Affordable Housing Institute : US

[Continued from yesterday’s Part 1 and Part 2.]

 

So far our examination of the UK’s inclusionary zoning scheme, Section 106, has unearthed what we expected — that in a zero-sum game, negotiations are protracted, acrimonious, and coy.  Further, localities — rightly appreciating that equity extract from Section 106 agreements is their principal source of new municipal infrastructure or public-good capital expenditures — use the negotiations as a platform to ask for anything and everything, whether or not related to housing.

 

You need my approval, don’t you?

 

The study found that there is often a long list of other planning gain in addition to affordable housing. This can come from the county council as well as the local authority. Planning obligations place a strain on a development – affordable housing is only one aspect and is usually the first to be squeezed when viability issues arise.

 

Land price and housing affordability are the two variables.  Of course they’ll be pitted against one another.

 

Examples of the ’shopping list’ from one case study include:

 

Why not everything?

 

1.       Community facilities provision

2.       Community forest contributions

3.       Landscape improvements

4.       Local labour and training initiatives

5.       Park and ride contributions

6.       Pedestrian, cycle and public transport improvements

7.       Plant and wildlife habitat areas conservation and enhancement

8.       Pollution control contribution

9.       Public art provision and

10.   Public realm provision.  [Open space and parks — Ed.]

 

This list is striking in several ways.  Very few of them are directly or even proximally related to the increased demand for city services related to the increase in population arising from the housing development itself.  They’re just a grab-bag of things the locals would like to give their inhabitants without having to pay for them.

 

Mmm, political benefits

 

Virtually all of them could be expressed, much more simply, as sums of money.  So it becomes clear that Section 106, at least when traded into those commodities, is merely a tax on development.  Everything’s a trade with something else.

 

A related problem is when the county comes into the negotiations too late, asking for essential planning obligations that force the affordable housing to be renegotiated.

 

Sure, put in your ask too late and you have to claw back something previously conceded.  And a shrewd developer, knowing that the city and county will have competing objectives, will find a way to set them against each other, then stand back and let them exhaust each other’s patience.

 

 

Pitting the city and county against each other

 

Unitary authorities have a greater ability, and incentive, to present a united front with all the other obligations sorted out at the same time. However, those among our case studies tended to have an even longer ‘wish list’ than the districts.

 

Why not?  If you’re innumerate, and you’re not paying for it anyway, you develop a choke-hold approach to negotiation: squeeze until the other guy faints, then back off.

 

Recently there has been a shift in what developers want to negotiate over: “The sticking point in negotiations is starting subtly to change. It used to be the percentage but now most developers have taken on board that from a member’s point of view and getting it through planning control they will have a much, easier ride if they don’t argue for something lower. So now we get developers saying they will do the 30 per cent but not the tenure split and offering less social rented.”

 

Developers have learned that the other side values units, regardless of how affordable each one is.  So the bargain element will be shaved even as the total homes provide stays constant.

 

There goes the bargain element

 

 

In the end, homes are votes, and in a democracy, one counts the votes:

 

Support for the affordable housing policy from local authority councillors helps planning officers in negotiations because developers know that if their application goes to committee without meeting the affordable housing requirements the councillors will reject it: “Because there is the public perception that people are struggling to buy houses, members (councillors) have become more aware that affordable housing is important and they have been pushing us a lot at committee. Four years ago they wouldn’t have even asked what the affordable housing was on a site, they weren’t bothered about 106s, now it is the key question on every site, ‘Are you getting 30 per cent and if not why not?’”

 

Threshold creep is a very common consequence of public policy.  What once was a ceiling gradually becomes a floor in subsequent rounds.

 

This issue is closely linked to the size of developer contribution achieved. For example, in one case study the LPA is very closely involved with the financial aspects of the affordable housing as they determine a set of prices for different sizes and types of dwellings that the housing association will pay to the developer. The LPA feels that this approach means that: “Developers are happy because it provides certainty even before they have acquired the land so they can build it in to their calculations.”

 

And negotiate the land price accordingly!

 

At the other extreme, in another case study the LPA is not at all concerned with what contribution the developer makes: “What goes on between the developer and the housing association is no concern of the council as long as we get what we ask for… We said all along we want dwellings. We are not interested in who pays for them as long as they get built.”

 

Developers are builders; often they have no desire to own affordable housing long-term.  So they enter into a pre-development agreement with a housing association (registered social landlord) to ‘flip’ the completed affordable homes to the RSL. 

 

However, this is seen to raise an additional concern – that Registered Social Landlords (RSLs) may then pay above the set prices, ‘undermining’ the approach and reducing developer contributions.

 

It’s not a Monopoly, man!

 

Folks, it’s a market, not a cartel or a monopoly.  Markets move faster than governments.

 

This difference is linked to more fundamental attitudes of the LPA to the policy of achieving affordable housing through the planning system. There are two extremes in terms of these attitudes. Some of the case study authorities say they are not concerned with how the affordable units are financed, only with achieving the target numbers. Others want to maximise the developer contribution and provide the ‘right’ housing to meet needs in terms of size, type and tenure, rather than just achieving the target numbers.

 

The question raised — homes or money? — is far from trivial. 

 

One on which affordable housing finance detective Sherlock Holmes has yet to post

 

If Section 106 is simply a cash extract, to be used for whatever the locals want, then the money is the right metric … but if that is so, and homes are irrelevant except as they are a use of money, why bother to tie it to development?  In other words, the more local government makes clear that it’s all about the elizabeths –

 

This is how we keep score in Britain

 

– the less of a moral or policy justification it has for taking them from only one group of contributors — developers — especially when lack of development both contributes to housing unaffordability throughout Britain, and retards job growth and economic expansion.

 

The system has been delivering significant amounts of affordable housing despite the uncertainty surrounding the policy and the lack of guidance LPAs feel they face. Progress has been largely the result of all parties improving the negotiation ‘game’ and of planning authorities setting out their policies with greater clarity, using Supplementary Planning Guidance Documents to spell out the details of their approach.

 

In order to increase clarity for developers and to allow LPAs easier comparison with other authorities, the authors recommend that a website containing a database of all LPAs’ policies would be helpful. Greater consistency in the system would also be helped by the use of a common toolkit in all LPAs. Taken together with broadly accepted regional guidance, this could make expectations more consistent and lead to common practice across LPAs.

 

These are all good ideas.  They all cost money — and none of them will alter the game’s fundamental nature as zero-sum.

 

Section 106 for affordable housing has proved to be robust in the face of continuing uncertainties.

 

“Proved to be robust”?  It’s a gatekeeper to a monopoly!!  Of course the tollbooth never goes out of business.

 

Only one way to go

 

However, tensions are building up within the system regarding other planning obligations; the types of dwellings delivered; the use of grants; and the fact that many local authority plans are out-of-date.

 

The tensions aren’t building up; they’re inherent and ongoing.

 

In a zero-sum game, it’s one or the other

 

There are further tensions arising from uncertainties about broader policies, notably the impact of Government approaches to capturing planning gain, on what can be achieved in terms of affordable housing.  Finally there are fundamental concerns about the realism of some LPA housing policies as rising affordable housing targets increasingly lead to viability issues, an issue that is unlikely to be resolved by clearer government guidance.

 

Zero sum games are like that.  After all the head-butting, you get a headache.

 

You want a headache?  I’ll give you a headache

 

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