Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Westminster City Council (AFH 21)


  The City Council was one of the first local authorities in the country to introduce an affordable housing planning policy following the publication of the Planning and Affordable Housing Circular in August 1996 and its revised version in April 1998.

  The City Council has negotiated over 800 units of on-site affordable homes in some 25 schemes and many of these have either been completed or are under construction. In addition, over £25 million has been negotiated as financial contributions agreed instead of on-site provision and £12 million of this has been received. Much of this has been spent or is committed to schemes to provide much needed affordable housing in Westminster.

  This has been achieved in the centre of London that has amongst the highest land prices in the country, if not the world, but where the need for affordable housing is very acute. The City Council is therefore very willing to give evidence to the Sub-Committee and share with its views on what can be done to deliver more affordable housing. The structure of the City Council's evidence follows that set out in the Sub-Committee's Press Notice. We have taken the liberty of including one additional section at the end of the evidence on the impact on the provision of affordable housing of the Government's proposals for the reform of the planning system and in particular its proposed tariff system.


  The Government's definition of affordable housing encompasses low cost market and subsidised housing. There is confusion over what is meant by low cost market housing. We consider it to mean small units—studio and one bedroom flats let/sold at market prices and these are not considered to be affordable in Westminster. Others take it to mean shared ownership housing where a proportion of the dwelling is bought and the remainder rented.

  Such is the demand for affordable housing in Westminster (see below) that we define affordable housing as being both social rented housing and subsidised shared ownership housing, with the priority being social rented housing. Without subsidy, housing in Westminster cannot be made affordable (the average price is over £0.5 million). The shared ownership element can be for key workers. The Government has not objected to this approach but it is due to discussed at the UDP Inquiry later this year. Many developers have objected to our definition.


  There are currently approximately 52,000 households in temporary accommodation placed by all London boroughs, of which about 8,000 are in bed and breakfast. Westminster has approximately 2,400 households in temporary accommodation of which about 950 are in bed and breakfast.

  Westminster's latest Housing Needs Study (completed in 2001) determined a total affordable housing need of about 3,300 units per annum and a shortfall over the five years to 2006 of 11,425 affordable housing units. This compares to the average total number of dwellings permitted in Westminster each year of only 1,500 despite housing being given the highest priority in the Council's development plan (UDP).


  New affordable housing produced through the affordable housing planning policy is of an extremely high standard because it is provided in conjunction with private developments and is often in areas where there has not traditionally been social housing development.

  A significant element of continuing supply is derived from re-lets of existing council and RSL stock. The City Council's establishment of an Arms Length Management Company and the consequent investment proposals will ensure that the decent homes standard will be achieved for the City Council stock before the Government deadline. This will not be achieved with RSL stock and there is a concern at the under-investment in the repair and upgrading of RSL stock.


  Westminster's Housing Needs study demonstrates that the annual shortfall of units, taking account of existing supply and projected investment in new affordable homes is 2,285 units. Notwithstanding the extra £20 million investment committed by the City Council for new homes, the current projected level of funding from all sources is insufficient to reduce this shortfall.

  The shortfall is also substantially in excess of the entire number of market residential units being developed in Westminster. In the last five years an average of 1,100 new homes have been completed in Westminster annually. Increased funding is required but development opportunities outside Westminster also need to be more readily accessed.


  This question itself raises a common misconception. The provision of affordable housing through the planning system is not a matter of planning gain but of good planning and this has been bought about by the introduction of the circular on planning and affordable housing (c/98 and its predecessor 13/96). It is now as integral to planning as is good design or securing a mix of uses. Quite simply, the developer has to provide affordable housing to accord with local plan policy, in the same way he has to meet all other relevant planning policies. If he fails to do so, his application is refused on the basis that it is contrary to the local plan. It is not different to any other policy. Whilst it is secured by the use of s. 106 legal agreements, it is not planning gain.

  But, the planning system has always been about the use of land, not about occupiers or about the value of the developments. To use the planning system to control prices (eg to provide affordable housing) is really using the wrong tool for the job. The main tool has been through the use of public money to the Housing Corporation to directly fund developments by RSLs. But, this has clearly been inadequate and in recent years the Housing Corporation's TCIs have not reflected the costs of development in Westminster so that almost all of the affordable housing provided in Westminster in recent years, and for the foreseeable future, will be provided through the planning system.

  This over reliance on private developments brings a number of problems:

    —  the local authority and the RSL have no control over the timing of the development—it is entirely in the hands of the developer;

    —  there is no guarantee over supply—in an uncertain economic climate the developer will not implement his planning permission and may seek a new permission for commercial rather than housing use; and

    —  housing developers compete at a disadvantage with commercial developers in Westminster as the latter are not required to provide affordable housing (the circular refers only to securing affordable housing as part of housing developments). We have tried to reduce this impact by requiring commercial developers to provide housing to match their increase in commercial floorspace and when the amount of housing required reaches 15 units (the threshold for when affordable housing is required), then the affordable housing policy applies in the usual way.

  It is to the credit of local authorities that they have managed to translate the Government's wishes into planning policies to secure affordable housing from private developers. But this has not been an easy ride for either local authorities or developers and the policy is very complicated.

