Affordable housebuilding in Shropshire is set to shudder to a halt – and there is not much we can do about it

In the last few weeks, the courts and parliament have delivered crippling blows to affordable housing. These setbacks come on the back of a continued reduction in government funding for affordable housing.

On 11 May, the appeal court backed a government edict that frees small developments from any obligation to provide or contribute to affordable housing. The following day, the Housing and Planning Act gained royal assent. Under the Act, starter homes – houses sold at a 20% discount to market price – will be given priority ahead of affordable housing. Put these together with cuts to grants for affordable housing and the supply of new affordable housing in this county looks like it will dry up.

Affordable housing levy restricted

Most of the affordable housing in Shropshire has been delivered through a levy on new build housing. Developers either build affordable housing on site or make a commuted payment to enable the homes to be built elsewhere. The affordable housing levy has been applied to developments of all sizes. About 80% of housing delivery in Shropshire is on sites of five units or fewer.

In November 2014, the government decreed that affordable housing (S106) contributions could not be charged on developments of ten units or fewer, or five units or fewer in some designated areas. Minsters argued their new guidance this would support small builders, self-build projects, and promote housebuilding. They called S106 payments a “stealth tax”. West Berkshire and Reading councils challenged the guidance in the high court and they won the case, forcing the government to withdraw its edict. All was well until the government appealed. On 11 May, ministers won the backing of three appeal court judges, including the Master of the Rolls.

Following the judgement, the planning guidance to exempt small developments from paying towards affordable housing was brought back into force.

So what does this mean for Shropshire? We are a county that delivers housing through small developments, not sprawling estates. From now on, if developments are of five or fewer homes, they will not pay any affordable housing levy.

For some areas of Shropshire, especially here in the south of the county,[1] developers will pay an affordable housing levy if they construct between six and ten homes. They will make a commuted payment towards the housing rather than build affordable homes on site. But in towns like Ludlow, there will be no contribution towards affordable housing for developments of ten homes or fewer.

Starter homes to replace affordable housing

The flagship policy in the government’s recently enacted Housing and Planning Act is provision for starter homes. These homes will be sold with at least 20% discount off market value, subject to a price cap of £250k outside London and £450k within London.[2] The discount will largely be funded by waiving affordable housing levies. Purchasers must be first time buyers and normally younger than 40 years of age.

The government is planning to insist that 20% of new properties on any development of 10 homes or more must be starter homes.[3] This nationally imposed threshold will be far too high for Shropshire. The maximum affordable housing requirement in Shropshire is 20%, including here in Ludlow. In some areas of the county, the level is just 10%.[4] If the government imposes a 20% starter homes requirement, larger developments in Shropshire will deliver only starter homes and no affordable housing for rent.

Cuts to affordable housing budgets

The government makes much of its plans to get affordable housing built but in reality there is now very little public subsidy for building social homes.[5] A cut in council and social rents imposed by the government will take hundreds of millions of pounds out of budgets for building new homes and maintaining existing properties.[6] The right to buy has been extended to housing association homes on a “voluntary basis” under the Housing and Planning Act. This will further reduce social housing stock. More social homes are being let at “affordable rents” – rents set at 75% of the local market rate whether they are actually affordable or not. Housing benefit for young people is being cut back.

All this means that it is harder to build affordable houses and harder for many people to get somewhere to live.

The consequences

I despair for the future of affordable housing, particularly social housing. In some sort of perfect world, we might all own our homes. We are not doing too badly. In the UK, we have about the same level of home ownership as the United States and France, and more home ownership than Germany. But I think it is unrealistic for everyone to own their own home in a county where wages are often low and house prices usually high.

The current squeeze on affordable housing will mean that we will need to give greater priority to elderly and vulnerable people. That could squeeze young people out of our county. They will have nowhere to live and nowhere they can afford to live. That, in my view, is scary.

Notes

[1]. In all parishes in the Shropshire Hills AONB, housing developments of between six and ten homes will pay a commuted sum towards affordable housing. Developers building homes in a further 107 Shropshire parishes will also pay the contribution. Details are in this briefing from planner Ian Kilby.

[2]. The average house price in Shropshire in 2014 was £210,648. That was 8.8 times the local annual wage. Source: National Housing Federation: Home Truths.

[3]. A government consultation on the regulations for starter homes has just ended.

[4]. See affordable housing zone map.

[5]. “In the early nineties grants met 75% of the cost of each new home, by 2010 this had fallen to 40% and it is now only 14%.” Source: Guardian.

[6]. The government has also forced councils and social housing providers to cut rents for tenants by 1% over four years. The real reason for the rent cut is not to help tenants but to cut the housing benefit bill. The cut will lead to an estimated drop of 12% in rental income by 2020 for housing associations and councils.