1 Reading Borough Council Local Plan Draft Alteration to the Reading Borough Local Development Framework (Local Plan) on Affordable Housing Provision Issues and Options November 2013
2 Draft Alteration to the Reading Borough Local Development Framework (Local Plan) on Affordable Housing Provision Issues and Options 1.0 Background 1.1 Reading Borough Council has long supported a policy position that seeks to achieve high levels of affordable housing provision as part of developments to meet the acknowledged high levels of need for such housing in the Borough. Over the years, various studies have demonstrated high levels of need for affordable housing in the Borough. A brief summary of the findings of the most recent study, the Housing Needs Assessment for Berkshire, carried out by DTZ and published in 2012, can be found at Appendix Existing policies CS16 and DM6 were drafted and adopted/largely adopted before the new planning regime brought in by the publication of the National Planning Policy Framework (NPPF) in March In preparing a draft Charging Schedule under the Community Infrastructure Levy, it is apparent that these policies may not fully fit in with the way that the NPPF views policy drafting in relation to the assessment of viability and the deliverability of development. Essentially, the NPPF indicates that all the policy requirements in a local plan need to be fully costed and assessed and should, when taking account of the normal cost of development and mitigation, provide competitive returns to a willing land owner and willing developer to enable the development to be deliverable Policy CS16, in particular, reflects the Council s long-term policy target for affordable housing on sites of 15 or more dwellings of 50% affordable housing provision. The target of 50% was considered achievable in terms of viability in instances of development where some form of subsidy for affordable housing provision was available. It was an aspirational target. The text to the policy indicates that the council will be sensitive to exceptional costs in bringing a site to market. In practice this has meant that most applications for developments of this size have been accompanied by viability assessments and involved negotiation of the affordable housing content of each scheme. Generally, there has been agreement on the provision of affordable housing as part of schemes, the system has worked well and there has been a high level of delivery of housing, including affordable housing, in the Borough. 1.4 Monitoring of affordable housing provision as part of larger schemes in the Borough since 2006, shows that the proportion of affordable housing provided as part of schemes has varied widely. Except for schemes where 100% provision has been made, the proportion provided has varied from less than 20% up to 50%. Schemes proposing 50% provision have been achieved and a number of schemes have provided more than 40%. The average provision has been around the 30-35% mark, more towards the lower end since the start of the recession in Under the NPPF, the expectation is that authorities will set policy targets having carried out an assessment of viability, taking account of, all the likely cumulative impacts on development in their area of all existing and proposed local standards, supplementary planning documents and policies that support 1 Paragraph 173 and following, see: https://www.gov.uk/government/publications/national-planningpolicy-framework--2
3 the development plan, when added to nationally required standards. In order to be appropriate, the cumulative impact of these standards and policies should not put implementation of the plan at serious risk, and should facilitate development throughout the economic cycle. 1.6 Community Infrastructure Levy Charging Schedules are being assessed on these principles. In the light of this significant change to national policy, the Council has reluctantly accepted that it can no longer sustain a target of 50% affordable housing for schemes of more than 15 dwellings. It must therefore change the policy to provide a policy target that has been tested as part of an exercise that assesses the cumulative impact of all requirements on the viability of development in the area. Further commentary on the national and local policy position is provided in Appendix Similarly, Policy DM6 in the Sites and Detailed Policies Document sets targets that were intended to be relevant for a number of years as the economy comes out of recession. Its targets assumed that the economy will come out of recession reasonably quickly. It provided for the policy targets to be considered in each case in the light of individual viability assessments. However, in relation to the viability assessment that will inform the setting of a CIL rate, the targets in the policy may be ambitious in the current market. An exercise is being carried out to assess whether those targets are appropriate in 2014, as the Council goes forward with its CIL Charging Schedule, or whether they need to be adjusted. 1.8 The viability work undertaken for the Community Infrastructure Levy along with recent experience of negotiating viability for a number of planning applications provides an indication of current general viability in the Borough. A more detailed viability assessment is being prepared using a range of sample hypothetical sites. This will inform the drafting of the Pre-Submission Draft Alteration. 2.0 ISSUES AND OPTIONS 2.1 The proposed revisions to policies CS16 and DM6 arise from the publication of the NPPF and the considerations for determining the viability of proposed charges under the Community Infrastructure Levy. It is intended that the policies will continue to rely on existing evidence in terms of identified need, priorities, mechanisms and methodology to guide the provision of affordable housing. A new Background Paper will be produced to inform the Pre-Submission Draft Policies but this will rely on evidence previously produced for the Core Strategy and the Sites and Detailed Policies Document This issues and options consultation provides for stakeholders and consultees to comment on the policies. The starting point is obviously the existing policies that, as indicated above, have been used in operation and, from the Council s point of view, work well. An Affordable Housing SPD 3 was adopted in September 2013 to add further detail on how the existing policies will be operated. 2 Housing Background Paper (Core Strategy Background Paper, RBC, 2007) and Affordable Housing Background Paper (Sites and Detailed Policies Document Background Paper, RBC 2011) 3 Affordable Housing Supplementary Planning Document, Adopted July 2013 (Affordable Housing SPD, RBC, 2013)
