Affordable housing

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Londoners criticise their local authorities for subordinating public needs to developers’ private interests.

‘Regeneration partnerships’ between council and developers seem geared to upholding the corporate interests of developers over the rights of local residents.

Anger stems initially from the total lack of new replacement council or ‘social rented’ homes in regeneration schemes.

During ‘consultation’ on scheme proposals, developers and politicians quickly rule out the provision of replacement social rented or council housing.

They say public housing offered at subsidised rents would render such schemes wholly unviable for commercial developers.

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Shared ownership

Proposed ‘affordable housing’ – a completely different form of tenure from council housing – often provokes further criticism.

A developer chooses a ‘registered social landlord’ or housing association to provide an element of ‘affordable housing’ in a regeneration scheme.

The extended role of housing associations with charitable objectives proves initially popular in the late 1990s. Housing associations pride themselves on providing homes at lower prices than offered by the housing market.

In the first two decades of the 21st Century, they offer ‘affordable housing’ in regeneration schemes in the shape of ‘shared ownership’ homes.

In late 2013, the average price of a shared ownership property bought in London is £240,943.

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Outlay

But can Londoners in need of a home realistically afford this common form of ‘affordable housing’?

For instance, an east London homebuyer purchases a 25 per cent equity share in a two-bedroom flat worth £250,000.

They pay £62,000.

Their monthly mortgage payment is £447.

They also pay a monthly rent of £430 on the remainder.

Plus a £125 monthly service charge.

Council Tax paid to their local authority adds another £92 per month.

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Costs

Shared owners who aspire to buy around 40 per cent share need a deposit of £18,794.

On top of this outlay, the average monthly mortgage and rent costs for shared ownership in London is £857.

Shared ownership buyers in London typically need a household income of £33,460 per year.

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Unaffordable

Thus, for many Londoners on average and lower incomes in need of a home, especially single person households, ‘affordable housing’ becomes unaffordable.

Housing associations claim they need to build and sell more homes at this price level so they can fund the building and acquisition of newer homes elsewhere.

But this plea does not convince many Londoners who need genuinely affordable homes.

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Viability

Later, some developers contend that financial viability – their need to return a profit – dictates they can only deliver an even smaller number of ‘affordable’ properties than originally offered in the regeneration plan.

Such developers complain a lack of available private lending and public funding means regeneration developments suffer from reduced profitable viability.

Certainly, the banking crisis and economic meltdown of 2008/9 leaves many London local councils and their developer ‘partners’ with stalled regeneration schemes.

Investor confidence plummets.

Potential funding evaporates.

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Assessments

But, by 2013, local people suspect developers use ‘viability’ to hoodwink local councillors into approving more private luxury homes and fewer ‘affordable homes’.

Appointed officials conduct ‘independent’, commercially confidential viability assessments.

Even local politicians do not get to scrutinise these confidential assessments on grounds they contain ‘commercially sensitive’ information about the developer’s financial position.

If revealed, argue developers, this information hands ‘unfair advantages’ to their project contractors and wider market competitors.

Diminshed

Local politicians in London do not challenge this confidentiality even though the assessments dictate the tenure type and price of housing in an area undergoing developer-led regeneration.

They accept the general thrust of the assessment and simply agree to a reduction in the percentage of previously agreed affordable housing.

This diminishes the originally promised proportion of ‘affordable homes’.

‘Better some than no affordable homes,’ is how politicians try to sell this diminution to local people.

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Challenge

However, in 2014, residents in south London persuade a judge to rule that Southwark Council and global developer Lend Lease must publicly disclose elements of a hitherto confidential viability assessment for the Heygate regeneration scheme.

Residents want to see the viability calculation that justifies the proportion of new affordable homes on the scheme being reduced to fewer than 25%. Southwark Council’s stated policy is that the proportion of ‘affordable homes’ on any regeneration scheme must be 35% – but the policy seems worthless.

Local council chiefs immersed in developer-led regeneration bleat this kind of public disclosure could hamper future negotiations between councils and developers – and halt developer-led regeneration schemes.

 

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© London Intelligence 2014