This document outlines Dr. Nicky Morrison's presentation on negotiating affordable housing in England. The presentation covers the context of England's affordable housing crisis, how the planning system works to secure affordable housing through negotiations with private developers, and the role of housing associations. It also provides an example of an innovative joint venture between a local authority and housing association to develop affordable housing. The presentation concludes by discussing potential cross-cultural lessons around securing affordable housing.

1. Negotiating affordable
housing in England
Dr Nicky Morrison
Department of Land Economy
University of Cambridge
14th March 2018
Drammen

2. Presentation outline
 The English context
 Why affordable housing crisis has occurred
 The English system – how it works
 Negotiating affordable housing provision with private house
builders
 The role of the not-for-profit Housing Association sector
 Innovative affordable housing solutions
 An example of joint venture working between a local authority
and a housing association
 Summary
 transferable lessons & cross-cultural exchange

3. The context

5. Housing completions in England

7. Affordability ratios in England
Average house prices: average
household income (2016)

8. English system:
how it works

9. Role of land use planning system in
securing affordable housing delivery
• Centralised state
• Government owns development rights to land
• Every development must obtain planning permission
• Local authorities little autonomy & must work within national
planning framework
• Discretionary planning system / case-by-case assessments
• Town & Country Planning Act 1990: Section 106 agreements
- List of requirements – essential versus desirable
- e.g. highways/ education facilities/ community facilities/ open space
- Require affordable housing on SAME site as market housing
 Subject to negotiation
 Subject to viability

10. Form of developer contributions
 Local authorities seek affordable housing on:
- Delivers mixed tenure scheme on the site (e.g. typical target: 30-40%)
- Or deliver the affordable housing component on an alternative site…
 Developers’ contributions
- build housing at lower costs – housing association purchase (with
grant?) at `existing use value’
- provide land at discounted price – housing association build (with
grant?)
- provide financial contribution/commuted sums
(e.g. Belvedere, Cambridge – 2m euros)
• OR Housing Association buys land directly
• Equally complies with S106 & delivers mixed tenure schemes
 N.B land transactions data – opaque…

11. Negotiation process
Section 106 tied to market conditions/predicated on
rising land values & market demand
In a property upturn/buoyant market
Developers achieve profits from open market housing
Large windfall gains/uplifted land values – cushions
developer profits
Developers prepared to accept affordable housing
quotas – willingness to pay/ few disputes
Up until 2008 – viability not undermined/no evidence of
downward pressure on housing supply
 Affordable housing £2.6bn of £4.9bn total value of planning
obligations in 2007/8 (Brownhill et al 2015)

12. Negotiation process cont.
In a property downturn (Morrison & Burgess 2014, Morrison 2016)
Reduced level of market activity – hampers delivery of
affordable housing
Depressed land values impact on expected residual
values/ reduce contributions
Hard to pass S106 costs on:
 consumer
 landowner if purchase price already agreed
Bought land at top of market
– cannot write off value from their books
- seek to renegotiate S106 agreements
 N.B Affordable housing reduced from 60,480 to 42,920 (2010-2014)

13. Avoiding S106 contributions

14. Delivery of affordable housing
across London (2009-15)
BPN Paribas 2017

15. Greenwich
•Original plan: 10,010 homes of which
35% affordable, on 170 acres south of O2
•June 2012: bought by new owner
•January 2013: developer argues 35% is
no longer ‘viable’
•February 2013: local authority drops
requirement to 21%
Freedom of Information Act 2000 gives
‘right of access’ to information held by
local authorities
‘Open book’ on viability assumptions
This case sets a precedence.

16. Greenwich Peninsula
– the plan..

17. Media outrage

18. The role of the not-for-profit
housing association sector

19. Housing Association sector
• 1500 not-for-profit organisations (336 own 95% of stock)
• Represents 10% of England’s total housing stock
- 2.5 million units for 5 million people
• Independent BUT regulated by Government
• Not-for-profit charitable status & governed by boards
• Alternative to local authority public housing
- Providing housing for lower income households
- Traditional versus large scale voluntary transfer associations
• Provide sub-market affordable rented housing
- Existing stock:35% below market value/ new build & relets: 20% below
- Approx. 60% eligible claimants still need government’s housing assistance to afford
rents..

20. Housing Associations’
performance record (2016)
• Surpluses (after tax) = £3 billion (25% increase from
2015)
• Book value of properties £138 billion
• Debt drawn from financial institutions £63.4
billion (£0.5billion from government grants)
• Delivered 46,500 affordable homes p.a. (1/5th of
total new builds)
> Could do more?

21. Turnover
£m
Non-social
housing
development
activity share
of total
turnover
Change in
%
compared
to 2015
L&Q 642 37 +3
Notting Hill 381 38 +9
Affinity Sutton 430 30 +18
Catalyst 212 43 +11
A2 Dominion 297 30 +3
Hyde 326 27 +6
Network 190 28 +10
East Thames 146 34 -7
Circle 412 10 +8
Family Mosaic 230 17 -8
Genesis 282 13 +5
Southern Housing 175 16 +4
Peabody 223 11 0
Large London
Housing
Associations
Diversify into
Market sales &
Private rental
(Morrison 2016a&b,
Manzi & Morrison
2017)

22. Innovative affordable housing
solution:
an example

23. Joint Ventures
Brighton & Hove Local authority with Hyde Housing
Association – first-of-its-kind (Morrison 2018 forthcoming)
 Limited Liability Partnership – 50:50 Board Ring fenced
 135.6m euros – Hyde uses reserves & LA provides land
 Pool resources, skills, expertise
 Share risks and rewards – index-linked revenue stream
 1000 units – subsidised rental housing & shared ownership
 Bespoke rent setting – linked to National Living wages
 Equity investor interest in future
 Can act counter-cyclically
 Greater London Authority and others are keen to learn how..

24. Summary
• UK Government’s Town & Country
Planning 1990 Act:
o Legitimised use of planning system in requiring
affordable housing on development sites
o S106 dependent on private sector market housing
output
o Affordable housing contributions affected in market
downturn
• Role of Housing Associations
• Role of joint venture arrangements
o working together to find innovative solutions

25. Cross-cultural exchange
Approaches to secure affordable housing & mixed tenure schemes
o Mandatory versus voluntary requirement
o Negotiation/bargaining versus fixed charge
o Inclusionary zoning – statute/ordinances
o Financial incentives – bonuses/inducements
• Dependent on nature of planning system and land & housing
market
• Different institutional contexts and different actors
• Dependent on ideological/political context
• Transferable lessons in finding innovative solutions…