4 2.3 This document forms the basis for consultation and involvement on the review of the Council s Affordable Housing policies. The main changes to the policies are their target levels of provision. These will be revised downwards to reflect the general level of viability of development in the Borough at the current time. The suggestion is that policy CS16 will have a target somewhere between 30 and 35%, the exact figure to be determined following further viability assessment. Similarly, the targets in Policy DM6 will be reviewed and subjected to further viability assessment. This may result in one or two of the targets being lowered by small amounts to reflect actual viability in the current market conditions. However, this is also an opportunity for you to comment on the policies more generally. Are there ways that we could improve the operation of the policies? 2.4 The next section comprises suggested wording for the Draft Alteration to provide an indication of what the Draft Alteration might look like. It uses the existing wording of the policies and their explanatory text as a starting point 3.0 Community Involvement 3.1 This Issues and Options document forms the basis for community involvement on the review of the Council s existing affordable housing policies. Stakeholders and consultees are being invited to comment on the contents of this document. A direct phone number is provided for anyone who wishes to discuss the proposed Alteration in more detail. Comments and views will be considered in the drafting of the Pre-Submission Draft Alteration. 3.2 Consultation will take place during December 2013 and January Any representations and comments, along with further evidence gathering, will be taken into account in preparing the Pre-Submission Draft Alteration. The closing date for comments will be 24 th January 2014 (this allows 8 weeks, longer than the normal 6 weeks consultation to take account of the Christmas break at the end of December 2013). 4.0 Programme 4.1 It is anticipated that the Pre-Submission Draft Alteration will be published at the end of March The Draft Alteration will then be submitted to the Secretary of State during June/July An examination of the Alteration is anticipated during autumn 2014.
5 Revised Policies Replacement Policy CS16 - What the revised Policy might look like. (New wording is in red and underlined). The following sets out the existing wording of Policy CS16 with indications of how the policy might change in order to provide a draft altered policy: Replacement Policy CS16: Affordable Housing All developments of 15 dwellings and above or of any alternative lower threshold contained in a future adopted Development Plan Document will provide (30-35%) of the total number of dwellings in the form of affordable housing to meet the needs of the area, as defined in a housing needs assessment. Housing is subsidised housing that enables the asking price or rent to be substantially lower than the prevailing market prices or rents in the locality, and which is subject to mechanisms that will ensure that the housing remains affordable for those who cannot afford market housing. What the revised text to the Policy might look like. A.1 The text to the policy also remains largely relevant although it is felt that some additional detail related to experience in implementing the policy will help in its interpretation. It is copied below with indications in red of how it might change. A.2 Affordable housing is defined (in the National Planning Policy Framework (NPPF)) as Social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market. Where they have identified that affordable housing is needed, authorities have to set policies for meeting this need and contributing to the objective of creating mixed and balanced communities 4. A.3 The Berkshire Strategic Housing Market Assessment (SHMA), along with the Housing Needs Assessment published in 2012, provide evidence of the high level of need for affordable housing that exists in Reading and the surrounding areas. The Reading Borough Housing Strategy sets out strategic housing objectives and priorities for housing provision within the overall needs identified. The provision of family sized housing, specialist accommodation for vulnerable people and extra care housing for the elderly have the highest priority under the Strategy. A.4 Affordable housing contributions will be sought from residential-only developments, mixed-use developments, and major B1 employment developments of more than 2,500m 2. On-site provision (serviced land or completed units) of affordable housing will always be sought in the first instance. Where there are exceptional reasons, the provision of surrogate sites (serviced land or completed units) or commuted sums that will enable the provision of a commensurate number and mix of affordable units, will be considered. In the 4 DCLG, National Planning Policy Framework (NPPF) (2012). See Glossary - extract provided at Appendix 1.
