The supply of new affordable homes has dried up in recent months, with local authorities losing their ability to force developers to provide cheap new homes as part of estates of houses for sale.
£6bn lost
According to a report from consultants E.C. Harris, councils have lost £6bn that they expected to receive from Section 106 agreements. Under Section 106 of the Town and Country Planning Act, local authorities can require developers to provide additional infrastructure as part of a planning agreement for a new development. These 'planning gain' approvals can lead to developers paying for roads, public transport, parks, schools and affordable homes.
According to accountants PricewaterhouseCoopers, Section 106 agreements have been responsible for 90% of the affordable homes built in recent years.
But with the collapse in new housing schemes, most of the affordable housing that would have been provided will not now happen. Even existing planning gain agreements are being renegotiated by developers in the changed economic circumstances.
Councils have also lost large amounts of income from developers for planning applications, contributing to financial pressures that are forcing authorities into major cuts in services.
70,000 affordable homes a year?
The House of Commons Communities and Local Government Select Committee says that it is important that despite the economic crisis the Government does not back-track on its commitment to create large numbers of new affordable homes. The Government has pledged to build a minimum of 70,000 affordable homes, including 45,000 social rented homes, each year by 2010/11. But, points out the committee, home building levels are not on course to meet this target.
Chair of the committee Dr Phyllis Starkey MP says: "The credit crunch has not reduced the numbers of households needing new housing, nor does it affect the need to address years of undersupply."
The committee recommends a substantial construction programme of council housing and an increased supply of housing association homes. In particular, it says, funds should be provided to associations to buy up new family homes that have been on the market for over a year and remain unsold. MPs are also calling for greater clarity in explaining 'starter' routes for home ownership, such as shared ownership schemes - which it believes many would-be home owners find too confusing to take advantage of.
Concern is expressed by the committee that government action to increase social house building in the short-term is being financed by bringing forward £975m of existing spending commitments from future years, whereas what is actually required is additional spending.
Tenants' worry
There are also worries that some housing associations may collapse as a result of the economic crisis. The MPs point out that associations are also badly affected by the collapse in development opportunities achieved previously by Section 106 agreements. Over recent years public subsidy for the building of new social homes has fallen from 90% to between 30% and 40%, to a large extent because of developers' contributions to the financing of social housing schemes as required by planning gain agreements.
Housing associations are also squeezed because many committed themselves financially to mixed tenure schemes in which they partnered private developers, but which are no longer proceeding. Some associations will have to wait several years before they gain a return on their investment - if they ever do.
The Communities and Local Government Committee is disturbed by these threats to housing associations and their tenants. It is urging clear commitments to the rights of existing tenants from the Tenants' Services Authority. Some larger housing associations have already promised to protect weaker associations by providing them with loans and loan guarantees.
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- new homes
The Government has pledged to build a minimum of 70,000 affordable homes, including 45,000 social rented homes, each year by 2010/11. But home building levels are not on course to meet this target.
