New Infrastructure Levy – Will this cause a shortfall in affordable housing?
11/24/2020
At a glance:
- The scrapping of section 106 agreement could lead to a reduction in houses being built
- The proposed new planning policy, sees the introduction of a new infrastructure levy
- The current requirement before developers need to build social housing has risen from 10 to 50 houses
Housing experts warn that the scrapping of Section 106 agreements, could lead to a dramatic reduction in houses being built for social rent. This follows a white paper, published last month, proposing significant changes to the existing framework. Planning obligations under the existing Section 106 agreements, say developers are required to make a contribution to a local council, with the funds often used to obtain affordable housing. Currently rates are set locally and are subject to comprehensive negotiation. The white paper is a gateway towards the Government’s pledge to build 300,000 homes per year and increase development’s contribution to the economy.
The proposed new planning policy, sees the introduction of a new infrastructure levy, in an effort to speed up developments. Developers will pay a ‘levy’ – which will be a fixed proportion of a scheme’s value at sale, above a minimum threshold, and set at a national level. In the consultation document, it states the aim for the new charge is to raise more returns than under the current framework. As part of the new levy, local authorities will still be able to use the funds to help secure affordable housing on a development.
Opportunities and risks surrounding the replacement of Section 106
The new planning proposal comes with both opportunities and risks. The white paper begins with criticisms of the current system – it’s been critiqued for being overly complicated and onerous.
The paper leans strongly towards moving to digitisation, including the call for greater and more effective community engagement in the planning process. For example, schemes are to be made more accessible to the community, by providing online maps and data to allow communities to be more involved. They’ll also get a say from inception of the planning process.
Every area will have a local plan for housing and plans must be agreed in 30 months – slashed from the current seven years.
While inclusive, simpler and more efficient processes are welcomed, one concern is that the proposal will reduce the financial contribution developers are required to make – signalling a decline in the number of homes councils can afford to buy, to accommodate low income households.
Another potential concern is that the current requirement before needing to build social housing is 10, but the new requirement for developers has risen to 50 – which could mean a massive reduction in the number of homes being built for social rent. A drop in the availability of affordable homes, will mean the difference between some renters having a safe place to call home or becoming homeless.
Despite any efficiencies they have made, experts are uneasy that many of the white paper’s proposals rely on effective delivery by local authorities – many of whom already struggle with resource and cash-flow. Councils will face bigger financial issues under the new system, covering the cost for development infrastructure upfront, as the new levy is payable on completion – potentially reducing the delivery of affordable homes.
Trade bodies say it is not clear if the development of ‘beautiful buildings’ is confined to only the external appearance. There is apprehension over the consideration that has been given to accessibility and space standards - over visual demeanour.
As a result of the new framework, some worry the average size of new homes will continue to shrink in the rush to build homes more quickly – and that homes for social rent will be ‘down-graded’ in terms of quality – lead to more selective choices of development sites and impact the type of housing built.
Whilst it’s challenging to assess what the new infrastructure levy will mean and look like for affordable housing, we’d love to hear your thoughts.
