The Viability Escape Clause for Developers and Affordable Housing

This article is part of a series based around our Plan for Affordable Housing which you can read more about here.

To sign the petition supporting our Plan for Affordable Housing click here.

The current Portsmouth Plan includes specific requirements for affordable housing provision on market developments. Sites containing a net increase of: 8-10 dwellings must provide 20% affordable housing; 11-14 dwellings must provide 25% affordable housing; and 15+ dwellings must provide 30% affordable housing. In exceptional circumstances where affordable housing cannot be provided on site a developer can propose to build affordable housing off site or pay a financial contribution towards a council housing scheme.

It has become common practice for developers to try and circumvent these requirements by claiming it would not be financially viable to provide the specified level of affordable housing. Property developers commission consultants to produce highly technical documents supposedly proving their case for reduced affordable housing provision. Often these documents state it would not be financially viable to provide any affordable housing whatsoever nor for a financial contribution to be made towards council housing.

These financial viability assessments are attracting growing criticism. Many housing academics and campaigners argue the figures they contain are manipulated to down-play the profitability of developments and thus the viability of developers contributing towards affordable housing provision[1].

Between 2011/12 and 2015/16 there were 31 planning applications approved for market developments resulting in a net increase of at least 8 dwellings (not including nursing homes and student accommodation which are currently exempt from affordable housing obligations). Of those 31 planning applications, the developer was successful in reducing the level of affordable housing required on their site on 12 occasions. During this period over 196 affordable homes were lost as a result of these financial viability assessments.

Table 5: planning permissions granted on applications supported by viability assessments

2011/12 2012/13 2013/14 2014/15 2015/16 Total
No of sites non-compliant with affordable housing requirements 3 1 2 3 3 12
Affordable housing units required for those sites to be compliant 197.4 4.8 26.7 71.4 21 321.3
Actual affordable housing units agreed on those sites 77 0 0 45 3 125
Shortfall 120.4 4.8 26.7 26.4 18 196.3

Source: data provided by PCC Planning Policy team

Kingston Prison is a notable example of a developer using this mechanism to avoid providing affordable housing. The developer, City & Country, submitted a planning application to construct 230 flats on the site but claimed that due to the cost of preserving the heritage buildings it would not be financially viable for them to provide the 30% affordable housing required by local planning policy. They proposed to include no affordable housing either on or off site nor to make a financial contribution towards council housing elsewhere. This was supported by an “independent” viability assessment from the well-known estate agent Savills. This document was withheld from public access on the grounds of commercial sensitivity. Even the councillors on the planning committee were only permitted to see the figures shortly before being asked to vote the application through, which they duly did. Several months later local campaigners were able to acquire a copy of the viability assessment through a Freedom of Information request. That document revealed the developer was estimated to make at least £10m in profit on the site, but was still able to plead poverty when it came to affordable housing provision.

In recognition of this issue many local authorities now require developers who propose to include lower levels of affordable housing than are required by local planning policies to openly publish their viability assessments for scrutiny by experts and local residents. For example, it is the policy of New Forest District Council to routinely publish all viability assessments and also to instruct the District Valuer, a public body, to provide a truly independent assessment of viability at the developer’s expense.

One troubling aspect of the Issues and Options paper published by Portsmouth City Council as part of the Local Plan review process, is a proposal to abolish the specific requirements (20%, 25% or 30%) for affordable housing provision on market developments. Instead viability of affordable housing provision would be assessed on a case by case basis. We believe this would open the door even further to developers negotiating down their affordable housing obligations and therefore the specific targets should be maintained.

We believe any developer proposing non-compliance with affordable housing requirements as set out in local planning policy should have their viability assessment published for Portsmouth residents to see and also for it to be independently assessed by the District Valuer at the developer’s expense.

To sign the petition supporting our Plan for Affordable Housing click here.