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Affordable housing

Striking a Balance on Affordable Housing

Gentrification has been a good thing for a lot of people, improving urban environments and making inner cities safer and more profitable. However, there are winners and losers – the latter generally being low-income residents, forced out of their historical neighbourhoods by the pace of change which pushes property values out of their reach.

As such, developers are required to fulfil an affordable housing requirement, making part of their new properties available to low-income and existing residents at threat of displacement. However, the amount of affordable housing they need to build is the subject of a fierce debate.

Current requirements

Writing for Which?, Stephen Maunder explains:

“In early 2017, the government made a proposal to amend the National Planning Policy Framework, so that at least 10% of the homes on developments of 10 or more units would be classified as ‘affordable’. As it stands, local authorities can insist that developers include affordable housing on their sites as a condition of granting planning permission. For example, London mayor Sadiq Khan plans to make developers in the capital set aside 35% of their new-build properties as ‘affordable’ housing.”

To some, this is a welcome change in policy. The idea is to preserve neighbourhood makeup while allowing for the positive aspects of gentrification. However, there will likely be concern from developers over lowered profits. Before the Brexit vote, the London property boom seemingly had no ceiling. Since the vote, prices have plateaued or even dropped (although they have risen in other regions). In light of the fact that Britain hasn’t left the EU yet, it’s entirely possible prices will fall even further as Britain begins to lose foreign investment. Developers may be unwilling to burden themselves with increased risk for less profit.

Argument for tax

One current idea is to do away with affordable housing requirements altogether, and simply charge a higher tax on development and sales – particularly in major urban areas like London. The thinking goes that instead of a small amount of affordable housing, city authorities can use a bigger cash pot to build better and more public housing themselves.

In fact, one of the strategies of modern housing associations is to use the boom of gentrification to fund their social housing ambitions. By borrowing cheaply against a portfolio of rented properties, some associations have built market-rate housing in areas with rising prices, and then used the profits to build affordable housing elsewhere. The Chief Executive of the National Housing Federation, David Orr, has been positive about the change:

“Genuinely socially-rented homes are being produced by housing associations because they are behaving commercially. There would be no social rent if it were not for that activity. This is not a failure by housing associations. It is a success story in the light of a failure by government to continue subsidy.”

This tactic has mostly worked, but it does not address the issue of gentrification and neighbourhood displacement. It also exposes housing associations to an unprecedented level of risk, especially given a potential downturn is on the cards.

It’s clear that the housing crisis isn’t going away anytime soon. Most people can’t afford the market-rate prices of London’s new builds, but they have to be housed somewhere. Is more affordable housing the answer?



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Striking a Balance on Affordable Housing