6 case of commuted sums, the Council will choose the HA registered provider (RP) partner to which to direct the funding. A.5 The target set in the policy has been determined as the result of an assessment of the viability of development of sites of various sizes in the Borough during early 2014 in accordance with the requirements of the NPPF. This will be the expected level of affordable housing provision. A.6 However, the Council will be sensitive to exceptional costs of bringing a site to market such as for reasons of expensive reclamation, or infrastructure costs, or high existing use values such as in the case of re-using office accommodation. Where applicants can demonstrate, to the satisfaction of the Council, exceptional difficulties in bringing a site to market, the Council will be prepared to consider detailed information on the viability of a particular scheme and, where justified, to reduce the affordable housing requirement. As development costs are usually reflected in the residual land value, the purchase price of a particular site will not, on its own, be a reason for reducing the affordable housing requirement. The Council will generally secure provision of affordable housing through a Section 106 agreement. A.7 The tenure, size and type of affordable housing provided as part of any scheme should respond to the identified need for affordable housing taking account of the details and specific priorities set out in any Affordable Housing Supplementary Planning Document or other Supplementary Planning Document. New development should therefore include a range and mix of tenures, sizes and types (e.g. house types, flats) of affordable housing (as appropriate depending on site size) to reflect local needs and to reflect the range and mix of house types in the scheme as a whole (i.e. the mix of dwelling sizes in the provision of affordable housing should reflect the mix proposed for the private housing). Replacement Policy DM6 - What the revised Policy might look like. Replacement Policy DM6: Affordable Housing On development sites of less than 15 dwellings, the following proportions of affordable housing provision will be provided: o o o on sites of dwellings 30%? provision; on sites of 5 9 dwellings 20%? provision; and on sites of 1 4 dwellings, a financial contribution will be made that will enable the equivalent of 10%? of the housing to be provided as affordable housing elsewhere in the Borough. For sites of more than 4 dwellings, provision should be made on site in the first instance with a financial contribution being negotiated to make up the full requirement as appropriate. In all cases where proposals fall short of the policy targets/thresholds as a result of viability considerations, an open-book approach will be taken and the onus will be on the developer/landowner to clearly demonstrate the circumstances justifying a lower affordable housing contribution. In determining residential applications the Council will assess the site size, suitability and type of units to be delivered in relation to the current
7 evidence of identified needs and against Policy CS15. The Council will seek a tenure split of 70% social rented and 30% intermediate affordable units, with the affordable units integrated into the development. Priority needs are for family sized housing, specialist accommodation for vulnerable people and extra care housing. The Council will regularly monitor and review the need for, and delivery of, affordable housing. What the revised text to the Policy might look like. Aim of the Policy B.1 The key national policy goal is that everyone should have the opportunity of a decent home, which they can afford. National policy seeks to provide sustainable, inclusive mixed and balanced communities in all areas. The key characteristics of a mixed community are defined as a variety of housing, particularly in terms of tenure and price, and a mix of different households such as families with children, single person households and older people. This policy seeks to achieve those aims. In doing so it achieves Core Objective 2 of the Core Strategy. Reason for the Policy B.2 The NPPF indicates that obligations and policy burdens should be weighed against viability considerations. It notes that affordable housing should involve high quality design. Policy H3 of the South East Plan (May 2009) seeks a high level of affordable housing that takes account of housing need split between social rented (70%) and intermediate housing (30%). The policy refers to viability considerations and locally set site size