Lack of bids keeps 17,000 homes stuck in development purgatory
Around 17,000 affordable homes are stuck in development purgatory due to a lack of demand from housing providers, according to new research.
Under the English planning system, housing developments must set aside a proportion of the site for affordable housing via a Section 106 deal.
These Section 106 houses have become an increasingly important mechanism for funding and providing new affordable homes, and account for about half of all new affordable homes.
Section 106 contracts are bid for by registered providers (RPs), a social landlord that owns and manages housing for rent and sometimes for purchase. They buy up the affordable homes on development sites at a reduced price.
But in recent years, deals have dried up due to a ‘perfect storm’ of economic and policy challenges facing the affordable housing sector, with RPs pulling back from the market, according to the Home Builders Federation.
A study by the Home Builders Federation (HBF) has found that at least 139 home building sites are currently delayed due to uncontracted Section 106 houses, totalling 17,432 houses.
“The lack of Registered Providers in the market to take on the affordable housing delivered by the private sector is a major and growing problem, increasingly threatening affordable and overall housing supply,” Neil Jefferson, chief executive at the Home Builders Federation, said.
Without a contracted 106 deal, small builders are often unable to secure the development finance to start a development, whilst larger sites can be stalled because the planning permission requires the affordable element of the site to be delivered by a certain trigger point.
As a result, both private and affordable housing delivery is being slowed or stalled.
“Small sites are being prevented from starting, and larger sites are being halted due to the inability of developers to meet the affordable housing delivery requirements of the planning permission,” Jefferson said.
No easy fix
It’s tempting to suggest that this issue will be solved by throwing money at housing associations.
Indeed, the HBF have called for housing associations to be put on a “firm financial footing” to “enable them to confidently take on the affordable housing delivered by home builders”.
But Savills have suggested the solution goes much deeper, and said that grant funding “won’t solves the problem alone”.
The property firm have floated the idea of Homes England and the Greater London Authority acquiring Section 106 affordable housing “and holding it with a view to selling it to local authorities and housing associations when financial capacity allows”.
Savills have also argued that RPs are looking for property with greater energy efficiency and sustainability credentials, as well as cheaper prices, and suggested a collaborative approach on design and stock quality.
A third solution, touted by both Savills and HBF, calls for greater flexibility around the delivery of Section 106 to avoid housing projects getting stuck in the development pipeline because RPs aren’t buying its affordable homes.
Unfortunately for Labour, falling housing association interest in section 106 stock will continue to create a bottleneck in wider housing delivery if they do not intervene.