Legal loophole exploited by developers means 80% of affordable homes lost

By agency reporter
November 6, 2017

Developers are using a legal loophole to get out of building thousands of affordable homes across the country every year, according to new research using Freedom of Information laws.

The housing charity Shelter examined how ‘viability assessments’ reduced the number of affordable homes being built in 11 local authorities across nine cities in England.

The research shows that when the loophole was used in the last year, some 2,500 affordable homes (79 per cent) were lost from the number required by council policies.

Viability assessments allow developers to reduce the number of affordable houses they build on their site, if they can show building them risks reducing their profits to below 20 per cent. It means many developers face no penalty for over-paying for land because they can recover the costs by reducing their commitments to building new affordable homes.

The research sampled: Birmingham, Brent, Bristol, Cambridge, Leeds, Leicester, Manchester, Newcastle, Oxford, Kensington and Chelsea, and Southwark. But the assessments are being used right across the country so the annual figure of lost houses is likely to be far higher.

The worst affected areas were Manchester, Birmingham and parts of London where viability was used to reduce the affordable housing to less than one per cent of homes being built.

Shelter's chief executive, Polly Neate, said: “What this research reveals is the scale at which developers are able to use legal loopholes to protect their profits and dramatically reduce the numbers of affordable homes available for people.

“Through freedom of information powers, Shelter has been able to reveal the extent to which affordable homes are required in local plans, only to be dropped by developers.

“The government needs to fix our broken housing system – and it must start by closing this loophole to get the country building homes that are genuinely affordable for people on middle and low incomes to rent or buy.”

The research reveals that viability is used most frequently on larger developments, which are generally managed by the country’s biggest developers.

Shelter is calling on the government to change national planning laws so developers can no longer use this loophole to get out of delivering affordable homes. 

Closing the loophole would provide developers with certainty about the number of affordable homes to build. This would be part of the cost of doing business for all developers meaning they would not need to overpay for land to stay competitive in the first place. Developers playing by these new rules would still be able to make good returns, while providing their share of affordable homes.

* The research, conducted with EGi, looked at 179 planning permissions, collected from 11 local authorities (LAs) (Birmingham, Brent, Bristol, Cambridge, Leeds, Leicester, Manchester, Newcastle, Oxford, Kensington and Chelsea and Southwark) across nine cities in England (including inner and outer London). The records relate to planning applications granted in 2015/16 (financial year).

* EGi https://www.egi.co.uk/

* Shelter http://england.shelter.org.uk/

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