The UK Government is proposing some big changes to the part of the planning system that provides affordable homes. But, is it good news or bad for people who need their own home now?
At the start of August, the UK Government put forward a White Paper that will drastically alter the way affordable homes are created. It will see the end of Section 106, which provides almost 50% of much-needed affordable housing and will replace it with something different. The Government believes it will lead to more homes going to people who need them, but certain critics are up in arms.
So what are the reforms, why are opinions so divided and is it the right path to take?
The planned reforms
Section 106 is part of the 1990 Town and Country Planning Act. This piece of legislation aims to balance the impact of construction on the local area and its infrastructure. It compels property developers to make a financial contribution – but another requirement is that a certain percentage of the new homes is allocated for affordable housing, with lower rents, more in the price range of people on lower incomes. 49% of all affordable homes created in the UK come out of Section 106 legislation.
We’ve called Section 106 ‘the key to affordable housing in the UK’. However, the Government’s new reforms will abolish it. Here is what will happen:
- Developers will be able to build sites of up to 50 units without having to contribute to affordable housing provision
- For larger sites, developers will have a nationally-set ‘infrastructure levy’, based on the final value of the project
- Local councils have the power to decide how to spend the income that comes in from the levy – it does not necessarily have to be on affordable homes, it could be on schools, roads, health or anything else. Councils may be asked to ring fence spending on affordable homes, but this has not been decided yet
Another part of the proposal states that developments considered ‘beautiful’ can be fast-tracked through the planning process. However, the criteria around what is ‘beautiful’ are not clear, and beauty is, of course, in the eye of the beholder.
Unsurprisingly, the Government are hailing these developments as a shot in the arm for the property industry, removing red tape so more much-needed homes can be built. As for affordable homes, the Government believes that under the new rules, as many affordable homes will be created as before, if not more. This is because the new system is more straightforward, more predictable and removes many exemptions that previously existed. It is for these reasons that the construction industry has broadly welcomed the proposals.
Others are not so sure, believing that the number of affordable homes will diminish due to the new Government proposals, perhaps by as much as 20%. Critics also say that the homes that are built will be of lower quality than before, due to more relaxed planning codes.
As we have written before, Section 106 was in need of reform. The question is whether these reforms are the way to go. Section 106 has been effective in getting affordable properties in the hands of people who need them, but nothing is perfect.
On the whole, developers keep to their obligations. However, not all do. There have been some high profile court cases where developers have been accused of selling off properties allocated as affordable housing at full price. Local authorities have not always been able to stay on top of developers to make sure they keep to their Section 106 agreements, claiming a lack of resources. Could reducing the red tape make the process simpler to monitor?
There are also regional disparities that need to be addressed. In cities like London, affordable housing is vital, so demand is high and affordable properties are always filled. Unfortunately, there is less demand for affordable housing in rural areas. Housing departments do not want to administrate these allocations, as the income does not justify the amount of work. The current Government talks a lot about ‘levelling up’ the country. Could these reforms help?
Getting it right
While we want to keep an open mind on these new reforms, it’s clear that the legislation should be concerned with providing more affordable homes, not fewer. When people can afford their own homes, it brings benefit not just to the new homeowners, but the entire community and country.
The more affordable properties built, the more we see:
- Job creation – not just in the construction industry, new communities need shops and other services
- Improved health and wellbeing – when you have a home, your quality of life is better, you have improved access to medical facilities and your mental health is easier to manage
- Reduction in homelessness numbers – affordable properties can get people off the streets and out of temporary shelters
- Cost savings and more tax revenue for the Government – authorities do not have to spend money on housing benefit or measures to reduce homelessness
- A multiplier effect on the broader UK economy
Section 106 was not perfect, but was still instrumental in getting more people into properties they could afford. It ensured a steady flow of properties with reasonable rents.
The more we can get affordable properties in the hands of people that need them, the better it is for all of us.
There will now be 12 weeks of consultation before the new rules start to be implemented. Getting these reforms right is essential. We will watch carefully to see what happens.