Author: Cyril Richert
Last July we attended the hearing organised by the government inspector in charge of reviewing Wandsworth planning policy. While we were discussing the level of housing in the borough, a senior officer acknowledged that Wandsworth was unable to meet its target of 40% affordable accommodation in every new developments. The figures are way below, although at the same time the Council is exceeding its target on total housing built.
So, why is the Council unable to promote affordable housing, or why is it building so many unaffordable units?
A simple answer is: for many reasons, including the biased assumption that by promoting luxury developments it will encourage developers to provide more affordable too (the same as the political assumption that by removing constraints on the richest, it will automatically cascade to help the poorest – although we all know from history and so many studies that it is completely wrong), the need to raise more Community Infrastructure Levy (the tax paid by developers to the Council) and Section 106 money as central government is cutting funding and Council’s budgets have been slashed (“the bigger the scheme, the fatter the bounty, leading to a situation not far from legalised bribery – or extortion, depending on which side of the bargain you are on” wrote another article in 2014), and a general consideration that new development should be looked on favourably.
First of all, what is affordable housing?
According to the London Plan (March 2015):
“Affordable housing is social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market.”
In reality developers often ignore the words “social housing” and concentrate solely on “intermediate” accommodation. Therefore any scheme labelled as “affordable” only means that dwellings will be sold at up to 80% of London’s superheated market rent (an “affordable” studio flat in the new development of Battersea Power station is advertised £600,000). For a family home, the household income is extending now to £80,000 (while the average household income is only half of that amount).
Although London’s affordable housing target (Policy 3.11 SPG Housing) says: “60% of the affordable housing provision should be for social rent and 40% for intermediate rent or sale“, it is ignored in most of the developments in Wandsworth.
Wandsworth Core Strategy Policy IS5 on Housing says:
“On individual sites outside Nine Elms a proportion of at least 33% of homes should be affordable”
Let’s take a few examples with some approved applications:
For the Ram Brewery site, the scheme includes 661 units (with only 66 of them – 10%, all in the same block 9 – being affordable, i.e. shared ownership, which will never get build before the decommissioning of the gas-holder beside). There is no social housing at all.
For 198 York Road (Homebase), of the 261 units proposed a mere 30 (11.5%) are offered as shared ownership, 8 x 1 bedroom and 22 x 2 bedroom.
And even in the Peabody’s redevelopment on St John’s Hill, only 278 units are classifieds as affordable, a reduction of 74 units comparing with the existing estate, and 53% of the 527 flats. Very ironic when remembering Peabody’s purpose, as a charity.
At a recent consultation meeting, a senior Council officer answered a local resident asking how can we build homes that the people who were born and raised here can afford to buy: “We can’t – that’s never going to happen”. Is that Wandsworth Council’s policy?
Council and developers use secret viability assessments to justify the unjustifiable
How is the Council able to approve schemes so clearly in breach of their housing policies? The answer is to be find in the viability assessment provided by the developers.
Developers who cannot provide at least a third of affordable accommodation will have to justify the proposal with a site based economic viability assessment (Core Strategy 4.186). This assessment produces the “residual land value” by deducting the total costs of the project (construction, fee and profit) from the total projected value. The game is therefore to under-estimate the projected value of selling the dwellings and maximise the construction cost. Instead of lowering their profit which must be retain, the developers will only have to explain that the more affordable units, the less viable it is.
An impressive article published by the Guardian this summer shows how developers exploit flawed planning system to minimise affordable housing. It shows that viability has got nothing to do with developers’ schemes, but everything to do with safeguarding their own profit. Outrageous, but legal.
“Within the pages of calculations, produced for Lend Lease by property agent Savills [Heygate redevelopment – Southwark], the level of “acceptable” profit is fixed at 25%”
The article explains:
“The viability assessment therefore became a way of proving that the affordable housing targets were indeed “reasonable”, while still allowing the developer to make a decent profit. Hence this profit was enshrined as a fixed cost in the viability equation, at a healthy 20% margin – a level which might have been a necessary incentive during the recession, but is now more than most hedge funds make. […]
To begin with, it worked, with many major schemes achieving 35–50% affordable housing across the city – not the 10–25% we are seeing now. “The bitter irony is that now London is back in boom,” says Duncan Bowie [former GLA senior planner] , “we’re getting much less affordable housing out of major market deals than we used to in the recession. And now the housing grant has effectively gone,” he adds, “viability has become a one-way negotiation. It’s not about best use of public money, it’s about developers using every technique and appraisal in their power to avoid compliance with planning policy.””
The viability calculations are kept secret, explains the Guardian:
“A crucial failure of the current system is that developers’ viability assessments are regularly hidden from councillors and protected from public scrutiny on the grounds of “commercial confidentiality”. Revealing the figures, developers argue, would compromise sensitive trade secrets.”
As in Wandsworth borough, many major schemes within London are assessed by BNP Paribas (main provider of viability assessment for Wandsworth planning proposals). Dr Anthony Lee, BNP Paribas’s director of financial viability advisory services, says that affordable housing requirements are only aspirational targets – they are a starting point for negotiation. The article says it’s a position that others are quick to question. “To say an affordable housing target is an ‘aspiration’ is just belittling the status of statutory plans,” says housing expert Dr Bob Colenutt. “These are policies that local authorities have spent years painstakingly developing and consulting on in a democratic process“. But if those firms are hired by local authorities to produce so-called “independent” viability assessments one day, and the day after advise the same private developers on other projects, how can their judgement be impartial?
According to the article, Steve Cowan, leader of Hammersmith and Fulham since last year – who stood on a ticket of “homes for residents, not overseas investors” – takes a no-nonsense line. “These assessments are not worth the paper they’re written on, I often just put them in the bin.”
Wouldn’t be a good idea to apply the same lines in Wandsworth?