“Housing crisis: affordable homes vanish as developers outmanoeuvre councils”

“Private property developers are outmanoeuvring councils in housing negotiations and routinely delivering fewer affordable homes than town halls want, an industry analysis has revealed.

Amid growing anger at the sale to foreign buyers of almost two-thirds of London’s tallest residential skyscraper, which includes no affordable housing, it has emerged that not one London borough that set targets has met them in the last six years.

Councils sometimes secured as little as 13% affordable housing when their stated targets were as high as 50%, according to analysis commissioned by BNP Paribas Real Estate, which advises local authorities and housebuilders in negotiations. On average, the 34 boroughs achieved 22% affordable housing, on targets ranging from 30% to 50%.

A key factor has been the rising value of land for commercial use, which has made developers more willing to abandon housing schemes and turn sites over to more profitable office buildings, the research suggests.

The difficulty that councils have faced in persuading developers to meet their needs illustrates the scale of the challenge facing the new London mayor, Sadiq Khan, who has pledged to dramatically boost affordable housing. Khan revealed on Wednesday that only 13% of the homes given planning consent in London last year were affordable. He has said his “long-term strategic target” is half.

If Khan moves too fast to reintroduce that 50% target, he risks stalling housing development completely, experts have warned. Move too slowly and he will face anger from his electorate, who voted him in with a mandate to tackle the housing crisis.

“Planners are mindful of the need to avoid squeezing the pips so hard that developments stall,” said Dr Anthony Lee, a BNP Paribas adviser who has represented London boroughs in negotiations with developers. “They need to strike a balance between pushing too hard in their negotiations on the affordable housing level on schemes and the impact this could have on overall housing land supply.”

Councils and developers have long been engaged in what amounts to a grand haggle. Developers examine a council’s affordable housing target and then make an opening offer, which is likely to be much lower. It is up to the planning authority to determine whether the basis for the calculations is fair and correct and a battle of the experts often ensues.

Frequently, the developer has not yet bought the site from the landowner, which gives them a significant negotiating advantage because there is a constant threat that if the negotiation doesn’t go their way, they could back out of the deal and the landowner could sell the site for commercial use instead. The local council risks losing not only the affordable homes, but all the homes.

Furthermore, said Lee, council leaders “need developers to deliver their vision for their areas, including town centre regeneration schemes. Councils can’t do it themselves. Marrying the two competing objectives can be quite tough.” …

… So for Professor Danny Dorling, an Oxford University housing expert, haggling with developers to build cheap homes is “nasty planning” and should be abandoned. “We are losing social housing through right to buy at a far faster rate than section 106 agreements could ever replace it,” he said. “There is no reason a strong government can’t do this properly by raising money through tax and develop social housing itself with compulsory purchases if needed.” …