  Whilst the planning system can contribute to the provision of affordable housing, currently there is over reliance on it and other methods must be used if the huge shortfall is to be addressed. It is not just Westminster that is heavily reliant on the planning system to deliver the bulk of affordable housing, the same goes for other London boroughs.

  However, the Government view seems to be that the planning system should be doing more to provide affordable housing and therefore is increasing the reliance on the planning system.


  The level of unmet housing need dictates that the majority of units provided should be social rented as the economic status of the majority of those requiring housing precludes any other effective provision. However, the need to foster balanced and sustainable communities means that it is counter-productive to develop concentrations of housing that are only social rented. On larger developments we require a proportion (20 per cent as a rule of thumb) to be reserved for subsidised shared ownership housing. This provision gives some scope for developing an intermediate market and assisting key workers.

  In high cost areas the number of households for which subsidised shared ownership might be an option would be increased if the grant were increased to enable minimum equity shares of 10 per cent rather than 25 per cent at present. It would also be advantageous if an equivalent to the rural exclusion was developed for the highest cost areas in order that a golden share of the equity is retained to ensure shared ownership units are retained in perpetuity. This would ensure that owners of shared ownership properties could not purchase the entire property and then sell the dwelling on the open market, but it would remain as a shared ownership property.


  Where there is a need for affordable housing, then it is essential that Regional Planning Guidance does set a target for the region as a whole and that this is taken into account in the development plans and housing strategies of local authorities and the Housing Corporation expenditure plans. These targets may be set as a proportion of the total new housing or as a set figure. But, the economies of different local authorities will vary and the overall targets in each local authority will therefore be different—some will be lower and some higher than the proportion set out in regional guidance. Therefore, the regional guidance should not specify targets for affordable housing for each authority within its area as this is best left to the authority as it has the best knowledge of its local economy. Given the current huge need for affordable housing, then it is essential that each authority seeks to maximise the amount for affordable housing provided. But this is not the same as simply setting a high percentage because this could prevent housing development taking place in favour of commercial development and therefore achieve less affordable housing in the long term.


  As outlined above the decent homes standard will be met for the stock owned by the City Council within the deadline. This target will not be met in relation to the stock owned by RSLs. No current projection for the requirement for affordable housing will be achieved without substantial and sustained increases to grant funding.


  The cost of new homes in Westminster (on average in excess of £0.5 million) restricts access through this route to a small percentage of the population. The predominance of homeless households in the lettings to social rented accommodation is reflected in a substantial reliance upon benefits. As a result there is a polarisation that precludes the substantial part of the population from establishing new households in Westminster. The affordable housing planning policy has challenged the trend of developing the enclave approach to private housing and the continued use and development of the intermediate market (key worker and subsidised shared ownership) offers improved prospects for genuinely mixed communities.


  There is no argument that the high house prices in London and the South East are causing difficulties for people to afford to live in the area. The rise in house prices since 1996 has been well documented. The impact of these prices is being felt in some sectors of the economy—most notably teachers and nurses. The private sector has attracted less attention.

  But in our view, the full impact has yet to be felt—for two reasons:

    —  All those who have already bought houses are to some extent insulated from the problem. It is the young and those looking to move to the area from elsewhere in the UK who are disadvantaged. These numbers are relatively small at the moment but will increase over time—so with house prices forecast to continue to increase, the situation will continue to deteriorate.

    —  London continues to attract young foreign people who come here to live and work for short periods of time and are prepared to put up with relatively poor quality and/or overcrowded accommodation as part of that experience. They fill part of the gap left by the key worker problem.

  I am not aware of any work that has been done to assess the cost to the economy. Currently, the costs could be expressed in terms of longer waiting times for NHS appointments due to lack of nursing staff and impact on children's education by teacher vacancies. In Westminster we have attempted to resolve this problem by offering new teacher recruits housing from our own Council stock or through nominations to RSL accommodation.


  Any consideration of affordable housing must have regard to the Government's proposals set out in its Green Paper to change the current system of requiring developers to provide affordable housing.

  The Government propose to delete the current circular on planning and affordable housing on which all planning policies are based and on which basis all negotiations with developers take place. It will be replaced by a tariff approach in which the developer simply pays a cheque to the planning authority instead of directly providing facilities or benefits that would otherwise be required. The provision of affordable housing is therefore downgraded from a planning policy requirement to just one of many benefits to be met by paying a tariff. But rather confusingly the paper states that affordable housing should still be provided on-site which contradicts the tariff approach.

  We are very concerned that there are inherent contradictions in the Government's proposals. Affordable housing must be provided on-site as part of the development and must retain its planning policy status rather than be relegated to a planning benefit. The deletion of the planning and affordable housing circular is a retrograde step as planning authorities are now making it work through their planning policies.

  The one positive point from the Government's proposals is the proposal to require commercial development to provide affordable housing. This seems a logical step as it is the commercial developments that in many cases create the need for affordable housing in the first place and has three benefits:

    —  More affordable housing will be provided as it will be required from both housing and commercial developments.

    —  It will create more of a level playing field so that housing developers will not be at a disadvantage in favour of commercial developments.

    —  It will give local authorities greater strength in negotiating with developers as developers will not be able to use the threat of a commercial development to justify reducing the amount of affordable housing they can provide.

  Therefore, this one single change would make an important contribution towards meeting our housing need subject to the disadvantages caused by relying too much on the private sector to deliver the affordable housing.

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