thresholds. B.3 The Berkshire Strategic Housing Market Assessment (SHMA) and the subsequent Housing Needs Assessment published in , provide up to date evidence of the high level of need for affordable housing that exists in Reading and the surrounding areas. The Berkshire SHMA has informed the preparation of a new Reading Borough Housing Strategy that sets out strategic housing objectives and priorities for housing provision within the overall needs identified. The provision of family sized housing, specialist accommodation for vulnerable people and extra care housing for the elderly have the highest priority under the Strategy. These priorities are reflected in the policy. How will the Policy be achieved? B.4 In implementing the policy, the Council will have regard to the definitions and provisions in relevant national guidance. The type/mix of affordable housing provided should reflect the type/mix of the development as a whole and at least reflect the type/mix sought under Policy CS16. Affordable housing provision should include an appropriate proportion of wheelchair accessible homes within the mix, and should comply with the Lifetime Homes requirements. All development should meet the appropriate standards for Sustainable Design and Construction and an appropriate quality of design. 5 Berkshire Strategic Housing Market Assessment (SHMA), DTZ, 2007 and Housing Needs Assessment, 2007, see
8 B.5 In the case of residential-only and mixed-use schemes, Reading s policy preference is for the affordable housing contribution to be in the form of serviced land or completed units on site. This contributes to forming mixed communities in line with national and other planning policy. In exceptional cases, it may be acceptable for the required affordable housing to be provided off-site, or for an appropriate financial contribution to be made instead of onsite provision. Examples may include sites where there are existing concentrations of particular types of affordable housing, where there are demonstrable benefits to be gained by providing the new units elsewhere (e.g. to create more socially-balanced communities), or where there is an opportunity to provide a particular type of much needed housing elsewhere (e.g. family housing). Under this policy it is accepted that affordable housing provision can take place off site or through contributions in the case of sites of less than 5 dwellings. B.6 Affordable housing contributions must be secured in perpetuity and thus be available to successive generations of households in recognised housing need. The most effective way of doing this is through the involvement of a registered provider (RP). B.7 The Council has carried out an informed assessment of the viability of the various thresholds and proportions of affordable housing proposed under its affordable housing policies. In reasonably buoyant economic circumstances (such as those that existed at September 2007), on sites with few exceptional costs and where grant funding is available, this assessment shows that the thresholds and proportions required can be achieved without making these forms of development unviable. However, it is accepted that these circumstances will not always exist and that meeting the targets set will be ambitious in some cases in different economic conditions. Where applicants can demonstrate, to the satisfaction of the Council, exceptional difficulties in bringing a site to market, it will be prepared to consider detailed open book evidence on the viability of a particular scheme and, where justified, to reduce the affordable housing requirement. However, as development costs are usually reflected in the residual land value, the purchase price of a particular site will not, on its own, be a reason for reducing the affordable housing requirement. B.8 It is intended that some Additional detail on the provision of affordable housing will be is provided in a separate Supplementary Planning Document(s) 6. This existing document will be updated from time to time to take account of changes in policy and circumstances. might include details of how economic conditions and other factors are accepted as affecting the viability of development at a particular point in time. It will also consider how LDF policies will be interpreted in the light of changes to government affordable housing policies and provision. 6
