Birmingham's homeless were denied more than 1,000 lower cost properties last year after developers used a ‘legal loophole’ to avoid the affordable home discount.
Housing charity Shelter revealed that during 2015/16 in Birmingham developers behind the construction of 2,916 homes were able to backtrack on promises to deliver 1,003 of them at the affordable rate by arguing their profits would be unfairly hit.
Anyone seeking planning permission of more than ten homes is expected to provide 35 per cent at the affordable rate under planning policies – or pay the council housing department equivalent compensation to subsidise housing costs on another site.
But following the economic crash of 2008 and the downturn in the construction industry, developers were allowed to wriggle out of the commitment if they could show their profit margin had slumped below 20 per cent and the site was therefore no longer economically viable.
The aim was to encourage construction to go ahead on sites where development might otherwise be mothballed.
Viability assessments have also been used to release companies from commitments to provide public transport, playgrounds, leisure and other community spin-offs.
Shelter looked at 11 city councils performance and found Manchester, Birmingham and parts of London were the worst affected. Birmingham currently has almost 6,000 households on the waiting list for a council or social property.
Shelter chief executive Polly Neate said: “What this research reveals is the scale at which developers are able to use legal loopholes to protect their profits and dramatically reduce the number of affordable homes available for people.
“Through freedom of information powers, Shelter has been able to reveal the extent to which affordable homes are required in local plans, only to be dropped by developers.
“The Government needs to fix our broken housing system, and it must start by closing this loophole to get the country building homes that are genuinely affordable for people on middle and low incomes to rent or buy.”
Shelter says that the viability assessment is used most frequently on larger sites, managed by the country’s biggest developers. It states that there has been a tendency to over pay for land, only to claw the money back through ditching affordable housing costs.
WHAT THE COUNCIL SAYS
Birmingham’s cabinet member for housing Peter Griffiths responded: “Housing is the city council’s highest priority and we are committed to providing high quality affordable housing which is available for people who are unable to access or afford market housing.
"We will continue to ensure that not only the right number of homes are provided, but also that the right type and quality of homes are built to create mixed, balanced and sustainable neighbourhoods.”
The council said that it carries out an independent review of the viability assessment to ensure the developers’ financial claims are accurate.
Development director Waheed Nazir said: “In the last two years, the city has negotiated in excess of £4 million of extra contributions from was initially offered by applicants.
He added: “The undersupply of affordable housing is an issue across the country, not just in Birmingham, which go back decades, due in a large part to the reductions in public grant available and financial restrictions placed on local authorities.
“We will continue to make the best use of the finance available, increase the direct provision of new homes by the council and maximise affordable housing provided through developer contributions.”
What do the developers say
Andrew Whitaker, planning director at the Home Builders Federation (HBF), said: "We have become increasingly reliant on the private sector for affordable housing provisions, in addition to expecting contributions towards infrastructure and local amenities.
"However, there is a limit as to what can be extracted from development sites before they become unviable."
Mr Whitaker said: "Without a willing landowner and developer you get no development and thus no affordable housing."
The Government says
A Department for Communities and Local Government spokeswoman said: "Affordable housing is a top priority for the Government. That's why we have confirmed that funding for affordable homes will be increased by a further £2 billion to more than £9 billion, and since 2010 we have delivered almost 333,000 affordable homes."
She continued: "We are currently consulting on proposed changes to the approach to viability assessments. Our measures would speed up decision making and increase transparency, so that local communities know what is expected from developers on new sites."
