The affordable housing hole

‘We are on target to deliver the programme and would not expect that to change substantially.’

Pat Ritchie, chief executive of the Homes and Communities Agency, is adamant that last week’s decision to allow the renegotiation of section 106 agreements on stalled sites will not result in any delay to the affordable homes programme.

The package of measures announced last week by the prime minister to stir the housing sector into action was expected to include a temporary suspension of affordable housing requirements written into section 106 agreements - a policy that would have had registered providers up in arms. The idea was diluted in an eleventh hour climbdown.

Instead, section 106 agreements will only be waived for sites where the Planning Inspectorate assesses that the affordable housing requirement has rendered the whole project unviable. The government says this could unlock 75,000 homes.

According to the HCA, this potential widespread rewriting of planning rules won’t impact on the building of 80,000 new affordable homes by 2015 as part of its £1.8 billion programme - despite an admission that up to a quarter of the programme is dependent on section 106 agreements.

‘Through the work we did in assessing the bids and agreeing the programme we would expect schemes to be viable,’ adds Ms Ritchie.

Alongside the potential for the relaxation of section 106 agreements is a £300 million pot of capital funding for new affordable housing. Bidding from social landlords for the fund are expected to be invited in the very near future, but the HCA insists the 15,000 homes it is earmarked to help bring forward are not compensation for any lost through developers canning their previous obligations.

‘It has to be seen as a direct investment in bringing forward additional numbers beyond the [2011/15] affordable homes programme,’ explains Ms Ritchie.

Trouble ahead

But some of the landlords delivering the 80,000 homes promised by the scheme tell a different story.

‘I’m intrigued that the HCA is confident it will have minimal impact,’ says Simon Dow, chief executive of the Guinness Partnership. ‘It feels like it might be a heroic assumption. I cannot see how there won’t be [disruption].’

The 60,000-home landlord has a commitment to build around 3,000 homes through its various subsidiaries, including 36 per cent that are reliant on section 106 deals. That equates to more than 1,000 homes that would be under threat if affordable housing obligations were loosened. Mr Dow adds that he believes the majority of those sites reliant on section 106 are not yet committed and so could be caught out by the shifting landscape.

‘The message is that if you are a developer and you have a project that is struggling for viability you can use that as a reason to go back and renegotiate [section] 106,’ continues Mr Dow.

The problem is that viability might imply something different to a profit-hungry developer than it does to a local authority or housing association - in Mr Dow’s words: ‘One person’s viable project is another’s walking disaster.’

To house builders, the chance to unlock sites is a godsend. Stephen Teagle, managing director of affordable housing and regeneration at Galliford Try, agrees with the HCA that loosening obligations will only result in the building of more homes, irrespective of tenure.

‘If a site is already being built on then you cannot challenge,’ he explains. ‘The direction of travel is to remove barriers to recalcitrant local authorities that haven’t accepted the new economic reality of delivery.

‘In some circumstances house builders are just sitting on sites and not working on them.’

Delay risk

There is of course no guarantee that the Planning Inspectorate will rule that section 106 agreements need to be torn up in anything but the most extreme cases. That is the essential difference between the plan in the form it ultimately took and the three-year section 106 ‘holiday’ that was being mooted until communities secretary Eric Pickles apparently dug his heels in to protect the affordable homes programme.

But even the prospect of challenges to the level of affordable housing risks adding delays to projects that need to start soon if the HCA is to meet its 2015 timetable - and if providers are going to access the grant funding, three quarters of which is only due to be paid on the completion of homes.

Responding to the mooted affordable housing holiday plan, the National Housing Federation initially said it believed 35,000 unbuilt homes could be at risk. Though it is unlikely anywhere near this number are genuinely under threat under the watered down plan, the NHF plans to meet the Communities and Local Government department, possibly later this month, to assess exactly what the impact will be on its members.

Even if the HCA is right and the affordable homes programme hits its target in two-and-a-half years’ time, there is another danger lurking in the relaxation of section 106.

‘Going forward we think it will be more difficult to compete [with the private sector] for land,’ warns John Hughes, development director at 25,000-home Notting Hill Housing Trust.

Mr Hughes is relatively sanguine about the effect of the stimulus package on the delivery of his own 2,300 homes under the HCA programme, with only around 15 per cent reliant on section 106.

But as a builder of homes itself, Notting Hill can only compete for land because section 106 effectively levels the playing field with the private developers.

‘If developers don’t have a requirement to deliver affordable homes that will increase their buying power,’ says Mr Hughes. ‘The way we can compete is to not deliver affordable homes as well but we don’t want to do that.’