In Sidmouth, plans for new housing are anything but:
Futures Forum: Knowle relocation project: building for a lucrative market
The question is to what extent the neighbourhood planning process can help:
Futures Forum: Neighbourhood plans and social housing
Futures Forum: The limits to how developers can 'outmanoeuvre' neighbourhood planning
Maybe local councils could help:
Futures Forum: "Giving councils more power to get housing built" - by getting them to calculate ‘objectively assessed need’
Meanwhile, though, it is becoming clear that central governments attempts to help are not working:
Futures Forum: Help-to-buy "has played a crucial role in buttressing the market for housebuilders."
And, besides, a developer can always cry 'unviable':
Futures Forum: Pressure on developers to publish viability appraisals
Futures Forum: "Some developers use viability reports to wriggle out of building more 'affordable' housing."
Futures Forum: When is a development 'viable' or not?
The East Devon Watch blog highlights several stories today on the issues.
From the Times:
DEVELOPERS, MAGIC MONEY TREES AND (UN)AFFORDABLE HOUSING
19 SEP 2017
Government thinks 20% profit is acceptable for developers.
We all know that, as developers make their case to cut affordable homes on a development by development basis, and not on aggregate figures, they can make numbers tell any story.
Seems weird that, with this system, as so many developments don’t make enough money to fund affordable homes, their profits soar, their directors get bigger and bigger bonuses and their shareholders get higher and higher dividends.
It’s a magic money tree!
“The countryside is facing a shortfall of 33,000 affordable homes over the next five years despite builders making record profits at a time of rising rural homelessness.
Profits at Britain’s three biggest builders have quadrupled since 2012 to £2.2 billion, yet they regularly cite financial constraints when cutting affordable homes in developments. Builders miss targets for affordable homes in the countryside by 18 houses a day, research by the Campaign to Protect Rural England (CPRE) shows.
Profits at Barratt Developments, Britain’s biggest developer, increased almost sevenfold from £100 million in 2012 to £682 million last year. Meanwhile, the number of affordable homes fell from 23 per cent of the total built in 2012 to 17 per cent last year.
Developers use “viability studies” under planning laws to pressure local authorities into cutting the requirement for affordable homes. The reports are kept confidential, on commercial grounds, but documents seen by The Times show that officials from the Department for Communities and Local Government (DCLG) ruled that 20 per cent profit was a “reasonable” margin for a developer. They backed a builder’s attempt to cut the number of affordable homes at a development in Gloucestershire to safeguard that return.
Sajid Javid, the communities secretary, has said that failing to fix Britain’s “broken housing market . . . would be nothing less than an act of intergenerational betrayal”.
Research by the CPRE found that the government overruled councils fighting house builders in 17 out of 23 appeals since 2013. Matt Thomson, the CPRE’s head of planning, said developers had councils “over a barrel”. “The developers will say, ‘Either you give us the 20 per cent profit we need, otherwise we won’t build the houses’,” he said. “It’s just extortion at the end of the day.”
The charity analysed more than 60 local plans, which are council blueprints for new housing, and found that the average rural authority needed 68 per cent of new homes to be affordable. Affordable housing includes shared ownership schemes, council houses and properties owned by housing associations which are rented at no more than 80 per cent of the market rate.
In practice, the councils cut the official requirement to just 29 per cent affordable, on the ground that developers would never agree to 68 per cent. Even that has proven unachievable. Just 26 per cent of new homes in the countryside were classed as affordable over the past three years. The average rural authority is short of 46 affordable homes a year. Across 145 rural authorities in England that is a shortfall of 6,670 homes a year.
A separate report by the Institute for Public Policy Research found that 6,270 rural households became homeless in 2016, part of a 40 per cent rise in rough sleeping since 2010. The centre-left think thank partly blamed “shortages in affordable homes”.
Polly Neate, the head of Shelter, a charity for the homeless, said the crisis would only get worse “if we keep letting developers off the hook”.
The Home Builders Federation, which represents developers, said local authorities “should be realistic”. “Making projects unviable reduces overall housing supply, including the supply of more affordable housing,” Andrew Whitaker, its planning director, said.
Georgina Butler, head of affordable housing at Barratt, said the company was “absolutely committed to delivering the homes of all types that the country needs”.
