Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Development Land and Planning Consultants Ltd (AFH 45)


  1.1  This paper has been drafted by Roland Bolton MRTPI and Neil Osborn MRTPI of Development Land & Planning Consultants Ltd to represent the views of Allison Homes, a regional housebuilding company part of the Kier Group, who are active in housing provision throughout the Home Counties, East Anglia and the East Midlands. Mr Bolton and Mr Osborn have together over 50 years of planning experience and have held senior positions in both local government, academia and private consultancy. They have been actively involved in the housing debate at both national, regional and sub regional level acting on behalf of housing developers, RSLs and for landowners. In particular, they have taken a keen interest in the assessment and deliverability of affordable housing via regional guidance, strategic and local plans, supplementary guidance and specifically in terms of making provision on individual development sites. It is this depth of experience through the different levels of the planning process connecting need with deliverability on the ground that is of significant importance and provides an overview of how general government policy is filtered down into the practicalities of individual site development.


  2.1  The demand for affordable housing cannot be separated from the overall levels of housing demand. It is no coincidence that in a period of the lowest level of housing provision since 1924, coupled with extremely low rates of borrowing in terms of real interest, there has been a growth in housing demand in general. This demand has not been, and is not being, met by the level of provision. It is suggested that one of the major problems regarding the delivery of affordable housing is the attempts by politicians and the planning profession to treat market and affordable housing as two distinct areas of need to be assessed and dealt with separately through planning policy.

  2.2  Absolutely central to the question of affordable housing is the overall approach to housing provision. In launching the plan, monitor and manage approach (PMM) set out in PPG3 the Deputy Prime Minister stated that this was a switch from the previous "predict and provide" approach. Inherent in PMM is the use of the market mechanism, ie the price of housing, to reduce demand. For such an approach to be successful, household formation must be seen as being elastic in terms of price. This however, highlights a dilemma at the centre of housing policy. If it is policy to restrict the formation of households, and hence the demand for housing by using the price mechanism, then the provision of housing at below market prices or rents will substantially undermine such a policy. If people's housing aspirations are deflated by the high cost of meeting those aspirations in the market place, then PMM can be regarded as successful. If on the other hand, as part of the planning process, housing is also made available at below market cost, then these aspirations will not be deflated but merely redirected from market to non market housing.

  2.3  In conclusion, if the objective of PMM is to manage demand then the provision of cheaper, non market housing will only serve to significantly undermine the achievement of this policy.

  2.4  Critics of PMM such as Professor Alan Holmans suggest that household formation is not determined by the availability of additional dwellings and that the failure to provide for the increased number of households is not to manage demand in any sense, but to reject part of it. At a national level the consequence is likely to be more crowding, multiple occupation and actual homelessness and not fewer households, except in the sense that more couples and lone parent families will be obliged to live as part of other households—concealed families. ("Housing Demand and Need in England 1996-2016", Joseph Rowntree Foundation). In calculating overall levels of housing need, the DTLR projections (the most recent being 1996 based) form the basis of any assessment at national or regional level. It should be noted however, that these projections of housing demand are not policy free in that they are based upon trends fitted to past values, and as such, are projections of the level of potential need if the social and economic conditions which have applied in the past continue into the future. In this respect they could be considered to represent effective housing demand rather than housing need. Work on the calculation of housing need has been developed by Holmans, the most recent suggesting that there are a number of categories of households which are specifically excluded from formal projections—in particular, "would be couples living apart" estimated to be approximately 65,000 people, and the single homeless estimated at 110,000 people. It is noted that although Holmans identifies these groups which are excluded from the Census, and therefore DTLR projections, Holman does use the DTLR's projection of the total number of households in his own estimations of need. This is of course different from the approach adopted for the purpose of regional planning where the Secretary of State has discounted all or substantial amounts of sharing households, concealed households and homeless households (institutional populations). The approach adopted by Holmans therefore, represents a widening of the definition of housing demand to incorporate housing need as well.

  2.5  Although the "Local Housing Needs Assessment: a Guide to Good Practice" (DTLR117,2000) suggests that local needs assessment should to be checked against overall levels of assessment of households incorporated in the development plan system, this unfortunately has rarely been done. However, local housing assessments based upon survey work, provide an important insight into both the potential overall need for housing but equally on the inability of professionals and politicians to treat housing demand as a single entity.

  2.6  The mismatch between local assessments of affordable housing need and the DTLR projections can be demonstrated by recent evidence produced by the local authorities for the impending West Midlands Regional Guidance Examination in Public. A survey of annual rates of affordable housing requirement arising from local affordable housing suggests an annual rate of need of 9,245 dwellings. Within the short term this compares to an overall annual level of dwelling provision of 16,730 dwellings as set out in the Draft RPG and implies that at least 55 per cent of all new dwellings in the West Midlands would have to be affordable. Such a conclusion would be patently without foundation. It would represent a substantial increase in the level of affordable housing over past rates and the projections would not, and cannot, produce such fundamental changes in the pattern of housing provision, being as they are based on past circumstances. Further analysis, however, highlights that the annual rate of affordable housing requirement of 9,245 has been derived from an overall level of estimated demand of some 30,846 dwellings per year. In other words, the local assessment of housing need has identified a level of requirement over twice that produced by the most recent DTLR projections.

