The Mayor of London has revealed his plans for his “shake up” of affordable housing and viability. He has published his draft guidance on the topic, which is open for consultation until 28 February 2017.
The good news for the Build to Rent (BTR) sector is that the Mayor is keen to encourage growth in this relatively new sector and has emphasised the need for local planning authorities (LPAs) to recognise the “distinct economics of the sector” compared to traditional housing.
The Mayor has devised a new affordable housing regime for BTR which he calls his planning “pathway”. Instead of requiring BTR developers to meet a 35% affordable housing threshold, he says that BTR should be assessed on its own viability. This does not necessarily mean that provision under 35% will always be acceptable, but LPAs are encouraged to consider a different approach to profits, sales, marketing, risk and rate of disposal when reviewing BTR viability appraisals.
The draft guidance includes a new definition of BTR:
• 50 units or more; • 15 years plus; • Self-contained and separately let; • Single ownership and management; • Professional on site management; and • Longer tenancies – ideally three years plus.
S.106 agreements will record the requirement to continue the BTR operation during the 15 year covenant period. Use which does not accord with the criteria (such as selling off individual units) could trigger an affordable housing “claw back”. The S.106 agreement could also require a review of the viable level of affordable housing at various stages of the development. This can have a significant impact on profit and timing of delivery, as extra on-site affordable housing maybe required.
The Mayor wants BTR to showcase best management practice and design. His draft guidance includes a raft of key management standards which he will expect BTR developers to follow. These include formula linked rent reviews, advertising on the GLA’s portal and six month break clauses as standard.
Find out more here.