A spokesman for the DCLG said almost 333,000 affordable homes had been built since 2010, more than 102,000 in rural local authorities. A funding crisis in social housing will continue unless the government “breaks with the past” to provide financial backing for new affordable homes, the head of an influential housing sector body will say today.
Billions of pounds of taxpayers’ money could be saved by building social housing instead of channelling housing benefit to private landlords, David Orr, chief executive of the National Housing Federation, will tell the organisation’s annual conference.
The government decided in 2010 that no further public money would be made available to finance social housing, which provides accommodation at below-market rents to those on low incomes. Britain needs to build about 250,000 new homes a year to cope with an existing shortage and a growing population, but only 141,000 homes were built last year. About a million families are on the housing waiting list, said the NHF, which represents housing associations and social landlords.
In a report published today, the NHF says that the government is now spending “more than ever” on housing benefit to accommodate people in private rentals instead of cheaper social homes, which cost £21 a week less per person. The amount of housing benefit channelled to private landlords almost doubled in the last decade to £9.1 billion. “This is poor value for the taxpayer and has a knock-on effect on everyone struggling to rent or buy,” the NHF said.”
Source: Times (pay wall)
Related
Times leader column attacks housing developers and the government
In "Affordable and Social Housing"
"Gentrification of the countryside"
"Gentrification of the countryside"
In "Local Plan"
One thought on “Developers, magic money trees and (un)affordable housing”
Paul F says:
19 Sep 2017 at 10:34am
This entirely misses the point – or rather two points.
1. If a development is not viable with the affordable housing required, then it’s simply NOT VIABLE. So don’t develop the land – or sell the land off to a smaller developer with lower overheads and lower profit expectations who can develop it viably.
2. A Viability Study is something that a developer should undertake BEFORE submitting their planning application. Once the PA is approved, then the motto should be “a deal is a deal” and if the developer suddenly realises that the development is not viable, then tough.
The concept is that the private sector accepts the commercial risks – it is neither the government’s job nor the local planning authorities job to give developers a guaranteed profit.
Indeed, I will even go so far as to suggest that this government guaranteeing a profit margin to developers has the appearance of corruption given that developers are major donors to the Conservative Party.
(Note: I call them sponsors or investors rather than donors. If you are a property developer or a multi-millionaire businessman looking for tax-cuts, a multi £100k donation to the Conservative Party is by far the best “investment” you can ever make by possibly two orders of magnitude.)
Developers, magic money trees and (un)affordable housing | East Devon Watch
Affordable homes shortage blights the countryside | News | The Times & The Sunday Times
TIMES LEADER COLUMN ATTACKS HOUSING DEVELOPERS AND THE GOVERNMENT
19 SEP 2017
(see also post below)
“Anyone who has fielded rival bids for a kitchen extension is likely to be familiar with the pattern: once contracts are signed and work is under way the winning bidder finds ways to cut costs or otherwise boost profits. Committed to the project, the client’s options are to sue or surrender.
In the multibillion-pound business of updating and expanding Britain’s housing stock, the equivalent of the kitchen extension is the mixed-used development that includes affordable housing to be let or sold at below-market rates.
Affordable housing is in critically short supply. This drives up prices in precisely the areas where buyers and the broader housing market need them to come down. It forces low-income families to live farther and farther from places of work, especially in the southeast, and it is storing up trouble for a weak Conservative government with little traction among voters aged under 40.
This is a government that has promised 1.5 million new homes by 2022. In principle almost all these homes are to be built by the private sector. In practice developers are being allowed to game the system by promising generous allocations of affordable housing only to dilute those commitments once planning permission has been granted and building is under way.
Examples of this underhand but technically legal approach are legion in cities. It has now spread to rural Britain too. The country’s biggest builders are rowing back on affordable housing commitments to the extent of 18 much-needed rural homes a day, leading to a projected shortfall of 33,000 affordable homes in the countryside as a whole by the end of this parliament.
The government should be acting to fix the problem. Instead it is making it worse, siding with developers against local councils in 17 of 23 appeals by builders seeking to cut the number of affordable housing units for which they have had to budget since 2013. Worse still, the process is shrouded in secrecy because it hinges on “viability assessments” that developers are allowed to keep confidential unless a court demands wider access.
These assessments should be open to public scrutiny as a matter of course. Sajid Javid, the communities secretary, claims to have adopted an “honest, open and consistent” approach to assessing local housing needs. It is none of these things.
