Homes for Londoners: key planning challenges to delivering housing to meet the capitals needs

“London is open. We are a leading global city with a strong economy, with businesses that trade internationally, and with people drawn from all over the world”.

So writes Sadiq Khan, the current Mayor of London. The new Mayor’s positive message is consistent with the commonly held view that London, as Europe’s largest city by both population and output, is in the top tier of global cities (together with New York, Singapore, Tokyo and Paris).

However, it is perhaps ironic that the Mayor’s ringing endorsement of his city should be found in the foreword to the recently published draft supplementary planning guidance on affordable housing and viability entitled “Homes for Londoners” (the Mayor’s SPG). If London is so large and doing so well, why is it apparently unable to provide something as basic as homes for its citizens?

The provision of “Homes for Londoners” was a key manifesto pledge of Khan because, behind London’s pole position as a global talent hub lies an acute housing shortage coupled with an ever-widening affordability gap. It is in this context that the Mayor’s aspirations to boost the supply of new affordable homes within London needs to be understood and, as the Mayor seeks to use the planning system and his planning powers to help achieve his objectives, affordable housing is the flashpoint which brings into focus the complex political and social dilemmas that dog the planning process.

In this article we look at the key challenges presented in delivering Homes for Londoners and consider some of the solutions.

Planning in London

London has been developing as a global hub for centuries, and for most of its history, it has done so without a planning system. Before the formal existence of any public control over the use and development of land in the form of the Town and Country Planning Act 1947, landowners were, broadly speaking, free to use land in any way they wished provided that they committed no nuisance or trespass against their neighbours’ property. Today, society requires that this freedom be restricted for the public good and that the use of land be determined by the long-term interests of the community as a whole. Therefore, the UK planning system exists to control development in the public interest.

Strategic planning in London is the shared responsibility of the Mayor of London, the 32 London Boroughs and the City of London Corporation. The Mayor is responsible for producing and keeping under review the London Plan (the spatial development strategy for the city) and Boroughs must ensure that their own local development documents are "in general conformity" with the London Plan.

One of the strategic objectives of the London Plan is to boost the supply of housing across the city. Despite the plan setting out housing targets for each Borough, London continues to face a supply crisis, which is described by the London Plan itself as pressing and desperate. At the public examination of recent alterations to the Plan, the Examining Inspector noted that policies seeking to achieve a step change in housing delivery were not working and that the revised housing targets set for the London Boroughs were “woefully short of what is needed”. Against this backdrop, London Boroughs are required as a matter of strategic importance to meet and exceed their housing targets.

Under Khan, the London Plan is due for a full review and a new draft Plan is due to be consulted upon in autumn 2017. However, its adoption is not expected before autumn 2019 at the earliest, some two and a half years into Khan’s four year tenure. This perhaps helps to explain the role of the draft SPG, which is seen by some to foreshadow future affordable housing policy that will be contained within the new London Plan.

Overcoming the challenges

London needs to provide homes to meet the diverse needs of its residents and therein lies the problem. The divergence between the poorest and the richest is most acutely felt in the capital so finding a solution which, to coin Theresa May’s strapline, ‘works for everyone’ is challenging, to say the least.

Land supply, viability and competing priorities and needs all play their part in the mix and all need to be overcome if a solution is to be found.

Land supply

Providing housing requires land, which is, by its nature, a finite resource. The problem is particularly severe in a historic city such as London. The fact that London is already well developed means that prime sites where people want to live are few and far between and those which do exist are often subject to a number of physical constraints in addition to any policy impediments.

There is also a clear political reluctance to build upon London’s precious Green Belt - many observers say that the release of some of this Green Belt would make a material difference in land supply and enable more sustainable development to come forward.

