Viability assessments are being used to undermine London’s affordable housing

Tower Hamlets is the fastest growing place in the country. One of the biggest challenges we face is ensuring that growth works for local people and delivers more genuinely affordable housing. Decent affordable housing is the foundation of a good start in life for our children and provides a place for all households to thrive. I’m clear that having more affordable homes in Tower Hamlets creates a place where people from all backgrounds can live as friends and neighbours.

Yet again and again when I discuss new schemes with my team, I hear that applications are being submitted with levels of affordable housing that are well below our policy requiring a ‘minimum of 35% up to 50%’. I’m told that this is because of three crucial words ‘subject to viability’ or in other words ‘if we can afford it’. The problem is, councils are effectively relying on the developer to tell them what they can afford. As a result developers will often say developments aren’t viable with high numbers of affordable homes – total rubbish. What makes this even worse is that it is almost always a condition that the viability assessment is kept secret, away from public scrutiny.

Because of the importance of ‘viability testing’, my planning team in Tower Hamlets, with colleagues across London, recently commissioned research on the impact of viability tests on the delivery of Affordable Housing in London. I wish I could say I was surprised by the results of the research but it confirmed my concerns:

“Some consultants acting for developers and landowners argue that land values should be based on the price that a developer has paid for land or evidence from transaction prices of other sites. However, the more a developer pays, the fewer the affordable housing units can be supported, as policy requires that economic development return be maintained. This circularity means that viability testing can be manipulated to the developers’ benefit, leading to inflated land values, a reduction in the level of affordable housing and what is, in effect, a transfer of risk from the developer to the community.”

What the above means in practice is that developers claim the cost of the land means they would be losing money if they sold or rented properties at affordable rates. Frankly it is bizarre to any ordinary person that anyone would want to build homes which are by definition unaffordable but that’s just a sign of how badly warped the London housing market has become. Whenever we have discussed the viability testing process with residents in Tower Hamlets, they were shocked by the system.

Viability assessments are meant to be there to ensure the numbers stack up but too often they are seen as a dark art; gerrymandered to make the case against affordable homes. That’s why Tower Hamlets will soon publishing a draft plan setting out how we could ensure viability assessments are published and made open to public scrutiny, in addition to making the system more transparent. The report recommends:

“changes to economic viability testing be made as a matter of urgency. Further, it recommends a scaling back of viability testing to apply only to sites with clear barriers to delivery, firmer affordable housing targets and that planning viability assessments should take into account the value of land in its current use – not in its proposed use. It also calls for more transparency, greater resources for the public sector planners and different mechanisms to encourage the release of land for development”

I’ll be working to make sure that the recommendations from this report are taken on board. I’d encourage anyone who is concerned about this to have a read of the research and see for themselves just how difficult it can be to get some developers to stump up their fair share of affordable housing.

John Biggs is the Executive Mayor of Tower Hamlets, he tweets @MayorJohnBiggs

4 Responses to “Viability assessments are being used to undermine London’s affordable housing”

  1. Alma

    Totally agree with you! This is just unfair! What can we do?

  2. Barrie Thompson

    One thing John Biggs could do is put all land controlled by Tower Hamlets that has or could have planning permission for housing into a Local Land Trust then offer the land at £1 year rent to developers to build homes for sale or rent at an agreed price based on cost of materials plus building costs as the price of land is a large part of the ultimate price this would not apply because the land would always remain as Local Land Trust land. The Cooperative Party could help Mayor Biggs with the legal details after all he is a Labour and Cooperative Mayor, the Cooperative Party has advocated this method of reducing housing costs for some time.

  3. Jim Lockie

    John Biggs: You are right,YOU ARE RIGHT!!! It is a disgrace that rich, often very, very rich foreign, landowners can manipulate the legal system created and enforced by the Tory government- (YES Theresa May YOU are responsible), ensures that their deals with councils are secret and allow these companies to fail to create enougth affordable housing, (80% of market rent, how disgraceful), and make Councils impotent to stop the failure to adhere to policy. Keep going John we are with you. If only we had a national Labour LEADER!

  4. patrick newman

    Good luck on that approach Mr. Biggs but it is unlikely to bear fruit because the system is all in favour of developers and they always seem to be able to trump the council’s case with smarter consultants and developers are big enough to walk away and try again later.
    The real crime is the rules that inhibit the building of social housing and few in real housing need can afford ‘affordable’ housing whether for rent or purchase. Some councils have managed to build social housing and I would expect TH to exploit whatever opportunities are practicable. Mayor Biggs should also be campaigning for lifting restrictions on new social housing.

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