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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 02/08/2004

Summary & Purpose
The environment in which the Council can enable the provision has significantly changed in the last two years and there are potentially more changes ahead. The future context in which the Planning and Housing Departments will have to operate, in order to secure affordable housing, is somewhat uncertain at present.

Quality of Life Implications
Natural Resource Use
Pollution Prevention and Control
Biodiversity and Nature
Local Environment
Social Inclusion
Safe Communities
Local Economy
Resource Use
Prevention and Control
and Nature
Safe, Healthy
and Active


28TH JUNE 2004

[Wards Affected: All]
Summary and purpose:

The environment in which the Council can enable the provision has significantly changed in the last two years and there are potentially more changes ahead. The future context in which the Planning and Housing Departments will have to operate, in order to secure affordable housing, is somewhat uncertain at present.

This report, which has been considered by both the Environment and Leisure and Community Overview and Scrutiny Committees,

1. provides background information about how affordable housing has been delivered in the past and the Council’s approaches to enabling affordable homes;

2. gives an update on the delivery of affordable housing across the Borough over the last financial year (2003/04) and the likely programme for 2004/05;

3. identifies the changes that have occurred in recent months in respect to affordable housing;

4. outlines some key issues and challenges for the future in relation to the delivery of affordable housing in the Borough;

5. acts as a discussion paper to start the debate as to how the Council might best operate in the new environment.

In short, many of the issues facing this and other Councils can be distilled into one fundamental question – how should ‘affordable housing’ be funded into the future?

It is intended that this paper should open the discussion about issues surrounding affordable housing into the future and that more detailed reports should return to the Overview and Scrutiny Committees and the Executive as national and regional policy become clearer, and as local responses to these issues are formulated.
Quality of life implications – social, environmental & economic (sustainable development):

Natural Resource Use
Pollution Prevention and Control
Biodiversity and Nature
Local Environment
Social Inclusion
Safe, Healthy and Active Communities
Local Economy

There are no quality of life issues directly arising from this report.

E-Government implications:

There are none.

Resource and legal implications:

It is likely that there will be a need for more staff time required to respond to developers and assess schemes. There will be training required in scheme viability analysis and negotiating skills. In the uncertainty surrounding potential new demands being made upon developments, it may be that there will be legal challenges whilst developers test new policies. The issues in this report should be considered against the backcloth of Waverley's Financial Strategy.


1. It is a time of considerable change and uncertainty in the arena of affordable housing provision. A number of factors have come together at around the same time, which have significantly affected the environment in which affordable housing is delivered. Some of this is uncharted territory for local authorities and the past assumptions and expectations of Registered Social Landlords (RSLs), Planning and Housing Departments, developers and landowners are being challenged.

2. Some of the factors bringing about this changing environment are:

a steadily growing housing need, with more and more households unable to access the housing market because of high housing costs – both to buy and rent;

because of the housing market, even people who aspire to shared-ownership are priced out of this option and so there is greater need for more housing for rent. At the same time, the Government and the Housing Corporation are attempting to increase the number of new affordable homes and their emphasis for funding is on shared-ownership and key-worker housing;

the abolition of Local Authority Social Housing Grant, which effectively reduces some local authorities’ abilities to provide grant to RSLs;

provisions within the Local Government Act 2003, which obliges councils, like Waverley, to make over 75% of their capital receipts from Right-to-Buy proceeds to central Government – thereby reducing further the local authority’s ability to provide capital grants to RSLs to support new affordable housing;

the Government’s emphasis on local authorities that own housing stock to meet the ‘Decent Homes Standard’ by 2010 – thereby giving such councils an imperative to focus resources on the maintenance and improvement of existing stock, rather than the development of new;

the creation of Regional Housing Boards who, with the Housing Corporation, are being given responsibility for the allocation of resources, particularly to RSLs.

the Government’s emphasis on the development of the ‘growth areas’ – in this region: Ashford in Kent; Milton Keynes; the Thames Gateway; and the Stansted area. There is a concern that a disproportionate amount of national/regional resources will need to be devoted to the growth areas at the expense of other parts of the region, such as Waverley. This concern has been underlined by a recent announcement by the Minister for Housing, Keith Hill, who wrote to Housing Boards saying “Ministers will not ask regional housing boards to provide any minimum level of support to local authorities. Each Board will be free to advise on the level of support, if any, to local authorities.

a growing recognition that there are potentially more affordable housing development opportunities than there is public subsidy to support it; a view that the planning system should be trying to provide even greater percentages of affordable housing than the 25-30% as currently required by Waverley; the Housing Corporation has indicated that it will resist funding ordinary Section 106 Agreement sites in the South East where ‘affordable housing’ is a standard requirement under the Local Plan, unless “it is clear that the development economics of that scheme require it” (letter dated 3rd December 2003); an expectation at a regional and national level, that the ‘planning system’ could be generating even more ‘social capital’ from new developments e.g. contributions for schools, hospitals, roads etc, as well as affordable housing. Not surprisingly, there is some resistance from developers about this policy direction, and there are real issues about where the balance of commercial viability of schemes lie; an emphasis on the redevelopment of ‘brownfield sites’ and attempting to resolve issues of contaminated sites, which potentially are already more costly to develop because of the inherent costs, and yet might be expected to also contribute to other ‘social capital’ as well – thereby potentially making developments unviable; and the Barker Review – a piece of work commissioned by the Treasury - which looked at the issue of housing of all tenures and issues of the economics of housing, affordability, delivery and the interventions that the Government can make to facilitate the provision of housing.