The pressure to deliver more housing and other infrastructure means that we are seeing the promotion of schemes of increasing densities and intensification, which are changing the urban fabric of this once low-rise city. Schemes are becoming taller as developers seek to provide higher numbers of units on smaller and more constrained plots. Good examples of this are Spire London and Landmark Pinnacle, the first and second tallest proposed residential towers in Western Europe promoted by Greenland Group and Chalegrove Properties respectively and which, advised by Ashurst, recently obtained planning permission.

These two schemes also serve as examples of how areas of London that have not historically been seen as residential are increasingly being promoted as new neighbourhoods. Both of these schemes are located immediately adjacent to Canary Wharf, usually thought of as one of London’s key financial centres and the antithesis of the once favoured suburban idyll.

They also illustrate how the quest for density often results in a more complicated and consequently more expensive building, which has knock-on effects in terms of design and build costs. In both cases, design constraints and build costs impacted overall scheme viability which in turn affected the ability to deliver on-site affordable housing; the solution in both cases was to provide off-site affordable housing on donor sites specifically acquired for this purpose. This in itself was a challenge given the limited availability of land suitable for such purposes that was both affordable to the developer and considered suitable by the local authority. So while the use of donor sites can help values it is not necessarily straightforward, given the inevitable competition for sites and the fact that the starting point for authorities is provision on site.

Increasingly, different categories of brownfield land are being brought into play to help in the delivery of housing. Perhaps the most celebrated example of this is the redevelopment of Battersea Power Station as part of a residential-led scheme. Central government has brought forward a register of brownfield land in an effort to fast-track development of these sites and, within London, the Mayor has produced a register of public land in an effort to identify surplus land that could be used to boost housing supply.

Upward extension is also going to become increasingly important and in a response to last year’s consultation on this topic, published alongside the Housing White Paper, the Government has indicated that National Planning Policy Framework will be used to support the delivery of additional homes by building up.

Viability

One of the consequences of the lack of land is that the subsequent competition for sites is driving land values up to an all-time high. This has obvious impacts on planning gain with affordable housing usually being the first casualty. However, local authorities are increasingly refusing to allow land values to dictate the levels of affordable housing offered. Strongly contrasting approaches to valuing land have emerged between the public and private sectors which are dividing the development market. On the one hand, there is a market-based approach which looks at comparable land transactions and, on the other hand, there is a more policy-led approach which seeks to ensure that planning policy requirements are properly accounted for.

The Mayor’s SPG advocates the latter approach and also provides that, as a general rule, any viability assessments used to support a departure from affordable housing policy will be made publically available. Local authorities, such as the Boroughs of Southwark and Islington, have already adopted very similar policies at a local level.

Should the Mayor’s SPG be adopted, we are likely to see this approach becoming even more firmly entrenched in the planning policies of all London Boroughs. One possible outcome is that the production, review and scrutiny of viability assessments will increasingly become standardised and transparent – any reduction to levels of affordable housing and other planning gain will have to be robustly justified, it no longer being satisfactory to hide behind the phrase “subject to viability”. Developers may be expected in future to have demonstrated that all possible routes to improve viability, e.g. through securing grant funding, have been exhausted before any reduction in affordable housing levels is accepted.

Increased use of review mechanisms in planning agreements is also likely to become the norm, with the Mayor suggesting that this tool could be used to encourage an early start on site. His proposal is that all schemes would be susceptible to an early review where an agreed level of progress has not been made within two years of the grant of planning permission. Those schemes that are not policy compliant would be subject to a further review towards the end of the development.

All of this may well bring into play a tension between what landowners are willing to sell their land for and what developers are willing to pay. If local authorities attempt to skew land values too much, there may come a time when landowners are no longer prepared to sell and will sit on their landholdings until such time as this latest political intervention passes. Rather than easing the housing crisis, it could well have the opposite effect.

Competing priorities and needs

The tension not only plays out between public and private, but also between different functions at local authorities, all wanting a slice of the planning gain pie.

Despite near universal acknowledgement of the housing crisis facing Londoners, there remains a conflict between strategic city-wide policies and local priorities.

