Plans to ‘get Britain building’ by scrapping developers’ affordable rental housing requirements

What is the significance of this policy shift away from affordable rental homes?

The recent policy changes in contemplation by the government to change the current requirements in respect of affordable rented properties, in favour of building starter homes to buy, is a policy geared towards a shift in emphasis from renting to home owning. It is all part of the government’s pledge to get Britain building.

How will this be received by developers?

The policy is likely to be met with cautious approval by developers who have argued for years that the definition of affordable housing should include ‘discounted sale housing’. While properties can be sold and income received in the short term rather than the longer rental process—which may be favourable to developers—it is possible that as the time taken to sell properties is generally longer than to let, there will be a delay in progressing developments such that house building could actually slow down. The policy may end up having the opposite effect to that intended if, ultimately, house building becomes more profitable such that land prices increase pushing up house prices in the long term. However, if the policy results in more flexibility for developers, as seems likely, reducing burdens placed on developers through section 106 agreements will be welcomed by the industry in the short term, making sites more commercially attractive.

What is unclear is how many people the policy will actually help get a step on the property ladder, and what exactly is ‘affordable’ in the government’s eyes. If the starter homes are to be sold for a maximum of £450,000 in London, and £250,000 elsewhere, the income required in order to afford such a home means that these homes are likely only to be suitable for relatively higher earners. Removing the requirement for affordable rented properties leaves a gaping hole in the system for those who cannot afford to buy. For those who can afford to buy, they are restricted from selling on for a period of five years.

How would this affect local authorities?

From a local authority perspective, if obligations on developers are reduced it may well get developments moving. It should certainly speed up the process of securing consent. Whether it will help authorities to reduce their waiting lists for social housing is doubtful. The starter homes option will be of no benefit to those stuck with high rents in the private rented system and unable to save to get a step on the property ladder.

Could existing developments change the make-up of the development in light of this announcement?

The Housing and Planning Bill 2015–16 places a new legal duty on authorities to guarantee the provision of 200,000 starter homes on all reasonably sized new development sites. The Bill makes provision for planning permission for certain residential developments to be granted only if requirements relating to the provision of starter homes are met.

As always with these things, the detail and the practical application of this will come further down the line, but it is likely that section 106 agreements will be used to ensure that developers are obliged to provide a certain number of starter homes or payment of a monetary contribution instead of provision on site.

In that respect, there will be little change from the present situation. It will be the regulations to follow which could make all the difference in prescribing the circumstances in which planning permission may be granted, depending on how many starter homes are provided on site, where the development is and whether there are any circumstances where a development could be exempt from the requirement.

Whether or not the local authorities will be able to exercise their discretion in relation to providing starter homes on a particular site remains unclear. It is also unclear how starter homes will be kept affordable.

Do you envisage this policy leading to any legal issues?

In policy terms, the Bill seeks to address the position where a local plan or other development plan document is incompatible with the duties of an authority to provide starter homes—which is an area that one imagines will be ripe for challenge. It is difficult to see how the national requirement to provide a specific number of starter homes fits with the National Planning Policy Framework’s requirement under paragraph 47 for local authorities to ensure that their local plan meets the ‘full, objectively assessed needs for market and affordable housing in the housing market area’.

Planning Practice Guidance encourages local planning authorities not to seek section 106 affordable housing and tariff-style contributions that would otherwise apply to starter home exception sites. If there is an exemption for starter homes sites (particularly from the Community Infrastructure Levy), how will infrastructure provision be achieved? Will that burden fall to other types of developments or on local authorities themselves?

Certainly there will need to be detail fleshed out in the regulations and, no doubt, some innovative drafting of section 106 agreements to address these issues as they arise in practice.

Interviewed by Nicola Laver. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.