In the housing plans that all local authorities are required to produce, the average requirement for affordable housing in rural areas is 68 per cent of the total. Under pressure from builders that share has fallen to 29 per cent, even as the companies post record profits. Those of the country’s three largest housebuilders have quadrupled since 2012.
Britain is a crowded island. Space for new homes is at a premium. Demand for land reliably outstrips supply. Landowners sell to high bidders who seek guaranteed generous profit margins to protect against downturns in a market that they are helping to overheat.
This is a classic market failure that might warrant state intervention in the form of publicly funded housebuilding to balance supply and demand at the lower end of the property ladder. This government has ruled that out, however, cutting public spending on social housing by 97 per cent since 2010 and on affordable housing by half in the same period.
At the same time, as the head of the National Housing Federation tells its annual conference today, housing benefit payments have risen by 51 per cent over the past two decades, to £25 billion a year, to help to cover inflated private sector rents.
If the government insists on staying out of the housebuilding business itself it must at the very least make affordable housing quotas binding, and high enough to house those unable to get on the housing ladder any other way. The alternative is a property-owning democracy that founders for want of property to own.”
Source: Times (pay wall)
Times leader column attacks housing developers and the government | East Devon Watch
Country Unfair | Comment | The Times & The Sunday Times
And from the Guardian:
ANOTHER SAVAGE ATTACK ON GOVERNMENT FAILURE ON AFFORDABLE AND SOCIAL HOUSING
19 SEP 2017
Owl says: But why is everyone surprised? This is the free market in operation – what Conservatives have ALWAYS believed in. This automatically favours “survival of the fittest” which most often means the most wealthy. Nothing new there. Just get wealthy – problem solved.
Unfortunately, those low down in the pecking order seem to think that, if they vote Conservative, they will be helped to become rich. That isn’t how it works – the rich like their exclusivity and power. Sharing that power with more people isn’t in their interest as it dilutes both – less exclusive, more power-sharing = not a good idea.
Wise up everyone: if you want change in a Tory constituency or in the country, hold your nose and vote for whoever in your constituency is most likely to come second, and make them first. Change IS hard – but it is desperately needed if we are to do the right thing by all generations.
David Orr, National Housing Federation:
““… The prime minister is right that we’ve not paid social housing enough attention. After the tragic fire at Grenfell, this crisis can no longer be ignored. The government must be bold and make a break with the past by making money available to build genuinely affordable homes.
“There’s more than a billion pounds that remains unspent on Starter Homes. Let’s put this money to use and let housing associations build 20,000 of the genuinely affordable homes the nation needs.”
Orr, who is chief executive of the federation, is expected to argue for a complete shift in government policy. Since 2010 the government has overseen a massive reduction in the provision of homes for social rent, instead focusing on “affordable” rents, which can be as much as 80% of the market value.
A report by the federation, produced to coincide with the conference, says the amount of capital committed by the government to homebuilding has fallen from £11.4bn in 2009 to £5.3bn in 2015.
In combination with this, the decision to stop public funding for social rented homes led to a decline in construction of these from 36,000 starts in 2010/11 to slightly over 3,000 the next year. The report says the only new social rent homes now are coming either from previous funding commitments or through cross-subsidies within housing associations projects, amounting to just under 1,000 starts in 2016/17.
It says the increase in rented housing stock has instead come from the private sector, with a 57% rise in real terms over the past two decades. The federation says private rents are on average £21 per week more expensive than their social let equivalents, meaning that over the last 20 years the annual spend on housing benefit has risen from £16.6bn to £25.1bn.
There is another cost, the report says. “Not only is it 23% more expensive to house someone in the private rented sector than social housing, but none of that money increases the supply of new homes. Social landlords do reinvest in new homes, building a third of all new homes last year including for social rent from their own funds, but the same does not happen in the private rented sector.”
In his speech, Orr will argue that this is an unsustainable situation. “It is absurd that we’re spending less on building social housing than we did in the 90s – there are even more people today on housing waiting lists than then, despite increasingly stringent criteria. We know we need more, better quality social housing. And yet, rather than putting public money into building the homes we need, we are propping up rents in a failing market. Ultimately, this is poor value for the taxpayer and has a knock-on effect on everyone struggling to rent or buy.”
John Healey, the shadow housing secretary, said: “Conservative ministers have washed their hands of any responsibility to build the homes families on ordinary incomes need. Ministers try to hide their failure to build more affordable homes by branding more homes ‘affordable’. The Conservative definition of affordable housing now includes homes close to full market rent and on sale for up to £450,000.
