Reaction to London’s housebuilding package: affordability cut must not set precedent

Ian McDermott, chief executive of Peabody and chair of the G15 group, said the G15 understands the need for the policy changes, but highlighted the need for change in the private sector to help bring forward affordable homes that housing associations want to buy.

“We understand the challenge that government and the mayor face in addressing what is now a significant housing market failure in the capital,” he said.

“Emergency times call for emergency measures, and the need for some temporary interventions to unlock stalled sites and get developers building quickly is clear. Action to reduce costs and simplify some planning requirements will help.”

Mr McDermott highlighted the aim of boosting the number of social and affordable homes provided through developer contributions, with requirements for these set to be upped to 60% of the total affordable housing that developers must build.

But he warned that “very often” social landlords are asked to buy homes that they will not own or manage and that tie them into “complex management arrangements and service charges”.

“We know this isn’t good for the residents who move in so our appetite to buy is of course limited in those circumstances,” he said.

“We’ve published guidance about how developers can engage and work with us from the start and we hope as a result we’ll start to see some improvement following this package.

“Housing delivery depends on the public, private and social sectors working in partnership, and hopefully today’s announcement will support better ways of working in the future.

“This will need culture change in the private sector and a wider package to restore housing associations’ capacity to invest in new supply, including rent convergence and low-cost loans alongside higher and more flexible grant rates.

“With these in place, we can work through these tough economic and market conditions to help scale up delivery and get the good-quality social and affordable homes Londoners need in this parliament.”

“What’s most important is that we deliver the homes people need, and we know that affordable housing requirements in the planning system deliver almost half of all new social and affordable homes across the country”

Kate Henderson, chief executive of the National Housing Federation, reiterated the group’s opposition to watering down housing targets and highlighted that almost half of all new social and affordable homes are delivered through the planning system.

She said: “It’s vital that action is taken to address these challenges, and while we don’t want to see affordable housing ambitions watered down, we hope that this temporary and London-specific package of measures gets spades in the ground and is quickly followed by ambitious plans to boost social housebuilding.

“This should include the confirmation of rent convergence, details of social housing funding and low-cost loans.

“What’s most important is that we deliver the homes people need, and we know that affordable housing requirements in the planning system deliver almost half of all new social and affordable homes across the country.

“Housing associations are committed to working with the government, developers and local government to ensure these requirements operate effectively and provide the homes families need.”

Grace Williams, executive member for housing and regeneration at London Councils, said the “chronic shortage” of affordable housing in the capital is the root cause of its soaring rates of homelessness – so building more of this type of housing remains a priority for many boroughs.

She added: “Boroughs have long called for bold action to accelerate housing delivery. In particular, we have made the case for funding and policy changes that would give councils greater financial capacity to support affordable housebuilding.

“The evidence shows this is the quickest and most effective way of accelerating housing delivery across all tenures.

“These announcements from the government and mayor represent a significant change in approach. Boroughs will now be looking at the proposed changes in detail to understand the implications for housing delivery in our local areas.

“Ultimately, with boroughs having already granted planning permission for almost 300,000 homes in London that are yet to be built, we need to ensure house builders deliver on their commitments so that we can collectively tackle the housing crisis facing the capital.”

Matt Downie, chief executive of Crisis, said: “The government has said they want to end the moral stain of homelessness. We back them to the hilt in that ambition – but we have real concerns that the solution they are presenting here doesn’t come close to addressing the scale of the problem.

“Over the years we’ve seen how fiddling with targets and putting faith in market forces leads to nowhere near enough social rent homes being built. The stark and shameful truth of this is record levels of homelessness.”

He called for “cast iron guarantees” from government that social housebuilding will happen at scale and highlighted that councils are spending nearly £5m per day on temporary accommodation in the city.

He added: “Without the social housing required to prevent people from becoming homeless in the first place, the government risks just propping up a broken system that is not only a ‘moral stain’ on the country, but which also makes no sense for the country’s finances.”

Mairi MacRae, director of campaigns, policy and communications at Shelter, called for the government to give a “firm guarantee” that the changes to planning rules will result in more social housing, not less.

She said: “For the secretary of state to stop homelessness rising, we need a huge increase in social homes.

“If private developers can now dip into the Social and Affordable Homes Programme, they must deliver new social homes that don’t come at the expense of ones that councils and housing associations would have built anyway.”