  2.7  This difference between locally derived estimates of housing need and DETR based projections is common throughout the country and recent examples have occurred in Bedford, Rotherham and North Lincolnshire. In all these cases, the overall level of locally assessed housing need has been over twice that derived from the DTLR projections.

  2.8  Practitioners who carry out local needs assessments will argue that they are effectively measuring need rather than demand, in that local surveys assess the population's aspirations with regard to housing rather than that which they maybe able to achieve. In the case of the West Midlands, if the derived percentage is used rather than the overall number of dwellings then a requirement for approximately 30 per cent affordable housing would arise.

  2.9  Such an approach however would be inappropriate, for as local housing needs assessments reflect the aspiration to obtain a house, then the decision has to be made about whose aspirations should not be met. What is clear from the evidence in the West Midlands is that if regional provision is only 16,730 dwellings per year, all of these could be taken up by people who are able to compete in the open market, as the study clearly identifies that there are some 21,000 households aspiring to enter the housing market each year who will not require affordable housing in order to make these aspirations a reality.

  2.10  The above is not to suggest that those unable to compete within the housing market should be ignored but only that in a situation whereby the total number of dwellings is below that required to meet even the market needs, then the role of non market housing is more one of changing tenure than of accommodating additional needs that would not otherwise be met by the market.

  2.11  Underlying any approach to the provision of affordable housing must be the objective of providing a decent home for everyone. To do this additional houses will have to built over and above the DTLR projections given that these projections explicitly exclude certain groups of households. In a situation where the supply of housing is more realistically in balance with the demand, then affordable housing in the form of both low cost market and rented accommodation can be realistically provided in order to give access to the less well off in our society. The provision of non market housing in scenarios of an under supply of housing will not meet the requirements of the least well off in society, but will merely act to shift the balance of tenure in the overall housing stock.

  2.12  In terms of the location of need, there is an obvious and direct correlation between the areas of highest housing demand where supply is at its most restricted as this has been seen to have a fundamental effect on price. There is in effect now two clear categories of need: those people who cannot compete in any housing market and need housing at minimal cost, and those who might obtain access to housing in some parts of the country but are denied it by regional price variations, many of whom may be considered as key workers.

Do not ignore the role of low cost housing on the open market

  2.13  There has been an increasing trend, led by practitioners who undertake local housing needs assessments, to exclude low cost market and shared ownership from the definition of affordable housing. This dismissal of the role of these two particular sectors of affordable housing has gained strong hold in many, we would say most, planning and housing departments, who see their role as enablers rather than providers. This raises two comments; in situations such as North Lincolnshire and Rotherham, where the ratio between house prices and incomes is amongst the lowest there are properties available on the market for around £15,000 which are affordable to most people and households who are in work. If the stock of existing housing which is affordable is taken into account there would be no need to seek additional affordable housing provision on new developments within these areas. In fact quite to the contrary, such areas are subject to high levels of affordable housing requirement on new development schemes (in the case of Rotherham, 40 per cent) on the basis that housing needs to be made available to those potential households who can only afford to rent at significantly below the RSL recommended levels of rent. Such an approach is clearly ridiculous and indicative of the failure to take a holistic view of market demand, the affordability of housing and all the sources and means of enabling people to obtain a decent home.

  2.14  Affordable housing practitioners also discourage the inclusion of affordable market housing in areas with more robust markets. This is because even small units with a relatively low specification will still fetch significant prices on the open market due to the highly constrained nature of the supply. Their prices will also inflate in proportion to open market levels so that even if the initial discount is maintained, they quickly cease to be affordable by as wide a population where income levels remain relatively constant in comparison. However, the exclusion of this component of supply is unhelpful as it hides the underlying problem of under supply and can be in our view essential in addressing the aspirational consideration which we believe cannot be ignored and which is unlikely to be reversed by government policy. That is the aspiration of ownership. We refer particularly to those who might expect to compete in the open market in many areas—key workers for example such as teachers or policemen—but cannot compete in others. Low cost ownership allowing them to take jobs in high cost areas is fundamental to the attraction of such employment but the present system is geared to providing housing for those never likely to compete in any housing market.

  2.15  It is further noted that in many of the Housing Needs Assessments undertaken, one of the major obstacles identified for households entering the open market is the inability to afford a 5 or 10 per cent deposit. This again ignores the alternative methods of funding that many households have for this initial deposit and the more flexible approach mortgage lenders are now taking to the security on loans. However, shared ownership provides a way around this and also assists households in gaining a foothold in the housing market. It has a distinct advantage over the rental sector in that it allows households to build up equity within their property. This equity can then be converted into full home ownership. In a society where home ownership is an aspiration and rented accommodation is regarded by many who now find themselves unable to buy as second best, it would be foolish to attempt to meet housing aspirations via the rented sector. It remains our experience that many authorities reject the shared ownership option as a means of meeting affordable needs, particularly in relation to key workers.