3. At the same time, there is the Planning and Compulsory Purchase Act, which received Royal Assent on 13th May 2004. The Government had sponsored this Bill in an attempt to make the planning regime more responsive. One of the main features of the Act is an obligation for local planning authorities to replace their ‘Local Plans’ with a more flexible ‘Local Development Framework’.

4. The Housing Bill before Parliament (which primarily deals with private sector issues) contains proposals to give the Housing Corporation powers to make Social Housing Grant directly available to developers, in addition to making allocations to RSLs. These provisions were passed without discussion because of pressure on Parliamentary time, so whether these provisions will stay in the Bill remains to be seen. Nevertheless, it does give an indication of the Government’s thinking and policy direction.

5. It is this mix and wide range of issues coming together at the same time that presents challenges and uncertainty because of some of the inherent conflicts contained within them. To some extent this Council, along with other local authorities, is entering ‘uncharted waters’ and this report attempts to raise a number of issues in order to start a debate and generate an appreciation of the issues, their complexity and inter-relatedness.

6. In summary, it appears that there are likely to be more opportunities for the development of affordable housing, but potentially less public funding in the Waverley area to support it. The issue can, therefore, be crystallised into the question – who is to fund ‘affordable housing’ in the future?

What is affordable housing?

7. Affordable Housing is defined in the Waverley Borough Local Plan in Paragraph 6.30. This states:


8. The Council’s Housing and Planning Departments work together over the last ten years to enable affordable housing for people in Waverley. New, additional affordable housing is achieved by:

the Council building new homes; Registered Social Landlords (RSLs) acquiring sites on the open market and building affordable housing – usually with a subsidy by way of a capital grant from either the Housing Corporation or the local authority; the Council providing land to an RSL for development (possibly with an additional ‘top-up’ subsidy of a capital grant); RSLs buying ‘street properties’ that are on the market - however, because of the very high house prices in Waverley, this has not been economically viable for RSLs for some years. Funding could be made available by the Housing Corporation or local authority; Key worker housing being supported first through the ‘Starter Homes Initiative’ and now by the initiative called ‘Key Worker Living’ by way of Government Grant to Thames Valley Housing Association across Surrey. This mechanism effectively gives key workers an interest free loan to top-up their own mortgage potential or the opportunity to buy under a shared-ownership arrangement. Key Workers can also be accommodated through ‘intermediate renting’ schemes where RSLs develop homes for rent at below market levels, but higher than would be considered ‘affordable social housing’ that households on benefit might access; sites being made available through the planning system by way of Section 106 Agreements (see Local Plan Policy H5); sites that would not ordinarily be granted planning permission but because of identified housing need, exceptionally could be granted planning permission for affordable housing – these usually tend to be in villages in rural areas (See Local Plan Policy H6); and

Homebuy – in the past this was a mechanism through which Thames Valley Housing Association is able to provide interest free equity loans of up to 25% of the value of a property to enable people in employment to access homeownership. The Housing Corporation provided enough resources to fund approximately eight such homebuys each year. However, for 2004/05, the Homebuy scheme has not been funded by the Housing Corporation in Waverley.

Do It Yourself Home Ownership – a scheme whereby the prospective purchaser finds a home up to a predetermined capital value, and enters into a shared ownership arrangement with a housing association. Unfortunately, the Housing Corporation is no longer funding DIYSO.


9. One of the issues arising from Waverley’s definition is: what does the Council mean by ‘subsidised affordable housing’? The Council, both as a Housing and Planning Authority, will need to bring clarity to this issue because at present the definition is silent on where the subsidy comes from and who provides it.

10. When the most recent Local Plan was adopted in 2002, the thresholds for obliging developers to provide affordable housing were reduced from developments of 25 homes to developments of 15 homes in urban areas, and from developments of 15 homes to developments of 5 homes in rural settlements. Since that time, there have been a number of developer-led schemes across the Borough that have been obliged to provide 25-30% affordable homes.

11. It has been the Council’s practice to require on-site provision of affordable homes and in nearly all cases social housing grant has been secured to support the affordable housing element. There is, therefore, an expectation on the part of developers that the ‘subsidy’ for the affordable housing will be met from either the Housing Corporation or the Council by way of grant.