Prime examples of this are two housing schemes recently recovered by the new Mayor for determination, his first call-ins since taking office. In both cases, the projects were relatively modest in scope (505 homes including a 21 storey tower in Haringey and 186 homes across up to 17 storeys in Harrow) but the local authorities recommended refusal about concerns at the height and density of the proposals in addition to affordable housing levels and, in the Haringey case,the impact on the Green Belt. The proposals will be considered by the Mayor at future representation hearings . These will be closely scrutinised for signals as to the direction of travel at City Hall. Given the suite of measures being provided by the GLA and the government to boost housing supply, the conflict between London-wide objectives and the immediate concerns of local electorates seems only set to increase with many wondering whether Khan (Labour) will take a more interventionist approach than his predecessor Boris Johnson (Conservative). If he does, he will arguably be at odds with the current Conservative government’s localism agenda, which through the promotion of neighbourhood planning is seeking to create a more positive relationship between the public and the planning process.

Alternative tenures

A city as diverse as London needs to provide diverse housing products to cater for its residents and we are starting to see a shift in this regard.

Build to Rent is finally being recognised as a sector in its own right and the Mayor’s SPG has, for the first time, provided a definition. Schemes of 50 units or more in single ownership, held under a build to rent covenant of at least 15 years, offering on-site management and longer tenancies will meet the criteria and benefit from being able to meet affordable requirements such as discounted market rent, flexibility in space standards and a mix focussed on one and two bed units.

Co-living is also starting to take off, bridging the gap between student halls of residence and private rented accommodation, offering living space and shared community facilities under one roof. The Collective’s scheme at Old Oak is a good example of this and its popularity will no doubt see more schemes of this nature come forward.

Providing an alternative to conventional forms of affordable housing, London Living Rent is now being encouraged by the Mayor. This is a form of intermediate housing where households with a maximum income of £60,000 are encouraged to save for their own home through low rents (based on one-third of median household incomes for the relevant borough) on time-limited tenancies.

The Starter Homes concept (the provision of discounted housing to the under 40s) is yet another product proposed by Government, albeit a controversial one. The recently published Housing White Paper has allayed fears that this alternative tenure would simply provide cheaper homes for would-be voters rather than genuinely affordable housing. As now proposed, eligibility will be means tested and local authorities will have the ability to determine the number of affordable homes that should be provided, based on local housing need.

Ever-evolving political demands

Planning has been in a state of flux for a significant period of time and, just as overworked planning authorities get to grips with one set of legislative changes, another is forced upon them. Many of the latter day changes seem to be knee-jerk tinkerings by central government to deal with immediate problems and to win votes. They lack the joined-up thinking and long term vision required to really make a difference.

However, that might be about to change following the publication of the Government’s Housing White Paper which seeks to take the long-term view rather than relying on headline grabbing, short-term measures. Whilst the detail will be worked up following consultation with stakeholders, various carrots and sticks will be wielded to get Britain building at an accelerated pace and burdensome red-tape will finally be slashed, to some degree at least.

And whilst the proposals are not as radical as some may have wished, it is refreshing to see that this administration has taken the bold step of attempting to resolve the housing crisis at the risk of upsetting their mainstay of voters.

Use it or lose it planning permissions, more funding for planning departments, a CIL overhaul, clarity on Starter Homes, proposals to increase density and proposals to speed up plan-making are all in the offing and it is hoped that this time, the Housing White Paper will deliver on its promise and pave the way for holistic and carefully thought out changes that put an end to the piecemeal approach to reform that we have, for so long, had to endure.

Concluding thoughts

London is witnessing a growing population and economy colliding with an acute housing and infrastructure shortfall.

Solving the problem is not going to be a quick fix. Long-term decisions need to be taken which are detached from the political cycle and strategies need to be put in place which are driven by a desire to make things better rather than protecting votes and popularity.

The Housing White Paper is a step towards this solution but formulation and implementation of these proposals will take time.