Demystifying Affordable Housing in Planning and Development

Affordable housing is often a misunderstood aspect of property development, yet it plays a crucial role in addressing the housing needs of communities across the UK. At Bartons Planning and Development, we frequently work with developers to help navigate the complex requirements around affordable housing and ensure that projects remain viable. This article seeks to demystify affordable housing by explaining why it is required, how it is captured, and the various tenures that fall under this category. We also explore how Bartons can support developers in managing their affordable housing obligations effectively.

Why is Affordable Housing Required?

Affordable housing is a key element of national and local planning policy aimed at addressing the growing gap between house prices and the ability of average households to afford a home. Rising property prices, particularly in urban areas and regions of high demand, have put homeownership out of reach for many. Affordable housing is designed to cater to those who cannot afford to buy or rent homes on the open market, thus providing a range of tenure options to ensure everyone has access to secure, suitable housing.

Planning authorities set affordable housing requirements for new developments to meet local housing needs. These obligations are typically captured through Section 106 agreements, which form part of the planning consent process. Such agreements stipulate that a portion of the homes within a development must be made available as affordable housing, either for sale or rent, ensuring that new developments contribute to the availability of accessible housing for all income groups.

How is Affordable Housing Captured?

Affordable housing is usually secured through the planning process, particularly via Section 106 agreements. These legal agreements are negotiated between developers and local planning authorities and are designed to mitigate the impact of new development by securing contributions that benefit the wider community. This can include not only affordable housing but also infrastructure, education, and green spaces.

The percentage of affordable housing required varies depending on the local authority’s policy and the specifics of the site. Urban developments often have higher requirements due to the acute housing need, while more rural areas may have slightly lower thresholds. Developers are generally required to provide affordable housing on-site, but in some circumstances, off-site provision or financial contributions (commuted sums) may be negotiated.

Different Tenures of Affordable Housing

Affordable housing takes several forms, each tailored to meet different needs within the community. Below, we break down the key tenures of affordable housing:

1. Social Rent

Social rented housing is typically owned and managed by local authorities or registered social landlords (RSLs). It is offered at significantly below market rent levels, which are determined based on a formula set by the government. This type of housing is aimed at those on the lowest incomes and provides a secure, long-term housing solution.

2. Affordable Rent

Affordable rent is housing let by local authorities or RSLs at rent levels capped at 80% of the local market rent. This tenure provides a slightly higher rental rate compared to social rent but is still below the open market rate, making it accessible to households that may not qualify for social rent but still need affordable housing options.

3. Shared Ownership

Shared ownership allows individuals to purchase a share of a property (usually between 25% and 75%) while paying rent on the remaining share. This approach provides an affordable route to homeownership for those who cannot afford to buy outright. Over time, shared owners may increase their stake in the property through a process called “staircasing,” potentially leading to full ownership.

4. First Homes

First Homes is a relatively new tenure introduced to help first-time buyers get onto the property ladder. These homes are sold at a minimum discount of 30% below market value, with some local authorities applying higher discounts based on local housing needs. First Homes are targeted at key workers and first-time buyers, ensuring that properties remain affordable within the local area.

5. Discounted Market Sale

Discounted market sale properties are sold at a reduced price, usually around 20% below market value, and are aimed at households that cannot afford full market prices. Unlike shared ownership, discounted market sale provides outright ownership at a lower price point, helping to bridge the gap between renting and buying.

Bartons: Helping Developers Manage Affordable Housing Requirements

Affordable housing obligations can significantly impact the viability of a development, particularly if the requirements are set at high levels. At Bartons Planning and Development, we work closely with developers to assess and negotiate affordable housing contributions that balance the need for community benefit with project viability.

We assist developers by preparing viability assessments that demonstrate the financial impact of affordable housing requirements. Where necessary, we negotiate with planning authorities to reduce the percentage of affordable housing to a viable level, ensuring that projects can proceed without compromising financial sustainability. Our expertise in this area means we have successfully negotiated reduced obligations on numerous occasions, helping our clients maximise the potential of their developments.

In addition to managing affordable housing contributions, Bartons also works with developers to secure Registered Social Landlord (RSL) partners at competitive prices for the finished units. Our extensive network of RSL contacts allows us to achieve favourable terms, including high golden brick payments, which can significantly reduce developers’ construction interest. A high golden brick payment is made at an early stage of construction, providing upfront funding that helps to alleviate cash flow constraints and lower the overall cost of financing.

Partnering with Bartons for Affordable Housing Solutions

Navigating the complexities of affordable housing can be challenging, but with the right guidance, developers can fulfil their obligations while maintaining a viable project. At Bartons Planning and Development, our experience in dealing with affordable housing requirements, negotiating with planning authorities, and securing favourable RSL agreements ensures that developers receive the support they need to make their projects a success.

If you are a developer looking for assistance in managing affordable housing contributions or wish to discuss how to maximise the value of your development, get in touch with Bartons today. Our expertise and strategic approach to planning and development can help you navigate the complexities of affordable housing and achieve the best possible outcome for your project.