Six months into his Mayoralty, Sadiq Khan has launched Homes for Londoners, his draft affordable housing and viability supplementary planning guidance (SPG) out for consultation until 28 Feb 2017.
The SPG aims to boost the overall supply of new homes and affordable housing in particular. The Mayor’s approach is set out under 3 key headings
- Threshold Approach to Viability:
- As expected, the SPG includes a 35% flat rate of affordable provision for private residential schemes (calculated based on habitable rooms).
- Applications meeting or exceeding 35% provision on site would not be required to submit a viability assessment.
- Applications which do not provide 35% affordable housing (or which require public subsidy) would still be required to submit a viability assessment.
- The Mayor also sets out his position that in London it would usually not be appropriate to apply the Vacant Building Credit.
- Guidance on Viability Assessments:
- The draft SPG introduces a standardised approach to viability and sets out what information and assumptions should be included in a viability appraisal.
- Staged review mechanisms are affirmed for schemes which do not meet the 35% provision threshold, supplementing current London Plan policy to ensure that affordable housing contributions are increased if viability improves over time.
- Viability assessments will no longer be treated confidentially (except possibly limited elements, if an applicant can provide justification)
- Build to Rent:
- The draft SPG provides support for ‘Build to Rent’ (BtR), and recognises the distinct economics of the tenure and that it often cannot compete on an equal footing with speculative build for sale when buying land.
- To help level the playing field for BtR, the Mayor is proposing a BtR ‘pathway’ through the planning system.
- The Mayor will encourage affordable homes in BtR developments to be delivered as discounted market rent (preferably at London Living Rent levels) and will not apply the 35% affordable housing threshold approach. Instead, a specific BtR viability assessment approach would recognise the distinct economics of the sector.
- Covenant and clawback mechanisms are proposed if units are sold out of BtR.
To help close the gap between the 35% threshold and his 50% manifesto commitment, the Mayor’s Homes for Londoners: Affordable Homes Programme 2016-2021 Funding Guidance sets out how grant may be used to increase the amount of affordable housing delivered on developer-led sites to more than 35%. Developers can benefit from a new £3.15bn affordable housing fund made available in the Autumn Statement and bidding for this grant opens on 31 January 2017.
Guidance on Starter Homes will follow as soon as the Government’s position is clear; a Housing White Paper is expected later in the year.
Brendan Hodges, senior associate partner, said: “Measures to boost housing in London are welcome, and particularly the supply of high quality rented homes. Some housebuilders may welcome the introduction of a 35% affordable housing requirement as providing a degree of certainty and a level playing field for all.
“However, the vast majority of private housing schemes delivered over the last decade have not delivered such a high level of affordable housing, and the Mayor’s approach is likely to lead to pressure for higher density schemes.”