Definitions of Affordable Housing

In a July 2012 Network member Martin Willey posed a question for members: "What
is Affordable Housing?' Particularly in the light of the discussion on the use and value of REITs, which may involve an alternative private sector provider to a housing association, how do you define 'affordable' in your local plan policies and in dealing with planning applications that propose an affordable housing element?"

how do you define 'affordable' in your local plan policies and in dealing with planning applications that propose an affordable housing element?

There was some consideration of the nature of this issue on the Red Brick blog.

Member Bob Line was the first to contribute his comments: "This is quite an issue, captured neatly by the old new PPS3 definition: The terms 'affordability' and 'affordable housing' have different meanings. 'Affordability' is a measure of whether
housing may be afforded by certain groups of households. 'Affordable housing' refers to particular products outside the main housing market. But is this now gone from the NPPF, since Planning Policy Statement 3: Housing (9 June 2011) is in Annex 3: Documents replaced by this Framework. Is that just oversight, tidying up, or does it have deep conspiratorial meaning?
The confusion is such (as exemplified by Humphrys/Shapps interview on the Today
programme) that it is probably better to now try to revert and stick to the 'meaning is the use' -  that is that most people think of affordable housing as housing that most people can afford - to buy or to rent.  Ex PPS3 affordable housing for planning purposes should probably be something like housing with capital subsidy.  A bit clumsy but more accurate?'

Another interesting slant came with an article in The Guardian: "Those who rent pay out over twice as much of their income on their accommodation than homeowners spend on a mortgage, new figures reveal, a financial penalty for a generation unable to buy a home, say charities. Statistics released on Thursday in the English Housing Survey from the Department for Communities and Local Government, show that renting is a way of life for increasing numbers in almost every part of England".

And another angle from Jules Birch in an Inside Housing blog: "So is affordable rent value for money? After two hours of scrutiny from MPs we are still not much closer to an answer."

Member Graham Facks-Martin added his thoughts: "Affordable Housing to me does not mean any housing that some people can afford, it means housing that people in low paid employment can afford to rent or buy. If your income is less than this you cannot afford to buy and Housing Benefit meets all or part of your housing costs but such housing also counts as affordable housing. Very few people have defined affordable or affordability, certainly no Government has ever done so and neither has the National Housing Federation arrived at a precise and agreed definition, but Core Strategies suggest the proportion of affordable housing that will be required as part of an approval for residential development so someone must have some idea of what they mean. The Government asserts without any evidence that housing let at 80% of Market Rent is affordable. It may be in some parts of the country but it is certainly not affordable in the highest priced areas with the greatest demand. Perhaps the RTPI should seek to define it? Those of us who have spent a lifetime in seeking to increase the provision of what we now call social housing would know what we mean by affordable but it is very unlikely that we would all agree!"

Jennifer Line, a member who works for Blaby District Council, noted: "We are frequently asked by Council Members about the meaning of affordable housing.  For simplicity we revert to a simplistic definition of subsidised housing, in the form of social rent, or shared ownership.  While affordable rent technically would also fall into this category, as it is subsidised, it is more of a stretch to include it since the rents could potentially exceed the average household capacity – this issue is compounded by the fact that the Affordable Rent guidelines indicate that the criteria for eligibility remain the same as for social rent, despite Councils now having the ability to review their wider allocations policies, the basic statutory requirements for housing need are
unchanged.  This prompts the question, is affordable rent just expensive social rent? Furthermore, is affordable rent affordable for the public purse with the implied housing benefit costs?  Will the changes to the benefit system remove the product from this simplistic definition of affordability?
From an academic perspective all housing could be affordable to somebody, so the separation of Affordable Housing as a policy tool and affordability as a general principal is a key argument which should be understood more widely."

And member Peter O'Brien attempted to tease out some of the issues on the basis of his experience: "Defintions of Affordable Housing, and the practical application
of planning policies, have vexed planners, developers, housing officers, politicians and the general public for many, many years! Some pointers from my experience:

• Planners are apt to think of affordable housing as being synonomous with social housing. Often this is because they do not fully understand the complexities of publicly funded housing
• The planning system should be capable of enabling affordable housing at below market prices for sale, rent or internediate (part rent or similar). There have in the past been useful (EU) definitions of what affordable means, related to say 75 to 80% of the market price or rent 
• Private housebuilders are normally unwilling to take on these obligations themselves, and delegate them to RSL's. Because of this planners have been able to avoid the complexities of themselves defining a threshold
• Providing affordable housing to rent in this way usually works well. However it does not work well for housing for sale. This is because RSL's are reluctant to build for sale as it is not their core business and their financial models do not lend themselves to it. Neither do they like 'half rent half purchase etc', as these have (understandably in my opinion) provided unpopular with with the public, certainly outside London. And private developers rarely have a mechanism to identify purchasers who would qualify for affordable housing; this again is quite sophisticated (ie complicated!), requiring an assessment of disposable income etc. However, in my view it should be given more prominence, otherwise as I said earlier, virtual all affordable houisng provided is for rent rather than purchase
• Planning policies on affordable housing need to be dovetailed with Housing Market Asessments, which the NPF helpfully refer to. This actually enables them to respond to changing circumstances (provided the HMA's are kept up to date), and provide a robust evidence basis on which to undertake negotiations with developers
• There are issues in low value areas, where affordable housing is still required (because income levels are also low), but where built values do not generate sufficient profit to enable developers to meet their obligations. The role of the HCA is crucial here, in providing some gap-funding; this helps avoid LPA's being forced to renegotiate S 106 agreements, removing the affordable housing requirement in order to get development going
• Finally there are always a range of design issues. Affordable does not mean that lower standards of design (for dwellings, landscape or the public realm) should be tolerated. And the temptation to increase densities to increase site values should be avoided where this may compromise design quality."

