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Affordable Housing Re – definition
1. This is an excellent opportunity to restore one of the areas of planning control that has led to its serious loss of credibility. What is being referred to in planning circles as 'affordable' is seen as ridiculous by those faced with paying up to and over half their income in rent and/or mortgage payments to keep a roof over their heads. Those in the PRS (the fastest growing sector) see the safety net of social renting becoming less available. It should be a main purpose of the planning system to provide an adequate supply of housing that can be paid for through about 30% of gross household income (the other purpose is ensuring that all housing is sustainable). If this is not possible through home ownership (and Government statistics should be able to reveal the extent to which households could reasonably afford to buy – subject to Bank of England estimates of interest rates and a normal 5% discount) then the remainder would have to be accommodated in rented accommodation. In the absence of any rent controls in the PRS (that should be on the Government agenda), it will be the social rental sector that must meet these needs.
2. Providing a reasonable and realistic definition of ‘affordable housing’ is one of the few areas of written guidance that does justify considered change and should not be regarded as part of the perpetual meddling by this and previous governments.
3. Decisions on what policies should be introduced, applying new or old definitions, should always attempt to analyses planning for housing as a system and take a systemic approach.
4. The current definition of affordable housing follows the original High Court judgement that found there to be a material planning difference between a home that could be afforded by a local person, taking into account local earning potential, and one that could not.
"Affordable housing: Social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market. Eligibility is determined with regard to local incomes and local house prices. Affordable housing should include provisions to remain at an affordable price for future eligible households or for the subsidy to be recycled for alternative affordable housing provision."(emphasis added)
This definition of eligibility makes no reference to Housing Benefit, Help to Buy, Funding for Lending or any other discounting through public subsidy or the bank of mum and dad.
5. "Social rented housing is owned by local authorities and private registered providers (as defined in section 80 of the Housing and Regeneration Act 2008), for which guideline target rents are determined through the national rent regime. It may also be owned by other persons and provided under equivalent rental arrangements to the above, as agreed with the local authority or with the Homes and Communities Agency."
No amendment is required to the definition of 'social housing', although this should not be within the definition of 'affordable housing ' if the 'national rent regime' requires public subsidy.
6. "Affordable rented housing is let by local authorities or private registered providers of social housing to households who are eligible for social rented housing. Affordable Rent is subject to rent controls that require a rent of no more than 80% of the local market rent (including service charges, where applicable)."
This definition does require amendment as, in many if not most parts of the country, 80% of market rents would not satisfy the 'eligibility' criteria’ relating to local incomes. If there is a public interest or planning benefit of retaining a category of houses rented at 80% of market rents then this should be the subject of some special justification. What is unacceptable is to continue to call it ‘affordable’ and include it in the Glossary as such.
7. The consequence of corrupting the original definition through the ‘national rent regimes’ and the reference to 80% of market rents has contributed substantially to house price/rent inflation and s106 obligations have acted like a conduit passing various public subsidies straight into the pockets of developers and landowners. ‘School-boy economics’ explains that increasing demand without a commensurate increase in supply will cause an increase in price and, therefore, the level of unaffordability. There isn’t a housing supply model that suggests that prices can be reduced where there is less than 1% annual increase in supply, mostly by developers intent on maintaining if not increasing prices.
8. In fact there could be a significant impact on prices if most of the 200,000 new dwellings built each year were small/2 bedroomed properties. A substantial increase in supply of what are already intrinsically the cheapest form of property could reduce prices in that particular sector. Incidentally, there would still be a supply of larger properties for households larger than the average of 2.4 people due to the downsizing of some of the 8 million household looking for attractive ‘right-sizing ‘options
9. "Intermediate housing is homes for sale and rent provided at a cost above social rent, but below market levels subject to the criteria in the Affordable Housing definition above. These can include shared equity (shared ownership and equity loans), other low cost homes for sale and intermediate rent, but not affordable rented housing."
Homes that do not meet the above definition of affordable housing, such as “low cost market” housing, may not be considered as affordable housing for planning purposes."
Do you have any comments or suggestions about the proposal to amend the definition of affordable housing in national planning policy to include a wider range of low cost homes?
10. The eligibility criteria are based on the Court's justification for distinguishing 'affordability' as a material consideration being the relationship with local earnings is logical and must not be changed.
11. In fact the system would work as intended: to provide genuinely affordable housing, if the eligibility criteria were consistently applied. The Glossary/definitions should be brought into line by removing the "affordable rent" category that is an abuse of language, and ensuring that "social rent" is affordable relative to local wage levels.
12. There is no reason why intermediate housing or even low cost houses for sale (including Starter Homes) could not be included, so long as the eligibility criteria are met. There is a difficulty in that the affordability in terms of purchase of all or some of the equity is conditional on the interest on loans. In these circumstances the affordability should be based on a Bank of England estimate of the interest over 20/25 years and not any current (loss leading) deals that might be available and a 5% deposit.
13. There is also a case for including self/custom building by individuals or associations of individuals within the definition of 'affordable housing' subject in each case to the submission of a business plan showing that the house(s) would be provided (to a liveable standard to allow for self-finishing) at a price to meet the eligibility criteria relating to local earnings. This would remove the existing disincentive for LPAs to support self/custom building due to the exemption from s106 obligations and other tariffs that already apply to affordable housing. There would also be the opportunity for self/custom builders to share the equity with a Registered Provider that could have provided and retained ownership of the land/serviced plots on which the houses were built.