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How has England fared in building affordable homes for rent?

The government is to scrap section 106, which forced developers to build affordable homes – but it was already marred by missed targets and segregation

Thursday 5 November 2015 07.07 GMT

Danielle Aumord

In his speech to the Conservative party conference, one of David Cameron’s pledges was to tear up planning rules that require property developers to build affordable homes for rent and invest in the communities where they are building. For 25 years these rules, known as section 106 agreements, have helped councils increase the number of affordable homes available to rent in their areas by being able to specify a minimum percentage within new private developments.
The rules have already been changed: in 2011 the new national planning framework scrapped the threshold that forced private developments of 15 properties or more to contain some affordable rental housing. Then, in December 2014, the Department for Communities and Local Government allowed anyone building fewer than 10 homes to avoid making a contribution to affordable housing. It also exempted anyone who turns an empty building into private housing from paying for further affordable units, even if they could still make healthy profits by doing so. Councils now set their own targets on getting affordable housing in private development, with mixed results (see below). Westminster council estimates it will lose £1bn in affordable housing payments as a result of the change. The key reform in the government’s housing bill will change the definition of affordable housing to include starter homes as part of its programme to build low-cost homes for first-time buyers under 40 years old. It will mean developers will have fulfilled their obligations to a council if they build homes for purchase. In the light of the announcement, we have talked to councils about the advantages – and disadvantages – of section 106 funding. Good • Affordable homes for rent: Councils have used section 106 agreements to ensure developers have either included affordable homes within their own developments, or provided councils with the cash to invest in their own development work. • Flexibility: Councils have been able to utilise section 106 to assess and cater for the needs of their residents – whether the need is for socially rented property typically charged at up to 40% of local market rates, or affordable rented property to be charged at rates of up to 80% of private sector rents. • Other community benefits: section 106 funding has contributed to more than just affordable homes. Benefits have included, for example, a new leisure centre and new public spaces as part of the former Heygate estate in Elephant and Castle. Bad • Missed targets: Westminster achieved its 30% target using planning obligations, while Brent managed 43% and Hounslow 27.2% affordable properties in all new builds granted. But Islington delivered 34% of all new homes as affordable, against atarget of 50%, and reached 50% on schemes required to provide affordable housing. Richmond council, which also aimed for 50%, achieved just 14% in 2013-2014. Kingston-upon-Thames also managed just 14% in the same timeframe. • Gaming the system: Developers have been able to get round the rules by claiming commercial confidentiality, which they have lobbied fiercely to protect, to obscure the financial models used to determine whether a scheme is viable in their eyes. It is shielded from the council and entirely hidden from public gaze. Broadly, the assessment subtracts building costs from projected revenue, while safeguarding a 20% profit margin. The slightest tweak of a single variable can prove that a project would be financially unworkable if the affordable housing quota were fulfilled. • Segregation: Many bids initially proposed that affordable homes would be dispersed throughout developments to create integrated communities. But this hasn’t always happened. One council’s solution • Scrutinising viability assessments: Islington aspires to keep its 50% target despite the challenges of dealing with viability assessments. Its strategy includes using both internal staff and external consultants to scrutinise whether the figures in proposals are reasonable. • Going public: The public is increasingly interested in what developers are doing in and for the community. Islington has also published detailed guidance on how developers should work out their proposals. It has warned them that their proposals will be published if it is in the public interest – a strategy other councils could employ. • Avoiding private developers: Islington’s Wharf Road development was part-owned by the council, which worked with a registered provider – rather than a private developer – to provide 78.9% affordable properties. At 351 Caledonian Road an agreement with Telford Homes secured 60 affordable homes out of 156 units – most of which will be let out at social rents. Sign up for your free Guardian Housing network newsletter with news and analysis sent direct to you every Friday. Follow us: @GuardianHousing • This article was amended on 6 November to clarify the affordable homes built by Islington.
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