9 Appendix 1 Briefing on Housing Need Assessment and Affordable Rent Review Update, During summer 2011, the housing officers of five of the six Berkshire Unitary Authorities (The Royal Borough of Windsor and Maidenhead has its own housing needs assessment) commissioned DTZ to update the housing need assessment in the original Berkshire Strategic Housing Market Assessment. 2. There were two key objectives in relation to this study. These were: To update the housing need assessment for 5 of the authorities to ensure a robust evidence base; To take account of the government s policy on Affordable Rent and the implications of this for those identified as in housing need. 3. The analysis in the report consists of three stages which includes a repeat, with minor refinements, of the housing need assessment undertaken for the five local authorities in 2007 as part of the Berkshire SHMA. In essence, this comprised the following analysis: Estimating the level of housing need, comprising current need and newly arising need less annual average supply; Calculating market and affordable rents; Analysing the incomes levels of those in housing need and the affordability of different rents 4. The main product of the study was individual assessments for each of the unitary authorities. In relation to Reading Borough, the study contains a table, Housing Need Assessment Update, which is attached at the end of this appendix. 5. The update table identifies a shortfall of 930 affordable dwellings per annum. This compares with the range of affordable dwellings per annum identified in the earlier 2007 study. This could suggest that the need for affordable housing has worsened and is even more acute than in However, some caution is needed as the 2011 figures incorporate some refinements in methodology. Regardless of that, the evidence for 2011 is that the level of need is, as in 2007, extremely high and way beyond the total housing currently being, or likely to be, provided in the Borough. 6. Section 2.2 provides an assessment of average market rents in Reading Borough, comparing them with Housing Benefit (Local Housing Allowance) rates. Housing benefit is insufficient to cover full market rent in Reading. It goes on to provide a table of Affordable Rents of market rents) indicating that, at the time of writing, these would only be accessible to those receiving full Local Housing Allowance. 7. Section 2.3 provides an analysis of incomes and affordability. It assesses affordable rent against income data for all households in Reading, showing that
10 26% of Reading households have incomes of less than 20,000, which is less than the income needed to afford to buy a one bedroom property. 8. At Section 2.4, there are a number of key points that it is useful to highlight from this analysis: There is a shortfall of around 932 affordable homes each year within Reading, based on a backlog of over 4,000 households on the housing register and taking into account estimates of newly arising need in the future; New supply of affordable homes has made a significant contribution to addressing needs over the last 5 years without which the shortfall would be even higher. Most of those identified as in housing need have very low incomes and are therefore accommodated either through social rented homes or in the private rented sector, supported by Housing Benefit. The majority of those on Reading s waiting list in housing need are likely to be unable to afford Affordable Rents set at 80% of market rents but in practice many will spend more than 33% of their income on rent because most have very low incomes. In theory, any households in receipt of the full amount of Housing Benefit would be able to afford Affordable Rent, since these would likely fall within Local Housing Allowance limits. If Affordable Rents are set in relation to average market rents there will be a large number of open market properties that are cheaper than those available at Affordable Rents unless Affordable Rents are set at or below 70% of average open market values. However, there is uncertainty around the level of Housing Benefit that will be available in the future, particularly when a cap is introduced on the overall level of benefits that can be received by an individual household. This may mean that Affordable Rents on larger properties will need to be set at levels well below 80% of market rents to remain affordable to those on benefits. There is a group of existing social rented tenants who would be able to afford other tenures, including Affordable Rent. These households have expressed an interest in intermediate housing options through the Local HomeBuy Agent, Catalyst. The Housing Need Assessment Update, a calculation of the need for affordable housing in the Borough, follows on the next page.
