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.

 
 
 
 

Here’s how Henry Ford and IKEA could provide the key to solving the housing crisis

A flatpack house designed by architectural firm Rogers Stirk Harbour and Partners, on display at the Royal Academy, London, in 2013. Image: Getty.

For many people, the housing market is not a welcoming place. The rungs of the property ladder seem to get further and further out of reach. There are loud calls to build hundreds of thousands of new homes (and equally loud demands that they’re not built in anyone’s back yard).

If there was ever a time to introduce mass-produced affordable housing, surely that time is now.

The benefits of mass production have been well known since Henry Ford’s car factories made the Model T back in 1908. It was only made in one colour, black, for economic reasons. Not because it was the cheapest colour of paint, but because it was the colour that dried the quickest.

This allowed the production line to operate at faster, more cost effective, speeds. And ultimately, it meant the product could be sold at a more attractive cost to the customer.

This approach, where processes are tested to achieve increasingly efficient production costs, is yet to filter properly into the construction of houses. This makes sense in a way, as not everybody wants exactly the same type of house.

Historically, affordable mass-produced housing removed a large amount of customisations, to ensure final costs were controlled. But there is another way. Builders and architects have the ability to create housing that allows a level of flexibility and customisation, yet also achieves the goal of affordability.


Back in 2006, the “BoKlok” approach to affordable housing was launched to great acclaim in the UK. Literally translated from Swedish, the term means “live smart”. Originally created from a collaboration between flat-pack favourite IKEA and Swedish construction giant Skanska, the BoKlok housing approach was to allow for selected customisation to maximise individuality and choice for the customers. But at the same time, it ensured that larger house building components were duplicated or mass-produced, to bring down the overall costs.

Standard elements – wall panels, doors, windows – were made in large numbers to bring the elemental costs down. This approach ensured the costs were controlled from the initial sketch ideas through to the final design choices offered to the customers. The kitchens and bathrooms were designed to be flexible in terms of adding additional units. Draw and cupboard fronts interchangeable. Small options that provided flexibility, but did not impact on overall affordability.

It’s a simple approach that has worked very well. More than 10,000 BoKlok houses have now been built, mainly in Norway, Sweden and Denmark, with a small number in the UK.

But it is only part of the architectural equation. The affordable housing market is vital, but the cost of making these homes more adaptable is rarely considered.

Flexibility is key. The needs of a house’s inhabitants change. Families can grow (and shrink) and require more room, so the costs of moving house reappear. One clever response to this, in BoKlok homes, has been to allow “built in” flexibility.

Loft living

This flexibility could include a loft space that already has flooring and a built in cupboard on a lower floor which can be simply dismantled and replaced with a “flat-pack style” staircase that can be purchased and installed with minimal disruption to the existing fabric.

Weeks of builders removing walls, plastering and upheaval are replaced by a trip to the IKEA store to purchase the staircase and the booking of a subcontractor to fit it. The original design accounted for this “future option” and is built into the core of the house.

The best approach to new affordable housing should consider combinations of factors that look at design, materials and processes that have yet to be widely used in the affordable housing market.

And the construction sector needs to look over its shoulder at other market places – especially the one that Henry Ford dominated over a century ago. Today’s car manufacturers offer customised options in everything from colour to wheel size, interior gadgets to different kinds of headlamp. These options have all been accounted for in the construction and costing of each model.

The ConversationThey share a similar design “platform”, and by doing so, considerably reduce the overall cost of the base model. The benefit is quicker production with the added benefit of a cost model that allows for customisation to be included. It is a method the construction sector should adopt to produce housing where quality and affordability live happily together.

David Morton, Associate Professor in Architecture and Built Environment, Northumbria University, Newcastle.

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