2nd opinion: How much are we really gaining?

veryone agrees that we need more affordable housing in England and that there is an overall shortage of housing in many parts of the country. One of the main planks in the government's affordable housing policy is provision through section 106 agreements – these aim not only to ensure that housing is provided but also that developers make a contribution to financing it.

The government estimates that around 15,000 homes a year are being secured through the planning system in this way. However, research for the Joseph Rowntree Foundation (HT 17 October, page 9) shows that this is probably an overestimate because of double counting and the inclusion of 100% affordable housing sites.

The report looked in detail at a range of local authorities where the stated policy was to achieve between 20% and 30% affordable housing. Individual site outcomes were consistent with these locally agreed policies but overall percentages ranged from around 4% to 8%.

The majority of sites where no affordable housing was being achieved were small and below the threshold. In many areas there were still large residential sites with outstanding planning permission that had little or no affordable housing requirement. In some areas rising house prices meant that larger discounts were needed to make the housing affordable, resulting in fewer affordable units. The abnormal development costs of brownfield land had also reduced the numbers provided.

In some cases, the registered social landlord had not been able to purchase the affordable dwellings within the agreed deadline so they reverted to market dwellings. In others, a contribution would have jeopardised the viability of development. Overall, our conclusion was that it would be almost impossible to achieve more than 10% of output as affordable housing – so to increase affordable housing, more market housing must be provided.

An equally important question is the scale of the financial contributions involved. Our evidence suggests that while the developer contributions may look quite large in terms of the proportion of affordable housing provided, the financial contribution is usually quite small when measured across the whole development.

Only in London are the developer contributions significant across the value of the whole scheme, but the results are still expensive and involve large social housing grant contributions. Even where the developer contribution is large and grants are high, the potential rents are also high. And even with developer contributions and social housing grant, the RSL often has to make a contribution from internal funds.

Planning gain is thus shifting the geography of social housing to the more expensive parts of the housing market in southern England rather than adding significantly to the national total of affordable homes provided.

If it is to work better in the future, more land and larger financial contributions have to be made available. This involves increasing three distinct types of sites:

affordable housing development which needs no additional subsidy. These make a relatively small but valuable contribution mainly in the North and the Midlands

Planning gain is shifting the geography of social housing to more expensive parts of southern England rather than adding to the national total of affordable homes

developments that require both developer contributions and social housing grant. Here the objective must be to move away from negotiations based around total cost indicators, which is what is too often occurring now – meaning that social housing grant does not go further

developments involving social housing grant but no section 106 agreement. These 100% affordable housing sites currently account for the majority of traditional social housing.

So there are three big questions that must be addressed if section 106 is to work more effectively:

Will there be enough social housing grant available to allow larger numbers of developments to come forward – especially in London and the South-east?

Will the successful introduction of section 106 agreements across a much wider range of sites actually mean any more affordable housing – or will these sites substitute for 100% affordable housing sites?

Is it really possible to obtain larger contributions from developers without jeopardising market provision?

If the answers to all these questions is yes then section 106 agreements might make a significantly larger proportion. But at the moment, an overall contribution of around 10% of total output is probably as much as we can hope for.

* Joseph Rowntree Foundation report, Planning Gain and Affordable Housing: Making it Count, by Tony Crook, Jennie Currie, Alastair Jackson, Sarah Monk, Steven Rowley, Kerry Smith and Christine Whitehead. Published by York Publishing Services, 01904 430033.