Weeks seems somewhat grudging at times over the necessity for such a statement.

Planning Committee is recommended to endorse the statement. It balances the Council's necessity to be clear about the priority it places on certain aspects in the delivery of affordable housing in association with new developments, against the need to not essentially repeat extensive existing robust policy and detailed advice that currently exists as a national, London and Brent level.

As such the Position Statement does not appear to make new policy but clarifies existing policy. It may fall short of the Planning Committee's expectations as exemplified by support at the July 23rd Meeting for Islington Council's Development Viability Supplementary Planning Document. The Brent report states:

...As such the production of a Supplementary Planning Document, essentially duplicating much of the existing relevant guidance against a background of resource constraint is recommended as inappropriate.

Finally the weight given to the Position Statement is limited:

The position statement can be regarded as a material planning consideration. However, the weight accorded to it will not be as strong as for instance Supplementary planning Documents, which have statutory status if adopted in accordance with regulations.

The background to the position statement is the stark fact that average housing prices in Brent are 12 times the average annual wage and that rents have risen by 60% over the last 5 years.  It seeks to maximise the amount of affordable housing through Section 106 obligations and states that 'the priority need in Brent is for affordable housing at rents well below market levels (social and affordable rented' with affordable home ownership and other forms of intermediate affordable housing a lesser priority although necessary for a 'balanced housing offer'.

This is contrary to the Conservative government's recently announced policy prioritising the building of ';affordable' housing for sale.

The preference for thorough viability assessments to be carried out at the pre-planning stage rather than later in the development cycle addresses some of the concerns raised at Planning Committee in July.

Affordable Housing, Viability, Vacant Building Credit and Poor Doors vital issues at Brent Planning Committee

The issue of 'viability assessments' where developers attempt to reduce the amount of affordable housing in developments that have already started has been well documented recently. This article from last year sets out the issues with passion LINK

Brent's Planning Committee on Thursday will receive a report which, between the lines, sets out how the Government and London Mayor are seeking to tie the hands of councils wanting to build affordable housing.

London councils have been trying to work together to develop a Protocol over  the issue and are considering employing consultants to respond to the developers' claims.

The report LINK states baldly:

 Government still wants to be seen to be encouraging additional housing development. Recent policy announcements such as the Starter Homes Initiative and the Vacant Buildings Credit both see normal affordable housing planning requirements as an expendable component in the delivery of this aim.

  The Vacant Building Credit was introduced by Ministerial Decree in November 2014:

The basic premise is that in order to support brownfield regeneration, development of empty or redundant buildings should be further incentivised. This is through reducing or potentially removing affordable housing contributions normally sought from qualifying housing developments. The Practice Guidance gives no flexibility on the application of the Credit related to a development’s viability. Consequently even if the development could in any case afford to provide policy compliant affordable housing amounts the Credit still applies.

The officers comment that details of the policy are inadequate and it is unclear to what extent it will affect Brent LINK but propose:

Vacant Building Credit will only be applicable to:

i) the Gross Internal Area of buildings (buildings as defined in the Community Infrastructure Regulations)

ii) buildings that have been in lawful use for a continuous period of less than six months in the three years before which planning permission first permits the chargeable development

What will certainly affect residents and those seeking affordable housing is the issues around developer profits and viability assessments that reduce the amount of affordable housing in developments, as well as the requirement to increase social rents to market levels. It is worth quoting the report LINK in detail here:

.    Notwithstanding the increases in values and delivery rates within the housing market and the viability of housing developments, Government still wants to be seen to be encouraging additional housing development. Recent policy announcements such as the Starter Homes Initiative and the Vacant Buildings Credit both see normal affordable housing planning requirements as an expendable component in the delivery of this aim. In addition developers can still appeal agreed Section 106 affordable housing levels on the basis of viability direct to the Secretary of State through changes introduced by the Growth and Infrastructure Act 2013. The adoption by the Council of the Community Infrastructure Levy (CIL) reduces the element of discretion that the Council has in relation to infrastructure matters that previously would have been captured through S.106 obligations. This means that when viability is raised as an issue, affordable housing represents a larger cost within what is a smaller contributions ‘pot’ around which there is flexibility to negotiate. 


.    Local authorities’ ability to control rents in S.106 obligations, following the move away from social rent as the preferred rented product, have been hindered by a judgement supporting the Mayor’s London Plan policy position of restricting such an approach. (LB Islington & Others v Mayor of London & Another - CO/16997/2013). The general assumption at national level (and followed through by the Mayor) is that affordable tenants should be paying higher amounts of rent more reflective of market levels. Where tenants find this unaffordable, they are initially supported by benefits. When benefits become insufficient, tenants should move on to options that they find affordable. Whatever the merits of this approach Planning has to work within these parameters.

.    3.12  Notwithstanding the potential progression of the protocol it is recommended to Committee that Brent in the mean time issues a position statement/guidance that seeks to ensure that as much of the information contained in viability assessments and ideally all can be viewed by the public. Where the developer is adamant that commercially sensitive information is contained within that they do not want to be disclosed, the Council will require an document that provides as much information as possible in the public domain. An easily understandable Executive Summary document should also be provided to be made available so that the opportunity for greater transparency exists.

Islington Council has set out its requirements on viability assessments fully with a detailed process that begins at the pre-application stage and is a document that Panning Committee members should study in detail. LINK

 Another controversial issue which Planning Committee has encountered is that of 'poor doors', separate entrances in mixed developments for 'market' and 'social residents. This is what officers say on the issue:

Tenure Blind development

.    3.18  There have been concerns and media coverage about ‘poor doors’ and highlighting differences in tenure related to design. The current Mayor’s Housing SPG in paragraph 1.3.18 is clear: “Schemes should be designed to maximise tenure integration and all affordable housing units should have the same external appearance and entrance arrangements as the private housing.” The Draft Interim Housing SPG recently issued for consultation has a slightly different approach to entrances. It states: “In some higher density schemes, separate provision of entrance and circulation spaces for different tenures may enable affordable housing provision which might otherwise be made unviable given high service charges and management arrangements. All entrances will need to be well integrated with the rest of the development...” 


.    3.19  Both documents are clear about the design being the same but reflect the real practicalities of dealing with management charges in particular. Case law has clarified that cross-subsidisation between tenures for management charges are not legal. Many private occupiers/tenants expect the prices they are paying for properties to reflect additional levels of service/standard related to the communal areas. Unsurprisingly Registered Providers are not keen for management charges to be higher than they need to be for their tenants/leaseholders. They want to control the charges as much as possible. They are also reluctant to be reliant on a third party freeholder/managing agent in managing those costs.

.    3.20 Compared to some rents, service charges can provide significant additional cost. For the purposes of benefits they are also regarded as part of the affordable rent charged. This increases risk to the Registered Provider of having to meet the cost out of other funds, thus impacting on overall affordable housing delivery. If there are risks of high charges, it will also affect the interest of Registered Providers in purchasing the affordable dwellings. Officers will seek to ensure that wherever possible tenure blind development occurs, however there may well be practical reasons why there may need to be differentiation in approach or physical separation between tenure types.

 This appears to leave wide open the potential for the continuation of at least some 'poor doors' developments in Brent.