Challenging Times for Affordable Housing

I attended a very good event on the future of affordable housing in Norfolk last week, hosted by Saffron Housing. Chief Executive Adam Ronaldson gave a sobering account of the impact that the credit crunch and recent government policy are having on the affordable-homes sector in Norfolk. There were some rather troubling statistics.

Delivery of new homes per year had dropped from 1,000 per annum in 2007/8 to around 700 this year and was set to fall further, perhaps to around 500 by 2013/14– only half its previous level. To make matters worse, in that period the housing list had grown around 3% per annum. Grant funding for each new home had dropped from £40k down to £15k for a typical house costing £110k to build. The new increased ‘Affordable Rent’ would allow Saffron to offset some of this loss and keep building, but managing an increase in rent from the former £78/week to £110/week for that typical house under the new deal (on new and some re-let properties) would obviously present some challenges.

Even more worrying were the proposed new under-occupation penalties, whereby housing association and council tenants who were no longer using all of their house (typically ‘empty-nesters’) would be charged £14/week for one empty room and £20/week for two. The government are introducing this charge to encourage such residents to down-size their accommodation, to free it up for those who have greater need of a larger property. In Norfolk, however, demand for one-bed accommodation already accounted for 65% demand for affordable housing, so smaller properties may well not be available for those wanting to down-scale.

Richard Bacon, South Norfolk’s Conservative MP, spoke next. He has a reputation for being independent-minded and was quite critical of recent government policy, joking that he occasionally had to remind himself that he was no longer an opposition MP! He did stress very forcibly that the ballooning of the Housing Benefit budget in recent years had to be tackled. He identified the root cause of the problem: chronic under-supply of all types of new homes, stretching back many years, creating an affordability problem through the simple law of supply and demand. He further observed that land with unimplemented planning permissions was not in short supply – apparently shifting blame for the undersupply from the oft-maligned planning system to…where exactly?

Edward Gilder of Badger Building, a small Norfolk house-builder, spelled out the answer: in his view the recent slump in housing supply was down to the credit-crunch, plain and simple. When people are worried about the future and the banks have reigned in mortgage-lending, people can’t buy houses – so house-builders won’t build them. He pointed out that under Labour, when credit was freely available, homes had been produced at a much higher and historically consistent rate – though he did concede that this rate (the house-building industry’s apparent maximum capacity, he suggested), did not keep pace with demand even then.

Planning lawyer Trevor Ivory of Howes Percival gave an update on issues arising from the Localism Bill, which should now properly be called the Localism Act, have in passed into Law after receiving Royal Assent on Tuesday this week. His two areas of main concern were the level of the new Community Infrastructure Levy (CIL) which he understood was likely to be set as part of the GNDP Core Strategy at around £135 per square metre. A new home typically costs between £900 and £1200 per square metre, so this is a significant cost, at a time when many schemes are struggling to be proved viable. More particularly he was concerned that becasue the level of the CIL is fixed in the local plan and is thereafter non-negotiable, developers would be left haggling haggling over on-site contributions (existing Section 106 agreements) where viability was marginal…and the biggest slice of this expenditure was usually the money available for affordable homes.

Challenging times indeed for housing in Norfolk.