“Public concern about housing is around the highest level for 40 years. Millions of families are struggling with high housing costs. Faced with this, ministers have turned their back on the way they can help most – by building low-cost homes to rent and buy.” …”
Another savage attack on government failure on affordable and social housing | East Devon Watch
Social housing crisis can no longer be ignored, says housing chief | Society | The Guardian
Sajid Javid promises social housing review following damning report | The Big Issue
Housing money wasted 'propping up rents' - BBC News
.
.
.
One thought on “Developers, magic money trees and (un)affordable housing”
Paul F says:19 Sep 2017 at 10:34am
This entirely misses the point – or rather two points.
1. If a development is not viable with the affordable housing required, then it’s simply NOT VIABLE. So don’t develop the land – or sell the land off to a smaller developer with lower overheads and lower profit expectations who can develop it viably.
2. A Viability Study is something that a developer should undertake BEFORE submitting their planning application. Once the PA is approved, then the motto should be “a deal is a deal” and if the developer suddenly realises that the development is not viable, then tough.
The concept is that the private sector accepts the commercial risks – it is neither the government’s job nor the local planning authorities job to give developers a guaranteed profit.
Indeed, I will even go so far as to suggest that this government guaranteeing a profit margin to developers has the appearance of corruption given that developers are major donors to the Conservative Party.
(Note: I call them sponsors or investors rather than donors. If you are a property developer or a multi-millionaire businessman looking for tax-cuts, a multi £100k donation to the Conservative Party is by far the best “investment” you can ever make by possibly two orders of magnitude.)
Developers, magic money trees and (un)affordable housing | East Devon Watch
Affordable homes shortage blights the countryside | News | The Times & The Sunday Times
TIMES LEADER COLUMN ATTACKS HOUSING DEVELOPERS AND THE GOVERNMENT
19 SEP 2017
(see also post below)
“Anyone who has fielded rival bids for a kitchen extension is likely to be familiar with the pattern: once contracts are signed and work is under way the winning bidder finds ways to cut costs or otherwise boost profits. Committed to the project, the client’s options are to sue or surrender.
In the multibillion-pound business of updating and expanding Britain’s housing stock, the equivalent of the kitchen extension is the mixed-used development that includes affordable housing to be let or sold at below-market rates.
Affordable housing is in critically short supply. This drives up prices in precisely the areas where buyers and the broader housing market need them to come down. It forces low-income families to live farther and farther from places of work, especially in the southeast, and it is storing up trouble for a weak Conservative government with little traction among voters aged under 40.
This is a government that has promised 1.5 million new homes by 2022. In principle almost all these homes are to be built by the private sector. In practice developers are being allowed to game the system by promising generous allocations of affordable housing only to dilute those commitments once planning permission has been granted and building is under way.
Examples of this underhand but technically legal approach are legion in cities. It has now spread to rural Britain too. The country’s biggest builders are rowing back on affordable housing commitments to the extent of 18 much-needed rural homes a day, leading to a projected shortfall of 33,000 affordable homes in the countryside as a whole by the end of this parliament.
The government should be acting to fix the problem. Instead it is making it worse, siding with developers against local councils in 17 of 23 appeals by builders seeking to cut the number of affordable housing units for which they have had to budget since 2013. Worse still, the process is shrouded in secrecy because it hinges on “viability assessments” that developers are allowed to keep confidential unless a court demands wider access.
These assessments should be open to public scrutiny as a matter of course. Sajid Javid, the communities secretary, claims to have adopted an “honest, open and consistent” approach to assessing local housing needs. It is none of these things.
In the housing plans that all local authorities are required to produce, the average requirement for affordable housing in rural areas is 68 per cent of the total. Under pressure from builders that share has fallen to 29 per cent, even as the companies post record profits. Those of the country’s three largest housebuilders have quadrupled since 2012.
Britain is a crowded island. Space for new homes is at a premium. Demand for land reliably outstrips supply. Landowners sell to high bidders who seek guaranteed generous profit margins to protect against downturns in a market that they are helping to overheat.
This is a classic market failure that might warrant state intervention in the form of publicly funded housebuilding to balance supply and demand at the lower end of the property ladder. This government has ruled that out, however, cutting public spending on social housing by 97 per cent since 2010 and on affordable housing by half in the same period.
