Once upon a time, local authorities and housing associations, funded by private donations, such as the Peabody Trust (1862) provided affordable housing, alongside some employers. That worked fine until Margaret Thatcher won votes in the 1980s by allowing council tenants to buy their homes at discounted prices and failed to leave the proceeds with the councils to enable stock to be replaced.
The main methodology adopted since then has been to use the “planning gain”, i.e. the increase in the value of the land as it is re-zoned to building and planning application approved. Known as a “Section 106 Agreement”, it is essentially a bribe so the local authority can off-load social development costs, be they for roads or affordable homes. Developers are usually happy to have the roads and necessary attributes but wriggle out of commitments they dislike, notably affordable homes. They make little or no money from affordable homes and have rather a Victorian attitude to housing the impoverished within their gentrified estates. It makes the executive houses harder to sell.
The Ministry of Housing, Communities and Local Government (MHCLG) has recognised that this system does not work and proposed a “Community Infrastructure Levy ……a nationally set, value-based flat rate charge (the ‘Infrastructure Levy’). A single rate or varied rates could be set.” (p.22) This was ill-thought out, if it was thought through at all: a national levy could not both motivate each local developer and, at the same time, maximise the income for affordable homes nationwide. It would be about as successful as the Poll Tax.
That said, any policy for affordable homes should be funded, at least in part, by planning gain. There is no reason why the developer should pocket it. The 2020 Planning White Paper does say (p.60) that about 30,000 (a suspiciously round number) affordable homes were built in 2018/19 - 12.4% of the total – as a result of Section 106 agreements.
The Housing, Communities and Local Government Committee’s report “Building more social housing” defined rents as being “only affordable when they do not exceed one third of household income” (para. 23). When the Committee quizzed the Minister for Housing on how many affordable homes were needed, he responded ““we need more homes, more affordable homes and more socially rented homes”, but that he did not think it was right to put “a number on the number of homes that need to be built of one tenure or another” (para.51).
On 30 June 2020, the Minister tweeted that the 2021–2026 programme would deliver “...around 36,000 affordable homes a year”, which is a lower output than 9 out of the last 10 years. According to the Committee “There is compelling evidence that England needs at least 90,000 net additional social rent homes a year” (para.53) and they went on to show how that could be financially justified. By December, MHCLG had moved in the opposite direction: the target dropped to 26,000 a year for the next five years, costing them, or rather us, £7.4bn.
Annex 2 of the 2012 of the National Planning Policy Framework defines what is affordable as, basically, anything 20% or more below market price. The definition of those entitled to affordable housing is to be savoured: “All households whose needs are not met by the market can be considered in affordable housing need.” How many that might be is not quantified, still less the extent of future unmet need.
However, MHCLG has a precise formula for calculating future needs: “ Total newly arising affordable housing need (gross per year) = (the number of newly forming households x the proportion unable to afford market housing) + existing households falling into need”. The trouble is that MHCLG has little or no idea of any of the numbers on the right hand side of the equation.
But they do have an “Affordable Homes Programme”. This will operate through Homes England, a quango, which “will create a more resilient and diverse housing market. This means partners will also be expected to focus on promoting significant use of Modern Methods of Construction (MMC), high-quality sustainable design and working closely with local small to medium-sized enterprises (SME) housebuilders.”
“Homes England” excludes London where “Overall the GLA aims to support 82,000 affordable homes between April 2021 and March 2026. This will see investment partners in London make a significant contribution to the national target of 180,000 starts by 2026.” “Over half of these starts across the new programme will be at Social Rent – where we know there is the greatest need in London. The remainder will support households into home ownership, through the delivery of London Living Rent or Shared Ownership homes.”
The 41 page “Homes for Londoners: Affordable Homes Programme 2021-2026 Funding Guidance” (November 2020) is immensely complex with all kinds of categories of affordable homes and rules and regulations for developers and tenants/prospective owners. Although it gives the impression that only new-build homes are being funded, this may not be the case: “91. The Mayor will use the Affordable Homes Programme 2021-2026 to maximise the number of new homes in London and is eager to ensure funding results in net additionality. For this reason, the GLA will only fund a limited number of acquisitions of existing homes through this programme.” The good news for MPs is that Sadiq Khan will provide them with new houses as their salaries are below his £90,000 limit for shared ownership. (Para 22)
One of the mysteries is why London is being treated differently. The additional layer of bureaucracy (the GLA) sits between the MHCLG, who still intervene when it suits them, and the Greater London local authorities who actually authorise these homes. The other bureaucratic layer, Homes England, acts similarly for the rest of the country.
If you ever imagined developers find the sites, get planning approvals, employ builders and sell the homes to the future owners, whether private, housing associations or local authorities, think again. Homes England, with only 1,042 staff in 2019/20 (albeit up 20% from the year before) did it all single-handed. According to its Chief Executive, “I’m incredibly proud that we have exceeded our annual delivery targets...and in the number of homes we have delivered that were additional to the market [sic], as well as surpassing our target for affordable housing delivery.” Its Annual Report does not quantify any future targets, just the ones surpassed, but it would be churlish to imagine those were finalised after the event. Amongst its many other achievements, it has delivered a modern slavery awareness webinar and it “continues to create a hostile environment for modern slavery and ambiguous supply chains.” (p.29)
Homes England was founded in 2008 in succession to the Housing Corporation. Its original role was narrower than it now seems to enjoy, namely just to assist housing associations to acquire affordable housing – that and no more. If we need Homes England at all, and that is questionable, it should be restricted to its original remit.
With the Affordable Homes Programme, Homes England and Homes for Londoners, the government has created a dense layer of expensive bureaucracy. It is unnecessary for a simple reason: central government is trying to intervene top down in a process that should be driven bottom up. Local authorities have a far better grasp of what housing in general, and affordable homes in particular, are needed where than the MHCLG or its affiliated bureaucrats. They also have a far better grasp of what resources are needed from the centre to meet those needs. Their annual housing plans, and consequential financial needs, would be unlikely to total to national needs, nor what HM Treasury is prepared to provide, but at least the negotiations would start from reality. Redundant High Street shops and office space post-pandemic should be factored in as well as planning gain, not to mention the savings from the removal of Kafkaesque meddlers which would streamline, as the government claims it wants, planning processes. Less bureaucracy, more affordable homes.