During his Mayor of London campaign, Sadiq Khan pledged a target of 50% of all new homes in London to be affordable. This target is expected to be a key plank of the revised London Plan to emerge in 2017. The Mayor has now announced the first steps in "working towards" the target, including a new pathway for developments with higher levels of affordable housing to avoid viability assessments altogether. In this article we summarise the Mayor's proposals in the draft Supplementary Planning Guidance (SPG) on Affordable Housing and Viability, which is now out for consultation.
As the name suggests, the SPG supplements the existing policy set out in the London Plan. Policy 3.11 of the London Plan establishes that, "The Mayor will, and boroughs and other relevant agencies and partners should, seek to maximise affordable housing provision and ensure an average of at least 17,000 more affordable homes per year in London over the term of this Plan" subject to having regard to the factors listed in Policy 3.12 including particularly the viability of developments. The current guidance (expressed in Part 4 of the Housing SPG published in March 2016) does not add any specifics to the maximisation position and sets out mainly technical guidance on how viability assessments, including review mechanisms, should be organised.
The new draft SPG is clear that it cannot set a fixed target for affordable housing delivery as it does not replace what is already there in policies 3.11 and 3.12. Instead, the draft proposes to incentivise developments to meet a fixed target by essentially removing the requirement for viability assessments from these developments. Where a development provides 35% affordable housing and does so entirely on-site, it would (subject to any other requirements such as mix of tenure) be eligible to proceed as a "Route B" application with no viability assessment at the outset.
All other applications, including particularly those offering off-site provision or contributions in lieu, would follow "Route A". These require both up-front viability evidence and a review mechanism to be triggered when 75% of units are sold, with the particulars of the review calculation set out in the guidance as well. Whichever route an application takes, the draft SPG also suggests a further incentive for delivery of permissions through an early review mechanism that would apply if an agreed level of progress has not been made within two years of the grant of permission.
To further encourage developers to avoid viability assessments, the information required as part of the assessment is more specifically defined, particularly in relation to costs to allow for benchmarking with BCIS. Transparency requirements are also more stringent, with the Mayor reserving the right to publish information where the Borough has not already done so.
The threshold approach would not be mandatory and the Boroughs are indeed encouraged to retain their current arrangements if these are delivering in excess of 35% affordable housing. Another area for the Boroughs to be involved relates to the mix of affordable tenures. The draft SPG seeks to formalise the flexibility inherent in the existing policy by requiring 30% of all provision to be low cost rent and 30% to be intermediate, with the remaining 40% determined by each Borough. The consultation seeks views from the Boroughs on the tenure mix and their responses will no doubt be of great interest.
Build to Rent
The draft SPG also expands on the treatment of Build to Rent properties, replacing Part 3.3 of the existing Housing SPG. The aim is to achieve a pathway for schemes to be identified and secured by covenant, incorporating specified management standards to drive best practice in the sector. Due to their unique nature, Build To Rent schemes would need to follow Route A with full viability assessment, but the draft SPG offers the ability to deliver affordable housing in such developments entirely through discounted market rent tenures, to maintain the rented nature of the development as a whole and further encourage on-site provision if it all possible.
The consultation on the draft SPG is open until 28 February 2017. With both the principle of the 35% threshold approach to be proven, and the effects of the Housing White Paper to be incorporated, the results should make for very interesting reading.
We regularly advise clients making representations to consultations on planning policy and would be pleased to assist if you are looking to take part in the SPG consultation.