Housing crisis: requirement for developers to build affordable homes could be scrapped

The requirement for developers to contribute towards affordable housing could be scrapped by the Government in a bid to boost growth, it has been reported.

Ministers have drawn up plans which would see developers exempted from having to build affordable homes on developments of up to 50 homes, up from the current threshold of 10, in a move which experts warn would have a “significant impact” on affordable housing provision.

The Government could be set to announce the policy as part of a wider raft of reforms to the planning system in the coming weeks and months, despite Boris Johnson’s government attempting a similar move last year only to U-turn after being met with fierce opposition from housing charities, campaigners and providers of social housing.

Various outlets have reported in recent days that the Secretary of State for Levelling Up, Housing and Communities, Simon Clarke, has written to Liz Truss suggesting the policy.

Campaigners have accused the government of prioritising the interests of landlords and large house building firms, and warned that the policy would only exacerbate the housing crisis.

Increasing threshold would have ‘significant impact’ on affordable housing provision

In the past, the majority of affordable housing stock would have been funded directly through grants by registered providers, housing associations and local councils, but since 2010 there has been an increased tendency for developers to provide a lot of affordable housing stock, either directly or by making financial contributions to local authorities.

This changing trend means that the requirement on developers is one of the primary ways that affordable housing gets built in the UK today.

While the current system does allow developers to get around the requirement in some cases, they generally have to contribute to the building of affordable homes in some way, even if indirectly through a levy.

Jonathan Webb,senior research fellow at IPPR North, says that increasing the threshold at which developers have to provide affordable housing will have a significant impact on provision.

While this is a relatively obvious effect of the policy, its stated aim is not to increase affordable housing stock, but to increase growth, with sources suggesting that it will provide a boost for small to medium house building firms.

But Webb questions this logic, describing it as a misdiagnosis of the problems facing smaller firms involved in the construction of housing. He believes the policy is more likely to benefit larger firms, who already have a significant advantage in the market due to their size.

“It’s the bigger house builders who still end up building a lot of the homes, even if the bigger house builders are building smaller developments. If we want more small, medium house builders, we need to look at some of those more fundamental factors which make house building difficult. We also need to look at the fact that it’s generally the biggest house builders who are able to build the homes at the minute”

The availability and cost of suitable land, plus rising material costs, labour and skills shortages are all prohibitive factors for smaller firms which are easier to manage for larger companies. And larger developers are often better set up to navigate the planning system and potentially get around some of the requirements to provide affordable housing under the current rules.

Many housing campaigners are already critical of the affordable housing system, which increasingly in recent years has seen private developers favouring affordable ownership homes, including shared-ownership, or affordable rental properties, which are capped at 80% of market rate.

While there are caps in place for these kinds of homes, due to rising housing costs, inflation and stagnant wages, so-called affordable housing options are actually unaffordable for many people.

Social housing ‘integral’ to solving crisis

Webb points to research by IPPR and other organisations which suggests building homes for social rent should be a main priority of the government if it is serious about providing sufficient provision of housing for people on all incomes.

“If we’re gonna fix the housing crisis, social rented housing has to be at the heart of that. Social rent is integral to solving the crisis as it’s the only tenure which is affordable for the vast majority of people who need that as a housing option,” he said.

“Until we build a significant quantity of social rented homes a year in England, we’re simply not going to fix the housing crisis, because we’re not focusing our energy and our resources into the area where it is needed most.”

Despite this, social rented tenancies have been declining significantly in recent years, dropping by more than 200,000 in the last decade or so.

While a small number of social rented homes are completed each year, a much larger number are lost to disrepair or sold off into private provision, resulting in a net loss of social housing year-on-year.

The Social Housing Action Campaign (SHAC) has long argued for a significant programme of house building focused on homes for social rent.

Suzanna Muna, secretary of SHAC, said increasing the threshold for developers to provide social housing would be a bad policy decision, and would “once again show that government support is geared towards landlords, not those in desperate need of housing they can afford to rent”.

She told NationalWorld: ”We have seen time and again that if social landlords aren’t forced to provide discounted homes, they increasingly prefer to build for maximum market rates, becoming little different from any other commercial operation.

“Really what we need is a rent formula linked to average wages rather than house prices or rents, as well as rent caps to prevent rents continually soaring beyond the reach of most people.”

The policy has not been formally announced and government sources stress that national planning policy for smaller developments is kept under constant review.

A government spokesperson said: “The government is committed to exploring policies that build the homes people need, deliver new jobs, support economic development and boost local economies.”