  2.16  It is our clear view that if the government were to exclude the definition of low cost market housing from the definition of affordable housing, it would simply be to recognise and endorse a continued widespread under provision of housing to meet the requirements of all of the population.


  3.1  The cost of affordable housing comes off the value of the land. Developers are in effect acting as tax collectors and it is this that drives the requirement of the authorities to secure affordable housing from new development irrespective of real need. The critical point will come when the percentage affordable housing requirement reaches a point where landowners decide not to make land available—effectively when the rate of tax arising from planning obligations exceeds the perception of the worth of the land. Paradoxically this is more likely to occur in respect of brownfield sites where land restoration costs may leave comparatively little residual value and where housing is in competition with other, potentially more valuable urban uses. There is evidence on this point that urban regeneration sites are not being required to provide affordable housing but largely for social mix reasons as gentrification is seen as the shortest route to urban renaissance through encouraging affluent young professional classes into such areas.

  3.2  If the overall level of housing provided were to be sufficient to meet the needs identified by DTLR projections, plus concealed sharing households and other needs not measured by such projections, then it is clear that as a nation we could deliver sufficient housing for all who could afford it (through the reduction in scarcity value of land decreasing relative prices) and, through planning gain, sufficient for all who could not.

  3.3  Conversely, in a situation where under provision is to continue, the impact of ever increasing percentages of affordable housing to be made available on each site will increase the price of the restricted number of market houses that are going to become available. Thereby, perversely, the restriction in overall housing numbers and the increased percentage of affordable housing demanded by local authorities will actually have the effect of increasing demand for these properties. It must be concluded therefore, that in a restricted market planning gain will never be able to provide the level of affordable housing required, as the level required will increase as the overall level of housing provided is restricted more and more.


  4.1  The house building industry has traditionally resisted the identification of affordable housing targets within RPG suggesting that these should be more appropriately set at a local level based on local information. It is our experience however, that local studies produce such divergent results from the overall estimations of housing need contained within the DTLR and similar projections that guidance within the RPG maybe more appropriate, especially if they are to act as a guide for future local development frameworks and action plans. By producing targets on a regional level there will be the opportunity to tie these calculations of need to overall projections in a meaningful and reliable way. It should avoid the situation that occurs where there is such a large discrepancy between need as calculated by regional projections and that assessed by local studies .

  4.2  Targets for affordable housing in terms of percentages could be met through the planning system, however, under the current planning regime it is unlikely that the system will make available a decent house for everybody. There are simply other objectives to be balanced against the provision of housing which appear ultimately to mean that some sectors of housing demand will not be met. Inevitably those who will bear the brunt of the cost of protecting the environment by the restrictions on building will be those least able to compete within either the open housing or the RSL market. In recognition of this, as well as addressing affordable housing, there is a need to consider the adequacy of alternative forms of accommodation for homeless families.


  5.1  It is clear that current policy and practices are not leading to the creation of mixed communities. For the most part RSLs will favour the most secure tenants—in the most acute areas of need (where market prices are highest) RSLs are renting to households who, elsewhere, would be participating in the open market. The provision of affordable housing for these classes of people, therefore, is not actually creating mixed communities but just changing the tenure of estates while accommodating the same type of households.

  5.2  A further barrier to creating mixed communities is the way that RSLs wish to manage their estates. Simply it is more economic to manage a group of houses together than if they are pepperpotted across an area, be it across a larger urban expansion or throughout the established parts of a town. That has implications for delivery too. Generally, developers would express preference to integrate affordable units within developments so as not to distinguish between market housing and affordable stock and to provide affordable units throughout the process of implementing a scheme. The funding of RSLs means that they are unable to take small clusters of units within a larger development as that development is slowly built out. If they were enabled to take one or two properties as a development is built out over a number of months or years this would allow for the integration of RSL housing into the overall development.

  5.3  Alternatively, if developers were allowed to operate shared equity or rented schemes themselves without the straightjacket of having to provide such accommodation through an RSL, it would allow for a more thorough integration of such properties into development schemes. It would also provide revenue flows for the developer that would make such provision much more attractive to them, or other investors.


  There needs to be a properly considered and transparent approach to assessing both demand and need for housing, and if total housing need is not to be met, which sectors are to be denied the opportunity.

  The relationship between the provision of affordable and market housing needs to be reconciled with a view to addressing the nation's desire to house its population, to provide sufficient housing where it is needed to support the continued strength of the economy and to accommodate key workers. If PMM is to continue to form the basis of housing policy as a control over total supply, in areas of acutest tension affordable housing should be limited to the needs of key workers to avoid generating further housing need which will not be met.

  There is a dichotomy of approach between the objectives of RSLs and of Housing Authorities in respect of the type and definition of affordable housing. The role of low cost and shared equity market housing to address the needs of those who are economically active but are denied housing by price and scarcity of supply needs to be given much greater emphasis, particularly in respect of key workers.

  There needs to be formal recognition of the problems that the funding of RSLs and their consequent letting policies have for the delivery of stock by the building industry governed by planning obligations.

  In simple terms the housing needs of the nation can only be met by providing sufficiently for the needs that arise and in areas where this is not achieved, then no level of provision of affordable housing will resolve housing stress.

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