London boroughs stand accused of failing to deploy affordable housing contributions, at a time when the capital’s housing provision continues to fall behind need.
A new report from London First and planning consultants Turley notes that developers are increasingly making payments in lieu, rather than constructing affordable housing they are required to deliver. Yet the funds fall into local authority coffers where there is little transparency about how they are managed, or spent.
The boroughs took more than £250 million in affordable housing payments in 2014, the report notes, with a significant increase in developers making payments rather than building the affordable homes that they are responsible for providing. This figure has ballooned, more than doubling in two years and growing from just £20 million a year prior to 2011.
“There is, however, little information publicly available about how this money is spent,” notes the report. “Indeed, because of the lack of transparency about how boroughs utilise this money, there are concerns that payments are not being used to support the delivery of affordable homes. Given the financial pressures facing boroughs, it could be that some money obtained by payments in lieu is used for general expenditure rather than to directly build or support the delivery of affordable homes.”
National planning guidance currently does not set out any timescale over which funds ought to be spent. And in the current climate, the report suggests local authorities may struggle to find land on which to build, or may simply lack the skills and resources to get construction going.
London First recommends three changes to the system, to make it more transparent and accountable. First, there needs to be more clarity on calculation – not all boroughs have a simple tariff, and a standardised formula would give everyone involved greater certainty.
Second, it says the GLA, as part of its Annual Monitoring Report, should have local authorities declare their income from payments in lieu, and also declare how much they have spent. This should not be a major administrative burden for authorities, say the report’s authors.
Third, it suggests a time limit be set on the spending of affordable housing payments, of three years. After this, any unspent receipts ought to be then transferred to the mayor, to be used on the GLA’s own affordable housing programme. The three year deadline ties in with a similar deadline under the Right to Buy legislation.
Jonathan Seager, director of housing policy at London First, said: “There needs to be a pan-London system for making this work — it’s a wasted opportunity that some of this money isn’t being fully utilised.”
Different boroughs have substantially different interpretations of the planning system currently. The Corporation of London, for example, almost exclusively accepts payments in lieu, arguing that the City does not have the infrastructure to support affordable housing tenants. A 2014 report noted the City was sitting on £24 million of funds for affordable housing, with plans to build additional units on its own estates, as well as work with neighbouring boroughs to look for other suitable development sites.
Westminster has been keen to encourage developers to find nearby sites, on which to deliver their affordable commitment, should they view it impractical to deliver on the main development site. Their “affordable housing cascade” views on site as preferred, off site locally as a second best, off site further afield in Westminster as a third best, and only payment in lieu as an “absolute last resort”. The practice has led to many dual site planning applications, with affordable units often delivered several streets away from a desired development. The authority has also been experimenting with affordable housing credits.
In a January 2015 report, Westminster said its affordable housing fund had received £148 million since 1999. Of this, £87.6 million had been spent, a further £33.4 million was contracted, while £29.5 million was still to be deployed.
A 2013 investigation by the Bureau of Investigative Journalism put the total sum London councils were sitting on at £161 million. Of this, it found the City Corporation was holding £19.6 million, Southwark had £36 million in the bank and Camden £9 million – some of which had been received more than five years previously.
LPA Perspective: It is high time a stronger light was shone on the sums of money that local authorities extort from developers, only then to sit on. Here is a tax that is effectively paid for by buyers of new homes, which ought to be spent promptly to deliver the affordable housing it is supposed to provide.
The recommendations from the London First report are sensible, and merit adoption. Added up, the cash that London boroughs is sitting on, could deliver thousands of new homes at a stroke.
It is no surprise that ever more developments are yielding a payment in lieu, rather than delivering actual flats for housing associations to manage. It is difficult to build two types of property – for two very different types of resident – on a single site. And often housing associations, who come to inherit the new affordable housing, don’t want the properties they look after pepperpotted in a block, instead preferring their own separate physical demise.
Further discouraging the efforts of developers, a 2014 media campaign over “poor doors” drew attention to the common practice of providing a separate, less glorious entrance for affordable housing units, in contrast to the glistening entrance halls often provided for buyers of private, high priced apartments. Many of these reports failed to point out the key financial issue that a larger, more impressive entrance hall and smarter lifts inevitably pass through to a higher service charge for residents.
The other big issue which this report does not address, is the viability argument. Increasingly advanced by developers to reduce the affordable housing contribution they end up paying, such arguments are all the easier to negotiate over, if the outcome is simply the size of a cheque, rather than the shuffling of flats on a floorplan.