Here's how developers wriggle out of building enough affordable housing

Another unaffordable London housing development. Image: Getty.

Labour’s Nicky Gavron on the dark art of viability assessments.

Are developers gaming the system to avoid making their fair contribution to affordable housing?

Just as more affordable homes are needed, fewer and fewer are being provided by developers. In 2007-08, 1,560 homes were funded entirely through planning obligations. Since then the totals have significantly declined, and last year, only 300 new affordable homes were funded entirely without grant.

And this is all the more disheartening when you consider that public subsidy for affordable housing has fallen since 2010, making private sector contributions through planning obligations even more important.


Some – including the mayor of London – have expressed concerns that developers are using the “dark arts” to calculate how much money they can contribute to pay for affordable housing, calculations known as “viability assessments”.

I have spoken out against the way some developers appear to be rigging viability assessments to inflate their costs and underestimate the value of the scheme on paper, and then claim there is no money left over for affordable housing. This could be done in the full knowledge that the actual costs and the actual values will be different.

At a meeting last week of the London Assembly Planning Committee, which I chair, we gathered some real insight into the issues from our guests. They cited various factors holding back councils in negotiating for more affordable homes:

The National Planning Policy Framework

We heard time and time again at the meeting that the new system of planning, introduced in 2012, emphasised that the level of “obligations and policy burdens” placed on a development should not threaten its viability. The policy framework and the guidance, taken with other government actions such as giving developers the right to force renegotiation, indicates the policy could be weighted in favour of developers.

But as we heard from guests – the interpretation of this is confused, especially alongside other guidance. The process is saturated with uncertainty.

The Mayor’s 20 per cent profit benchmark.

The “Three Dragons” model, provided by the mayor for calculating viability, sets a default profit level of 20 per cent on new developments. However, is it appropriate for the mayor to have such a benchmark in this widely used model? And more importantly, what is an “appropriate” profit benchmark for developments anyway?

Land issues

The price of land is a key issue affecting viability. The flexibility with which affordable housing requirements are applied may have contributed to skyrocketing land values: John Wacher of the London Borough of Islington told us that “almost by definition, the developer that gains the site is the one that has assumed the lowest level of policy compliance with the development plan”. From a developers’ perspective, it is claimed that the easy sites have already been snapped up and the land currently being developed is now much more expensive to build out.

There are also issues about the methodology used to value land. Most developers opt to use “market value” – which generally means that a developer will make the most attractive offer for the land, often based on the expectation of luxury housing with little or no affordable homes. A more appropriate approach might be “existing land use value plus”, which is based on the current use of the land in addition to an increase in value, to provide an incentive to sell the land.

Developing the right skills with limited budgets.

London boroughs need highly skilled staff to be able to negotiate effectively with developers. Councils are often outnumbered and out-skilled by developers who use their deep pockets to hire experts. 

John Wacher highlighted excellent work boroughs are doing together to improve their skills, but with pressures on council budgets, the recruitment and training environment is challenging.


But how do we solve these problems? Guests and community groups who have developed real expertise in this area presented us with some ideas – from making viability agreements more transparent, lowering the profit benchmark, and providing better information sharing and training of staff.

We also heard that the mayor’s own developments on public land holdings offer a real opportunity to show leadership.

The Committee will be exploring whether these ideas will work over the next weeks – but if you have any ideas of your own, please do email us on planningcommittee@london.gov.uk. We would especially like your ideas on how to develop a more holistic approach to viability, with a wider context of wellbeing and a more equitable approach to sharing value.

 Nicky Gavron AM is chair of the London Assembly Planning Committee.

 
 
 
 

What can other cities learn about water shortages from Cape Town’s narrow escape from ‘Day Zero’?

Cape town. Image: Pixabay/creative commons.

Cape Town was set to run dry on 12 April, leaving its 3.7m residents without tap water.

“Day Zero” was narrowly averted through drastic cuts in municipal water consumption and last-minute transfers from the agricultural sector. But the process was painful and inequitable, spurring much controversy.

The city managed to stave off “Day Zero,” but does that mean Cape Town’s water system is resilient?

We think not.

This may well foreshadow trouble beyond Cape Town. Cities across the Northern Hemisphere, including in Canada, are well into another summer season that has already brought record-setting heat, drought and flooding from increased run-off.

Water crises are not just about scarcity

Water scarcity crises are most often a result of mismanagement rather than of absolute declines in physical water supplies.

In Cape Town, lower than average rainfall tipped the scales towards a “crisis,” but the situation was worsened by slow and inadequate governance responses. Setting aside debates around whose responsibility it was to act and when, the bigger issue, in our view, was the persistence of outdated ways of thinking about “uncertainty” in the water system.

As the drought worsened in 2016, the City of Cape Town’s water managers remained confident in the system’s ability to withstand the drought. High-level engineers and managers viewed Cape Town’s water system as uniquely positioned to handle severe drought in part because of the vaunted success of their ongoing Water Demand Management strategies.

They weren’t entirely mistaken — demand management has cut overall daily consumption by 50 per cent since 2016. So what went wrong?


Limits to demand management

First, Cape Town’s approach to water management was not well-equipped to deal with growing uncertainty in rainfall patterns — a key challenge facing cities worldwide. Researchers at the University of Cape Town argued recently that the conventional models long used to forecast supply and demand underestimated the probability of failure in the water system.

Second, Cape Town’s water system neared disaster in part because demand management seemed to have reached its limits. Starting late last year, the city imposed a limit on water consumption of 87 litres per person per day. That ceiling thereafter shrunk to 50 litres per person per day.

Despite these efforts, Cape Town consistently failed to cut demand below the 500m-litre-per-day citywide target needed to ensure that the system would function into the next rainy season.

The mayor accused the city’s residents of wasting water, but her reprimanding rhetoric should not be seen as a sign that the citizens were non-compliant. The continuously shrinking water targets were an untenable long-term management strategy.

Buffers are key to water resilience

In the end, “Day Zero” was avoided primarily by relying on unexpected buffers, including temporary agricultural transfers and the private installation of small-scale, residential grey-water systems and boreholes in the city’s wealthier neighbourhoods. The former increased water supply and the latter lowered demand from the municipal system. These buffers are unlikely to be available next year, however, as the water allocations for the agricultural sector will not be renewed and there is uncertainty in the long-term sustainability of groundwater withdrawals.

For more than a decade, Cape Town has levelled demand, reduced leaks and implemented pressure management and water restrictions. This made Cape Town’s water system highly efficient and therefore less resilient because there were fewer reserves to draw from in times of unusual scarcity.

The UN Water 2015 report found that most cities are not very resilient to water risks. As water managers continue to wait for climate change models to become more certain or more specific, they defer action, paralysing decision-makers.

If we really want our cities to be water-resilient, we must collectively change long-held ideas about water supply and demand. This will require technological and institutional innovation, as well as behavioural change, to create new and more flexible buffers — for example, through water recycling, green infrastructure and other novel measures.

Although Cape Town avoided disaster this year, that does not make it water-resilient. Despite the arrival of the rainy season, Cape Town is still likely to face Day Zero at some point in the future.

The ConversationThere’s a good chance that the city is not alone.

Lucy Rodina, PhD Candidate, University of British Columbia and Kieran M. FindlaterUniversity of British Columbia.

This article was originally published on The Conversation. Read the original article.