At the same time, as the head of the National Housing Federation tells its annual conference today, housing benefit payments have risen by 51 per cent over the past two decades, to £25 billion a year, to help to cover inflated private sector rents.
If the government insists on staying out of the housebuilding business itself it must at the very least make affordable housing quotas binding, and high enough to house those unable to get on the housing ladder any other way. The alternative is a property-owning democracy that founders for want of property to own.”
Source: Times (pay wall)
Times leader column attacks housing developers and the government | East Devon Watch
Country Unfair | Comment | The Times & The Sunday Times
And from the Guardian:
ANOTHER SAVAGE ATTACK ON GOVERNMENT FAILURE ON AFFORDABLE AND SOCIAL HOUSING
19 SEP 2017
Owl says: But why is everyone surprised? This is the free market in operation – what Conservatives have ALWAYS believed in. This automatically favours “survival of the fittest” which most often means the most wealthy. Nothing new there. Just get wealthy – problem solved.
Unfortunately, those low down in the pecking order seem to think that, if they vote Conservative, they will be helped to become rich. That isn’t how it works – the rich like their exclusivity and power. Sharing that power with more people isn’t in their interest as it dilutes both – less exclusive, more power-sharing = not a good idea.
Wise up everyone: if you want change in a Tory constituency or in the country, hold your nose and vote for whoever in your constituency is most likely to come second, and make them first. Change IS hard – but it is desperately needed if we are to do the right thing by all generations.
David Orr, National Housing Federation:
““… The prime minister is right that we’ve not paid social housing enough attention. After the tragic fire at Grenfell, this crisis can no longer be ignored. The government must be bold and make a break with the past by making money available to build genuinely affordable homes.
“There’s more than a billion pounds that remains unspent on Starter Homes. Let’s put this money to use and let housing associations build 20,000 of the genuinely affordable homes the nation needs.”
Orr, who is chief executive of the federation, is expected to argue for a complete shift in government policy. Since 2010 the government has overseen a massive reduction in the provision of homes for social rent, instead focusing on “affordable” rents, which can be as much as 80% of the market value.
A report by the federation, produced to coincide with the conference, says the amount of capital committed by the government to homebuilding has fallen from £11.4bn in 2009 to £5.3bn in 2015.
In combination with this, the decision to stop public funding for social rented homes led to a decline in construction of these from 36,000 starts in 2010/11 to slightly over 3,000 the next year. The report says the only new social rent homes now are coming either from previous funding commitments or through cross-subsidies within housing associations projects, amounting to just under 1,000 starts in 2016/17.
It says the increase in rented housing stock has instead come from the private sector, with a 57% rise in real terms over the past two decades. The federation says private rents are on average £21 per week more expensive than their social let equivalents, meaning that over the last 20 years the annual spend on housing benefit has risen from £16.6bn to £25.1bn.
There is another cost, the report says. “Not only is it 23% more expensive to house someone in the private rented sector than social housing, but none of that money increases the supply of new homes. Social landlords do reinvest in new homes, building a third of all new homes last year including for social rent from their own funds, but the same does not happen in the private rented sector.”
In his speech, Orr will argue that this is an unsustainable situation. “It is absurd that we’re spending less on building social housing than we did in the 90s – there are even more people today on housing waiting lists than then, despite increasingly stringent criteria. We know we need more, better quality social housing. And yet, rather than putting public money into building the homes we need, we are propping up rents in a failing market. Ultimately, this is poor value for the taxpayer and has a knock-on effect on everyone struggling to rent or buy.”
John Healey, the shadow housing secretary, said: “Conservative ministers have washed their hands of any responsibility to build the homes families on ordinary incomes need. Ministers try to hide their failure to build more affordable homes by branding more homes ‘affordable’. The Conservative definition of affordable housing now includes homes close to full market rent and on sale for up to £450,000.
“Public concern about housing is around the highest level for 40 years. Millions of families are struggling with high housing costs. Faced with this, ministers have turned their back on the way they can help most – by building low-cost homes to rent and buy.” …”
Another savage attack on government failure on affordable and social housing | East Devon Watch
Social housing crisis can no longer be ignored, says housing chief | Society | The Guardian
Sajid Javid promises social housing review following damning report | The Big Issue
Housing money wasted 'propping up rents' - BBC News
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