Published: 5 Aug 2014 by John Bibby

Are you a developer? Worried about pesky obligations to pay for new affordable homes eating into your profit margin?

Then you need the services of a company like this one, who – as they put it – can help you “avoid affordable housing contributions with [their] viability reports”. They claim to be able to help developers avoid such contributions for planning applications where they might eat into profit margins of anything up to a whopping 17.5%. And to prove it they provide a page of case studies detailing an estimated £5.5 million of payments towards affordable housing that they have helped developers to avoid or renegotiate.

Rest assured: this is all perfectly legal.

Negotiation with councils of Section 106 planning obligations has existed since they were created as part of the 1990 Town and Country Planning Act.

So if it’s all legal then what’s the problem?

Partly, it’s just a question of the taste of the company’s advertising. The language used is crass and completely ignores England’s desperate shortage of affordable housing. They may not be the only firm offering this service (plenty do), but they probably are the only one that’s chosen to illustrate the savings that developers can make with an image of someone pushing a wheelbarrow loaded with cash.

But this is not just about some consultant’s poor taste in advertising.

Recent changes in both regulation and the law have made it easier for developers to avoid obligations to pay towards or build affordable housing by claiming that doing so would make schemes ‘unviable’.

The introduction of the National Planning Policy Framework (NPPF) allowed developers to avoid contributions towards affordable housing where doing so would mean that the development would not provide ‘competitive returns’ to landowner and developer. The Growth and Infrastructure Act strengthened this by extending developers’ right to apply for renegotiation of affordable housing obligations that have already been agreed and giving them a subsequent right to appeal. So if the market changes then developers are able to go back and renegotiate.

Shelter argued when both the NPPF and the Growth and Infrastructure Act were introduced that they would make it harder to deliver affordable housing through Section 106 planning obligations.

This is now being borne out by the decisions of the Planning Inspectorate, which has upheld appeals from developers arguing that delivering agreed contributions to affordable housing would make the scheme unviable.

In the case of Land at the Manor Shinfield, the planning inspector found that a 20% margin represented a competitive return meaning that the number of affordable homes delivered as part of the development was reduced from 40 to just two. A 20% margin may sound more than ‘competitive’ compared to other industries, but developers are able to argue for margins of this level because the development process is currently inherently risky and the margins uncertain.

The changes in the NPPF were introduced with the intention of getting development moving, but failed to remove this inherent risk. Instead of creating desperate fixes that minimise the levels of affordable homes being built we should be getting to grips with the fundamental shortcomings of England’s housing supply system.

Earlier this year we argued that we can fix the housing supply system by making it substantially less risky and incentivising developers to deliver unviable sites with devolved infrastructural spending. Sticking with the current approach will just continue to give developers an easy route out of providing affordable homes.