In a subsequent member Bulletin attention was drawn to 24dash.com article examining the thought that 'Is the Government set to merge the two rented sectors?' in a bid to rein in capital expenditure for house building and allow need to be met through market forces. Amongst the points considered are: 'we're now hearing the Montague review is set to recommend relaxing council requirements for social housing through section 106s in a bid to entice institutional investment in [private] rented homes' and 'the Government doesn't seem too bothered about the impacts of higher priced homes on the housing benefit bill despite its stated aim of reducing expenditure through caps and cuts'. A follow-up piece 'Merging rented sectors 'feels timely and would reduce social stigma'', whilst noting that '66% of 24dash readers believe that the Government should not merge the two sectors', had amongst the points noted in favour:

• "When putting planning permissions (sic) in for new developments the concept of affordable or social housing gets heckles up in local communities in a way that private sector housing doesn't."
• "If the two sectors were merged in some way to the extent where people had a choice between the two, that could create competition which isn't there at the moment in some areas."

So, potentially the debate had become more complex even before any satisfactory answer has been reached on the affordability issue?

Member Grham Facks-Martin commented: "I strongly support the allocation of Social
Housing based on need, this did NOT start with the homelessness legislation in 1977 but flows from the Cullingworth Report of 1969, prior to which many local authorities allocated on date order. It is often alleged that Social Housing carries a stigma, some estates do certainly, but the notion that 4.8 million Local Authority and Housing Association dwellings housing approx. 10 million people carry a stigma is absolute nonsense and many of the Local Authority and former Local Authority Estates are now mixed tenure estates. If the dwellings that have been sold under Right to Buy (RTB), some 2.5 million, the vast majority of which are in the above estates are added then at least another 5 million people live on these estates. In most Local Authority areas only a relatively small proportion of lettings are to homeless applicants , many of whom end up in the bottom end of the Private Rented Sector (PRS). I strongly maintain that the way many homeless applicants were treated prior to the enactment of the legislation was a national disgrace. There is every prospect that in the next decade many Local Authorities will wish to start building again, and if some Housing Associations move away from housing those in the greatest need as appears increasingly likely then the pressure to build more dwellings to house those in the greatest need will only grow. If Housing Associations no longer wish to house those in greatest need, then the justification for them to continue to receive Grant weakens also and if they join the PRS then it will vanish completely. There is a continuing obligation for a compassionate and civilised society which I hope we still are, to house people who cannot afford unsubsidised housing, many Housing Asociations have made massive contributions over the years, I very much hope that the majority will wish to emulate their great traditions."

Member Alan Gillham has added his thoughts from an LPA perspective:

• The issue is having an adopted affordable housing policy that will stack-up against NPPF
• NPPF makes it more difficult to secure affordable housing policy quotas and easier to appeal planning decisions where affordable housing policy make proposals unviable
• Policy requirements need to be based on meeting identified affordable housing need while meeting stringent viability tests
• Local Plan Policies need to have a quota on affordable requirements that is viable & flexible on changing market conditions
• But there is no requirement to define the details of that affordable housing according to NPPF
• A general policy criteria can be used e.g. "The precise mix in terms of tenure and house sizes of affordable housing within a scheme will be determined by local circumstances at the time of planning permission, including housing need, development costs and the availability of subsidy"
• The stricter the requirement for subsidised rented the more the policy will rely on viability/market buoyancy to keep it afloat
• Where necessary supporting text may have a specific requirement for subsidised rented housing which for many LPA's will also mean a fall-back position comprising intermediate affordable housing (including shared ownership), and exceptionally a commuted sum
• It is reasonable for an LPA to seek assurances of delivery and state its preference in supporting text for the involvement of approved RSL's
• Some LPA's have had their affordable housing policies downgraded to a seek-to-negotiate affordable housing policy by PINS inspectors on the grounds of failure to comply with national policy on viability
• Just a seek-to-negotiate affordable housing policy will put LPA's in a bad place in negotiations on affordable housing
• Too many LPA's have lost affordable housing policies/DC appeals in recent years on the anvil of national policy.

Please do contribute further to this discussion by sending your comments to housing@rtpi.org.uk