12. For information, Table 1 attached as Annexe 1 to this report, illustrates the number of affordable homes that were completed in 2003/04. Table 2 shows the number of new affordable homes that are either due for completion or to start on site in 2004/05 and Table 3 looks forward to anticipated completions, insofar as it is possible to do so. One of the reasons for this level of activity has been the Council’s track record and previous ability to provide Social Housing Grant – either from its own resources or via the Housing Corporation.

13. In the future, it is believed that there will be much less social housing grant available for the Waverley area. At the same time, it is likely that there will be a continuing stream of developments that will be obliged to provide an element of affordable housing. The key issue is: how will this be subsidised?

14. The Options are:

i. developers would be more likely to be prepared to provide shared-ownership rather than homes for rent, as this option at
least generates a capital receipt from the sale of the percentage share. However, in Waverley, there is a pressing need
for homes for rent;
15. Many of the issues raised above are concerned with how ‘affordable homes’ are to be provided and subsidised. It is increasingly likely that the amount of public resources to be directed to affordable housing is likely to decrease in the foreseeable future. The Government and the Housing Corporation are signalling that the planning system should be one of the main levers used to deliver more affordable housing. The planning system is also being asked to lever in more ‘social capital’ by requiring developers to provide contributions towards education, transport, health etc.

16. Affordable homes, or other social gains, required on Section 106 sites constitute a planning benefit that reduces land value, potentially developers’ profit, or both, depending on the specific circumstances of the land purchase.

17. In recent conversations with developers about the next context in which we all have to operate, a key theme is that of clarity, certainty and consistency. Developers and, as importantly, landowners need to know where they stand in relation to the obligations that will be imposed on them through the planning system so that they can undertake their financial/viability modelling for new developments and negotiate the acquisition/sale of sites for development.

18. A Surrey-wide study on the economics of affordable housing provision, undertaken by Knight Frank, suggests that it could be possible for affordable housing to be developed without subsidy in Surrey. However, it is clear that in order to determine whether this is possible, local authorities will need a better understanding of the economics of the development process and an up-to-date awareness of the property market/land values, and that developers will need to adopt an ‘open book’ approach to the finances of their developments – which would be a change of culture.

19. Apart from the practicalities of needing a better understanding of development economics and viability, there is a philosophical question about the extent to which the planning system can and should be used to generate ‘social capital’, as some see this as another form of non-transparent development taxation. Some developers have also expressed the view that those who develop small sites (those below the threshold levels) are not having to make any contribution towards affordable housing requirements, which is unfair in itself and also encourages developers to ensure that certain potential developments are so designed to come in under the thresholds.


20. This report has outlined the range of policy and financial changes that have and are occurring which affect the provision of affordable housing and traditional thinking about how it should be funded. A new ‘landscape’ is being created within which Waverley – along with other local authorities - will need to think creatively, if it is to continue to deliver affordable housing in meaningful numbers.

21. What is clear is that the environment in which affordable housing is to be developed and funded is changing significantly. However, Government advice and formal Guidance through ‘Planning Policy Guidance’ (PPG) notes is not keeping up with this changing environment and, understandably, there is resistance from developers to have even more demands being made upon new developments. There is a risk that Councils that impose unreasonable obligations on developers may be legally challenged.

22. Until further work is done on the various options, it is likely that the best way forward is for the Council to leave all options open namely:

23. A new affordable housing policy is required to be worked-up in the Local Development Framework document. The challenge will be to ensure that, as a Council, Waverley is confident that affordable housing requirements are set at a level that will maximise unsubsidised affordable housing delivery, but will not adversely affect the overall supply of new housing that contributes to the strategic requirements currently set out in the Surrey Structure Plan. To shape future policy along these lines, requires an understanding of local housing market conditions and the economics of development and affordable housing.

24. The Community Overview and Scrutiny Committee was anxious to ensure that if a policy for the use of commuted sums is established at a later date that the capital finance implications are understood and taken into account.

25. The Environment and Leisure and Community Overview and Scrutiny Committees, having considered the report at their respective meetings, are generally satisfied with the proposals outlined.


It is recommended that:

1. the report be received;

2. the Executive notes that, with regard to the issues arising and challenges facing the Council as a Planning and Housing Authority, the Community Overview and Scrutiny Committee endorses the actions proposed in paragraph 22 a, b and c above and the Environment and Leisure Overview and Scrutiny Committee endorses the actions proposed in paragraph 22 d, e, f and g;

3. opportunities to provide non-subsidised affordable housing be fully explored with organisations with which the Council has not traditionally worked and that there might be presentations to members, if appropriate;

4. further work be undertaken to establish a policy for the use of commuted sums which can be used for supporting affordable housing in the Borough, mindful of the important capital finance regulations dimension.

5. further reports be brought before members as matters emerge, clarify or need resolution.

Background Papers (DoH)

Letter from the Housing Corporation dated 3rd December 2003


Name: John Swanton Telephone: 01483 523375

E-mail: jswanton@waverley.gov.uk

Name: Daniel Hawes Telephone: 01483 523295

E-mail: dhawes@waverley.gov.uk