When private developers build houses, they are often required to include some homes at ‘affordable’ prices. Here in Sheffield, the Council are letting some developers off the hook, shifting the cost to the taxpayer. How?
Last year, Sheffield City Council sold land to a private housing developer. The Council claimed £2.9m as a contribution towards the provision of affordable – or social – housing in the south-west of the city. But when the developer whinged about this, the Council dropped the price of the land by that same £2.9m, so taxpayers have been made to pick up the bill for the affordable houses.
This is not a unique case. Over the last six years the Council have used the same technique, when developers pleaded they couldn’t afford that affordable homes obligation, to let them off the hook by at least £10m. Of 18 such developments in the south of Sheffield from April 2010 to November 2016, only two have actually met that requirement in full, while another nine met it in part. That leaves seven developments where no affordable housing contribution was made.
Most of these sites were in the south-west and three of them were also Council-owned land, yet the policy says all new developments in the south-west should provide a 30% proportion of affordable houses or the cash equivalent.
Councils now rely on this ‘planning gain’, otherwise known as S106 money, from private builders to get social rented homes built. But in the last six years Sheffield has built just 126 such homes via this route, as against 726 ‘affordable rent’ homes, defined as 80% of the market rent. Together that is less than a sixth of the need. Sheffield had 29,444 households on its waiting list for council housing last year.
How have private developers got away with it? In Crookes a developer rejected the obligation to provide affordable homes because they said “building affordable houses would harm the project’s financial viability”. Financial viability has become the ‘get out of jail free’ card for developers. By presenting a viability appraisal which shows their costs are too high, or their profits too low, they can avoid their obligations under Council policy and concentrate on building and selling high-cost executive homes.
We owe this get-out to government policy under the National Planning Policy Framework, introduced by the Coalition in 2011, which under the guise of promoting sustainable development leans over backwards to favour developers and gives them all sorts of excuses to avoid their obligations under local policies, such as the affordable housing one.
The Council can challenge this viability test by referring such cases to the District Valuer, who offers an independent service to councils to check the reliability of the developer’s figures. Unfortunately, District Valuers have high expectations of the profits that developers should make – 15% profit is standard, and in some cases it’s as high as 20% – and they often depend on figures the developer gives them, in a process that one expert recently described as showing “an almost systematic underestimation of values and an overestimation of costs”.
We don’t know how much was ‘lost’ on the Crookes development, because in this case the District Valuer agreed with the developer, and the Council accepted this and did not publish the figures. We do know, however, what happened in the first case described above, because community pressure forced the publishing of the District Valuer’s report. That report concluded the scheme was able to “viably support an Affordable Housing contribution of £2,934,294”, or 22%. The District Valuer also noted that “this is significantly below the Council’s policy in this regard [30%]. The reason for the departure from policy is principally due to the high level of abnormal costs associated with this scheme.”
The only sensible reading of this is that the District Valuer had already taken the price of the land and the high abnormal costs into account, and still thought the developer could afford the £2.9m towards affordable housing. Nevertheless, the Council lowered the price of the land by £2.9m.
There appears to be a reluctance on the part of the Council to challenge these practices, despite having such reports from the District Valuer. However, these reports are not routinely published. Not even Councillors on the Planning Committee get to see them. Only 11 District Valuer reports, out of 74 cases, have been published since 2010.
Developers can, and often do, sit on a site which has been given planning permission, waiting for the market to improve. Many councils have a review mechanism, so they can look again at a developer’s figures if the development is delayed. That way, if the developer stands to make a bigger profit, the Council will be able to claim a bigger share. Sheffield does have a mechanism which allows for this, but there is no evidence that it had been used in any of the cases researched for this article.
Information on councils’ affordable housing processes and outcomes is not readily available on their websites, but you can make Freedom of Information requests via WhatDoTheyKnow.com. A lot of the information in this article came via that site.
We put these issues to the Council. Cllr Mazher Iqbal, Cabinet Member for Infrastructure & Transport, denied that the Council was pressurised by the developer in the first case referred to, or that they have ‘given up’ any money for affordable housing. He also told us that, in that case, the Council had “commissioned a further independent assessment to verify the land value. This report confirmed that the assessment was within an acceptable range. We therefore accepted a lower receipt for the land than originally anticipated”.
This response does not make sense. It suggests the Council did not believe the District Valuer, so they asked a separate, unnamed company to recheck the land value. This company reported that ‘the assessment’ was a good one, ‘within an acceptable range’. Which assessment – the District Valuer’s? Then why accept a lower price, if the District Valuer was correct? And how did it come to pass that the difference in land value was exactly the same as the amount agreed as the contribution towards affordable housing? Other issues raised in this article were not addressed by Cllr Iqbal.
What could be done about this? Mandatory publication of District Valuer reports to planning committees might help create more transparency, but committee councillors also need to become more critical. The Council has a list of ‘preferred developers’. Perhaps only developers who make the expected contributions should be allowed onto that list.
Cllr Jayne Dunn, Cabinet Member for Housing, has said that ‘affordable housing is a priority’. Sheffield’s record on providing it is not going to reflect that priority – or bring down that 29,000+ waiting list – until the Council finds a way of stopping developers weaselling out of their obligations.