It has taken less than a year for the new Mayor of London to abandon the firm commitment to mandate that 50% of homes on new developments are built as affordable housing. Now, in a deal with London’s property developers he has announced that he will only be seeking 35% affordable housing on new homes.
It is remarkable that the Mayor’s official press release, announcing the new plans on affordable housing included quotes from property developers like Mount Anvil, themselves no stranger to the kind of games that undermine affordable housing delivery.
The Mayor’s aspiration
During the election campaign Mr Khan said that he would change the London plan ‘on day one’ to implement his commitment to 50% affordable housing, a return to the policy of Ken Livingstone, which was abandoned by Boris Johnson. But now, according to the new Mayor that target is merely an ‘aspiration’. In downgrading planning policies to ‘aspirations’ Mr Khan is adopting the language of Dr Anthony Lee, the development consultant from BNP Paribas that advises many boroughs and is responsible for signing off on deals which have led to huge losses in affordable housing.
The move has rightly been criticised as a betrayal of the promise the Mayor made to Londoners in order to get elected. In fact it is much worse than that.
Currently the London plan has no fixed target for the amount of affordable homes to be delivered. Instead the plan seeks to ‘maximise’ the amount of affordable housing. This has been problematic as developers tend to argue that the maximum amount of affordable housing that can be sustained is somewhere around 0.
Affordable housing targets are set by boroughs, and most boroughs in London have targets of between 40-50%. Southwark has a target of 35%, but when that was approved it was done so on the basis that a lower target was adopted in exchange for more family sized homes.
These local housing targets are not just plucked out of the air. They are not to use the BNP Paribas terminology, an ‘aspiration’.
Under the National Planning Policy Framework planning authorities are required to base their policies on an assessment of the need for new affordable housing in the borough. The fact that they are so high is simply a function of the fact that there is such a desperate need for affordable housing in London.
Local plans are also subject to a viability test. If a target of 50% would render development in the area to be generally economically unviable it cannot be approved. In other words it should normally be financially viable to build developments with affordable housing at levels of between 40-50%.
By setting a lower target than most boroughs, Mr Khan has admitted he has no intention of meeting the needs of London’s citizens in the near future. Indeed the new SPG is explicit in saying that the 35% target was arrived at not through an assessment of need but from an analysis of previous development applications and approvals (many of which will have been a product of dodgy viability assessments).
The claim of London for all is a sham, it is and will continue to be London for those who can afford it and the industries that serve their needs.
By setting a target below that of most boroughs, the mayor is undermining local democracy.
Under the Mayor’s plans any development of significant size that proposes more than 35% affordable housing will now not have to face a viability test and their application will be approved by the Mayor (baring of course other issues).
So what happens if a developer proposes a development with 35% affordable housing in a borough with a 50% affordable housing target?
Under the last mayoralty, Boris Johnson regularly undermined affordable housing targets by approving developments that had been refused by boroughs on the grounds of not providing enough affordable housing.
But that, in typical Johnson fashion was done on an ad-hoc basis. The new mayor appears to have made that policy, although to be fair, with a higher target.
So why has the Mayor caved without even putting up a fight? It seems that the Mayor and his team have bought the special pleading of the development industry, who claim that development in London is somehow financially unviable, and that if the Mayor puts strict planning controls on our developers economic activity will grind to a halt.
But all the Mayor needs to do is simply look at the facts. As I reported recently, developers profits have exploded in recent years, and the amount of money they make on each sale has increased substantially.
Last weekend, more evidence emerged from my old friends at the Bureau of Investigative Journalism, showing the vast sums of money the bosses of the UK’s top house builders have paid themselves in recent years.
All this is value extracted from an industry which the development community consistently complains is only barely viable in terms of profits.
The real solution
The problem with the way that the way in which the development viability test is currently administered, is that it asks the wrong question. Often the question put to planning authorities is: “is building affordable housing viable in my high cost, high rise, luxury development financially viable?”.
Affordable housing is essentially a form of price cap. If the revenues a developer can receive for new housing are held down, but the costs are Versace designed interiors, in a glass and steel tower designed by a ‘starchitect’, it is obvious to see how affordable housing becomes unviable relatively quickly. And that is often the deal developers put forward to councils, in a previous case study revealed by this website, developers were budgeting £25,000 per kitchen, even in the affordable component of their development.
But all that doesn’t mean that developing affordable housing is actually unviable. If instead of proposing high cost development that is only attractive to the international super rich, developers proposed to build mid-rise, lower cost buildings then we could build the homes we need in our city.
The way to achieve this through the planning process is simple enough, change the viability test to ask a different question. Is a policy compliant development achievable on any specific site? If the answer is yes, the planning authority could reject any development that didn’t meet the plan. It would then be up to the architects and developers to use their ingenuity and come up with any design they wish within those constraints. This is in fact how the viability test should be administered, but rarely is.
However, this simple change, which has the potential to completely change the way we develop our city, has been rejected by the Mayor’s office, who have also put it in the ‘aspiration’ box. Perhaps having a test that demonstrates the real potential social benefit of development is simply a prospect too terrifying for the Mayor’s new friends in the development industry.
The good news
Finally, it has to be said, the new development SPG is not all bad news. Contained within it are many things campaigners have been fighting for for years, more transparency for financial viability reports amongst them.
The Mayor has also rejected the case made by industry lobby group RICS, that market land values should be used as the basis of viability assessments. As land owners can get much more if they don’t build affordable housing, the problems with that approach should be obvious.
Finally, the Mayor has explicitly said that on public land it he will not seek the maximum financial return, but instead choose to maximise affordable housing delivery. That is in stark contrast to his predecessor, who sought to sell of London’s land to the highest bidder, which was frequently the most aggressive developer seeking to milk the planning process for all its worth.