In August 2017, London Mayor, Sadiq Khan, published his Supplementary Planning Guidance on Affordable Housing and Viability (SPG).

This supports his long-term aim for 50% of new homes in London to be affordable, and offers a Fast Track Route for schemes promising at least 35% on-site affordable housing. This level is increased to 50% on public land, and is potentially much higher for registered providers. There are, however, various exemptions to the Fast Track Route, and hurdles to overcome during the development process.

Will the Fast Track Route actually speed up housing delivery in London?

If an application qualifies for the Fast Track Route, viability information will not be required. To qualify, the application must:

  • promise to deliver at least 35% of affordable housing on-site (this is increased to 50% on public land, and for certain registered providers 50% or higher) without public subsidy; and
  • be consistent with the relevant tenure split and other local requirements.

The applicant must have also sought to increase the level of affordable housing above the 35% threshold by accessing grants.

What proportion of developers will be able to take advantage of it?

Various schemes are excluded from the Fast Track Route, and must submit viability information in the usual way. These include:

  • Developments that propose off-site provision, or cash in lieu, of affordable housing;
  • Schemes that require public subsidy; and
  • Schemes where the applicant wants Vacant Building Credit (VBC) to be applied.

VBC reduces the requirement for affordable housing contributions where a vacant building is brought back into use or is demolished to make way for a new building. The credit is based on the amount of vacant floor space being brought back into use or redeveloped. The Mayor's view is that in most circumstances it will not be appropriate to apply VBC in London. The SPG sets out criteria that should be met in order for VBC to apply. These include being able to demonstrate that the building has not been made vacant for the sole purpose of redevelopment.

What about small sites?

Whilst the Mayor's view that affordable housing provision should be required on sites which have a capacity to provide ten homes or more, he will support Local Planning Authorities that wish to apply requirements for sites providing fewer than ten homes. The Fast Track Route may be appropriate for such sites.

What if the site does not meet the 35% threshold?

It is hoped that setting a threshold will provide an incentive to developers to provide affordable housing at a level of 35% or more, so that they can proceed without the need to provide viability information. However, where a scheme does not meet the 35% level, a viability assessment (in a standardised form with full supporting evidence) must be submitted. This will then be scrutinised by the Local Planning Authority (LPA) and, in some circumstances, the Mayor, who will determine the level of affordable housing that is viable on the site. The LPA (and the Mayor) may conclude that more than 35% affordable housing is viable.

Ongoing review

Whether or not an application is proceeding along the Fast Track Route, review mechanisms will be employed to ensure that the maximum amount of affordable housing is achieved.

If an agreed level of progress has not been achieved within two years of the grant of consent, a viability review will be required. This is to ensure that consents for housing schemes are not only being progressed in a timely manner, but also their delivery is moving forward swiftly. This could result in further affordable housing being required on-site and plans will have to show which units could be converted into affordable housing units in such cases.

Viability tested schemes will also be subject to Late Stage Reviews, once 75% of homes are sold. The outcome of this review is likely to be a financial contribution towards off-site affordable housing provision.

Build to Rent (BTR)

There is no distinct planning use class for BTR, so the SPG contains a new definition, as follows:

  • a development, or block/phase within a development, of at least 50 units;
  • the homes to be held as BTR under a covenant for at least 15 years;
  • all units to be self-contained and let separately;
  • unified ownership and management of the development;
  • longer tenancies (three years or more) offered to all tenants, with break clauses that allow the tenant to end the tenancy with a month's notice after the first 6 months;
  • offer rent certainty for the period of the tenancy;
  • on-site management;
  • operated by providers who have a complaints procedure in place and are members of a recognised ombudsman scheme; and
  • not charge up-front fees other than deposits and rent in advance.

It is recognised that BTR homes differ from build for sale schemes. All BTR schemes will be subject to viability testing to determine the maximum amount of affordable housing that can be provided.

What is the likely impact of this guidance?

The Mayor has recently directed Westminster City Council to refuse an application on the site of New Scotland Yard where only 3% affordable housing was offered. The Mayor considered that both the amount of affordable housing and the lack of a review mechanism meant that the application did not accord with the new SPG. In this case, the SPG is being used not to speed up delivery but to enhance the amount of affordable housing by virtue of either forcing the developer to fall back on the original amount offered or to go to appeal. This application was submitted before the SPG was published so doesn't show how applicants might view the SPG when drawing up applications on sites that haven't got existing consents but it does show that the Mayor intends to enforce the policy position that has formed a large part of his platform since taking office.