Shifting sands

Originally posted on July 23 on Inside Edge 2, my blog for Inside Housing

A new report aims to maximise Section 106 contributions to affordable housing but the government seems intent on moving in the opposite direction.

Rethinking Planning Obligations is the result of research for the Joseph Rowntree Foundation by a team from Oxford Brookes University and the University of East London. It notes a sharp fall in the contribution from Section 106 since the credit crunch: from 32,000 in 2006/07 (65% of all affordable homes) to 16,000 in 2012/13 (still significant but only 37% of the total). Contributions to affordable housing varied across case study areas from 2% to 87%.

The decline is partly the result of the housing market downturn: planning permissions agreed before 2007 with high proportions of affordable housing were not viable after the crunch and had to be renegotiated.

However, the government has also introduced a series of changes that make it easier for developers to argue down their contribution, and secretive viability assessments have become a key weapon. For detailed examples of how it works, see Oliver Wainwright’s story about Neo Bankside in The Guardian this week or The Bureau of Investigative Journalism’s story from May about Greenwich Peninsula.

The introduction of the community infrastructure levy has also made Section 106 the only negotiable element of planning obligation, potentially making it more vulnerable to viability assessments.

At the same time, the definition of ‘affordable’ was weakened in the National Planning Policy Framework to mean below market value rather than what people can afford. Data on the type of affordable homes built under Section 106 are no longer collected but it seems a fair guess that contributions are becoming less ‘affordable’ as well as fewer.

The report calls for a combination of action to strengthen Section 106 and local measures to supplement it: ‘Key to strengthening the operation of Section 106 will be introducing greater transparency into the viability process, clarifying the viability parameters used to ensure appropriate capture of land value uplift and making changes to the definition of affordability in planning legislation.’

Examples of local action to maximise provision include:

• Employing specialised viability officers or teams in planning departments and additional training in viability on offer to officers and members
• Taking a more dynamic view of viability to boost provision of affordable homes in later stages of projects that out-perform the original viability appraisal
• The use of supplementary planning documents (SPDs) to set localised conditions and criteria for viability assessments and planning agreements, and to specify levels of rents (Islington gave a presentation on its plans at the launch on Thursday)

And the report highlights local good practice including partnerships with local developers in Newcastle, cross-local authority cooperation in Cambridgeshire and community land trusts in Cumbria.

A ‘golden triangle’ of land availability, finance and strategic leadership at the local level has the greatest potential to supplement and enable Section 106 provision:

‘Proposals to scale this up could include: promoting strategic leadership opportunities through an enhanced duty to cooperate and increased action by local enterprise partnerships (LEPs) and City Deals to address housing; devolving increased financial capacity to the local level through ability to borrow and access to national funds and enabling special purpose vehicles (SPVs) through public sector land assembly by lifting the requirement to dispose of public land at the highest price and the use of compulsory purchase orders (CPOs).’

Against that, the government’s localism agenda seems to be having a minimal impact so far: ‘Across the case study areas, the government’s localism agenda was not making a significant impact on numbers, despite delivering locally tailored schemes. In particular, LEPs and City Deals are not prioritising affordable housing within investment for growth.’

Even more worrying is the fact that the research took place before another raft of policy changes that have further undermined the provision of affordable housing through Section 106. The government sees cuts in planning ‘red tape’ as essential to its drive to get more homes built, but critics argue that cuts to Section 106 contributions simply feed through into higher land prices.

In a survey by the Local Government Association (LGA) last week, 80% of local authorities said that Section 106 exemptions for small developments (fewer than 10 homes) and empty buildings had hampered their ability to build affordable homes. The LGA also pointed to evidence that developers are using the reforms to remove previously agreed contributions.

And even more changes are on the way. Just after the Budget, the government’s productivity plan confirmed its commitment to 200,000 starter homes and that ‘Section 106 contributions for other affordable housing, and tariff-style general infrastructure funds, will not be sought for them’. Affordable contributions could also be relaxed on custom build sites and it remains to be seen what happens with the new zonal system for giving automatic planning permission for brownfield sites.

The buoyant housing market and the sort of action by local authorities highlighted in the report should be improving the prospects for affordable homes. But all the time the sands are shifting beneath their feet.