A sense of hope

Others in the sector, however, welcomed the news and said it would likely drive up housebuilding, although they highlighted that more work needs to be done to put it on a stable footing long term.

Steve Turner, executive director at the Home Builders Federation, said: “It is a very positive move, as in the current policy and economic environment, with a growing list of taxes and policy costs being levied on development, fewer sites can support 35%.

“A more flexible approach will allow some investment in new housing to return, but affordable housing levels are not the only reason housing delivery has collapsed.

“While mayoral and borough policies have reduced viability, central government has continued to levy additional taxes and policy costs on delivery with a new levy on new homes being introduced next year and a recent consultation on a huge hike in landfill tax.

“More widely, London faces an acute affordability challenge, in particular for first-time buyers, which limits builders’ ability to invest, as do recent delays caused by the problems with the Building Safety Regulator.”

Craig Carson, regional director at Barratt London, said: “These welcome proposals will help us start to tackle the housing crisis we face in London, delivering more homes of all tenures and the investment in infrastructure, jobs and economic growth that development will bring to our capital.

“Alongside this emergency package, it is vital that government looks at ways we can support buyers in London.”

Paul Rickard, chief executive of Pocket Living, said: “The range of measures, including the reduction in the affordable housing threshold which we have been advocating for, is a sensible and welcome short-term move that should unlock thousands of new schemes across London and help restore confidence in the market.

“This helps to kick-start delivery and allows us to look to longer-term structural reform, including a rethink of the wider approach to viability in London.

“There are currently 281,000 unbuilt homes with planning permission, many of which will require further intervention. Unlocking as many schemes as possible offers the fastest route towards the government’s 1.5 million homes target and we expect policymakers to continue to work with the sector to find innovative and fair ways to extend these interventions to consented schemes.”

Justin Young, chief executive of the Royal Institution of Chartered Surveyors, said: “Getting rid of late-stage viability assessments where house builders commit to 20% affordable housing will soften a barrier to equity investment.

“Developing the call-in powers of the mayor is also welcome. The mayor will have the ability to get projects moving, even in local authorities where they have been delayed indefinitely.

“A City Hall Developer Investment Fund, with an initial allocation of £322m of grant investment, is a powerful resource and makes it clear that this government is serious about getting London housebuilding moving again.”

“The 35% affordable homes target for new developments is admirable, and it’s one London should strive for in the long term. The reality is, however, that 35% of nothing is nothing. When no new developments are being built, there will be no new social homes.”

John Dickie, chief executive of BusinessLDN, said: “With housing starts, planning applications and house sales at historic lows in the capital, the government and mayor are right to take action to accelerate delivery of the new homes that Londoners desperately need.

“Temporarily adjusting the percentage of affordable homes that a project should provide and offering time-limited relief on developer contributions to local infrastructure payments are welcome.

“These changes, along with greater flexibility on design standards and enhanced planning powers for the mayor, will help to get more shovels in the ground.

“To build momentum, the government needs to double down on reforms to speed up the Building Safety Regulator’s approvals process and stand ready – with the mayor – to intervene if supply doesn’t respond and further action is needed to kick-start development and support economic growth.”

Antonia Jennings, chief executive of the Centre for London, said: “The 35% affordable homes target for new developments is admirable, and it’s one London should strive for in the long term.

“The reality is, however, that 35% of nothing is nothing. When no new developments are being built, there will be no new social homes.

“If reducing the affordability targets to fast-track planning permission unlocks a substantial number of new developments, the end result will be more social homes in the capital.

“With the state of the housing crisis, we need immediate action and to make difficult decisions to get spades in the ground.

“This is a pilot project, set to take place for two years. It must be used as a temporary measure to release the backlog of stalled sites and unused land, not as a long-term solution.”

She also called for further change, adding: “We need a better system across the board, which not only considers housing demand, but also our existing supply.

“In housebuilding, the long-term solutions are multifaceted and range from increasing the number of construction workers in London to reducing the limitations of government grants, and fixing the financial foundations of social housing providers by increasing the Local Housing Allowance every year to account for market rent rises.

“Alongside housebuilding legislation, we need to see regulation of the private rental sector to prevent sky-rocketing rents, and a proportional property tax to prevent huge houses being under-occupied.”