11 Figure 2.1: Housing Need Assessment Update READING HOUSING NEED ESTIMATE Version 1 Stage and Step in Calculation Estimate STAGE 1: CURRENT NEED 1.1 Current Occupiers of affordable housing in need 1, plus households from other tenures in housing need plus Households without self-contained accommodation 3, equals Total current housing need (gross) ( ) 4, times annual quota for the reduction of current need 20% 1.6 equals annual requirement of units to reduce current need (2.6 x ) STAGE 2: NEWLY ARISING NEED 2.1 New household formation (per year) times proportion of new households unable to rent in the market 57% 2.3 plus existing households falling into need equals Total newly arising need per year (2.1 x 2.2) STAGE 3: SUPPLY OF AFFORDABLE HOUSING 3.1 Current occupiers of affordable housing plus annual Supply of social re-lets (net) plus annual supply of intermediate housing available for re-let or 26 re-sale at sub market levels 3.4 plus surplus stock plus committed supply of new affordable units (per annum) minus units to be taken out of management equals annual supply of affordable units ( ) NET SHORTFALL (OR SURPLUS) OF AFFORDABLE UNITS PER ANNUM Overall shortfall (or surplus) ( ) per annum 932
12 Current (November 2013) National and Local Planning Policy Position The Development Plan Appendix Applications must be determined in accordance with the development plan. In relation to affordable housing, applications to RBC for development containing residential accommodation will be determined in accordance with Core Strategy policy CS16 7 for sites providing 15 dwellings or above and policy DM6 in the Sites and Detailed Policies Document 8 for sites of less than 15 dwellings. 2.2 Policy CS16 (Affordable Housing) requires the provision of 50% of the total number of dwellings on sites of 15 dwellings and above in the form of affordable housing to meet the needs of the area as defined in a housing needs assessment. Such housing should remain affordable. 2.3 Policy CS13 (Impact of Employment Development) indicates that employment development should provide mitigation measures in line with its impacts on the demand for housing (including affordable housing), labour and skills, and on the transport network. The tight labour market of Reading and the wider Thames Valley area means that additional employment development could result in still greater pressures on housing in the Borough. Pressure on housing can particularly affect those who cannot afford open market housing. New employment development is therefore expected to contribute to the provision of affordable housing. 2.4 Policy DM6 (Affordable Housing) relates to sites providing 1 14 dwellings and requires the provision of differing proportions of affordable housing depending on the size of the site with the amount decreasing from 30% to 10% as the total number of dwellings falls. This takes into account the differing viability of developing sites of different sizes. Policy DM7 relates to accommodation for vulnerable people which will often be provided as affordable housing. 2.5 The various relevant adopted policies are accompanied by supporting text that provides some guidance on the implementation of the policies. The National Planning Policy Framework (NPPF) 2.6 The NPPF indicates that where a local authority has, identified that affordable housing is needed, it should, set policies for meeting this need on site, unless off-site provision or a financial contribution of broadly equivalent value can be robustly justified (for example to improve or make more effective use of the existing housing stock) and the agreed approach contributes to the objective of creating mixed and balanced communities. Such policies should be sufficiently flexible to take account of changing market conditions over time. (Paragraph 50) 7 LDF Core Strategy, RBC, 2008 see: Core Strategy, Adopted January LDF Sites and Detailed Policies Document, RBC, 2012, see: Sites and Detailed Policies Document, Adopted October 2012
13 2.7 Paragraphs refer to viability. The provision of affordable housing has an impact on the costs of development and thus viability. Viability has been taken into account in the preparation and examination of the development plan policies. Both policies CS16 and DM6, however, allow for viability considerations to be taken into account in the implementation of their requirements in relation to individual schemes. 2.8 The Glossary to the NPPF, published in 2012, defines affordable housing as follows: Annex 2: Glossary Affordable housing: Social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market. Eligibility is determined with regard to local incomes and local house prices. Affordable housing should include provisions to remain at an affordable price for future eligible households or for the subsidy to be recycled for alternative affordable housing provision. Social rented housing is owned by local authorities and private registered providers (as defined in section 80 of the Housing and Regeneration Act 2008), for which guideline target rents are determined through the national rent regime. It may also be owned by other persons and provided under equivalent rental arrangements to the above, as agreed with the local authority or with the Homes and Communities Agency. Affordable rented housing is let by local authorities or private registered providers of social housing to households who are eligible for social rented housing. Affordable Rent is subject to rent controls that require a rent of no more than 80% of the local market rent (including service charges, where applicable). Intermediate housing is homes for sale and rent provided at a cost above social rent, but below market levels subject to the criteria in the Affordable Housing definition above. These can include shared equity (shared ownership and equity loans), other low cost homes for sale and intermediate rent, but not affordable rented housing. Homes that do not meet the above definition of affordable housing, such as low cost market housing, may not be considered as affordable housing for planning purposes.