Developers cannot be allowed to keep breaking their promises on affordable housing

In the aftermath of the Grenfell tragedy, the priority is to find secure, affordable homes for survivors in their community, and make sure they have all the support they need to move forward with their lives. It is encouraging to see homes starting to come forward, with 68 affordable homes in Kensington allocated for survivors so far.

But these are not additional homes. They are pre-existing affordable blocks fast-tracked and reserved for Grenfell families. And so there is a broader question we must also answer. How is London going to replace the social homes lost in Grenfell Tower? How are we going to make sure that Kensington and places like it retain a mix of communities? In this regard, the news this week from the Battersea Power Station development is deeply troubling.

The development company building 4,239 homes on the Battersea Power Station site originally pledged that 636 of these would be sub-market homes, more affordable to ordinary Londoners. Now that number has been cut to 386, a reduction from 15% of the development to just 9%.

Worse still, none of these more affordable homes will now actually be built on the power station site. The developer has instead identified a separate site next to an existing social housing estate, ensuring 100% of the prime power station site will be used for luxury flats and high-end commercial space. This scandal not only means fewer ordinary families in affordable homes, and therefore more families at risk of homelessness. It also undermines the social mix in London, with rich and poor confined to separate spaces.

The reasons cited for this backtracking are difficulties over renovating the power station, a Grade II listed landmark, higher build costs caused by the weaker pound, and lower than expected profits from luxury housing.

It is difficult to have sympathy with these arguments. A sound development strategy would have factored in at least some of these risks. As we have blogged about before, the slowdown in the central London property market is due to entirely predictable problems of oversupply. If land was bought and sold on the basis of building the homes we need, rather than the most expensive housing with the greatest possible profits, we would not be so vulnerable to this cycle. This is the kind of housing system Shelter argues for in our New Civic Housebuilding report.

But in the current planning system, developers faced with such changes in fortune can use a financial viability assessment to prove that a development has become uneconomic, and therefore argue down affordable housing commitments. In fact, the government’s National Planning Policy Framework enshrines in law developers’ right to make 20% profits from developments.

Unsurprisingly, councils often lack the confidence to fight affordable housing reductions through the appeals system. Threatened with the prospect of having no new housing at all, they too often simply take what developers will give them. That appears to be what has happened at Battersea Power Station. On Thursday, Wandsworth Council approved a deed of variation to the developer’s section 106 contributions, cutting social housing with no need for a public consultation.

Wednesday’s Queen’s speech offered precious little hope to people looking to central government to solve the housing crisis. In an agenda dominated by Brexit where every vote may prove an uphill battle, it is difficult to see major reforms to the land market and housebuilding system getting Parliamentary time. Today in London, there are 230,000 households on the waiting list for social housing.1 That includes 90,000 children living in temporary accommodation.2 It seems they’re going to be waiting a long time.

But it doesn’t have to be this way. Councils can still take action, by making it clear that developers who do not keep their promises on the numbers, types and affordability of homes built will not receive a rubber stamp to carry on developing. Regional government can provide policy tools and leadership, stopping the race to the bottom in which communities lose out. Shelter will be watching the Mayor of London’s new reforms to the viability system closely here. And central government can play an important role without primary legislation, making it clear that when developers appeal to the Secretary of State to reduce their offer to communities on viability, he will stand on the side of ordinary families, not developers’ profits.


1 Department for Communities and Local Government Live Table 600: numbers of households on local authorities’ housing waiting lists, by district: England 1997 to 2013

2 Department for Communities and Local Government: Detailed local authority level homelesness figures. Section 1, Column e69e