Affordable housing is an integral part of the UK property market as it enables people to find housing in a country where even high earners struggle to meet the excessive costs of home ownership. With such high proportions of affordable housing in urban areas, what effect does this have on land and property values?

 It is now common for many councils to effectively force developers to implement affordable housing for schemes of around 15 units or more (or above 0.5 hectares) often with excess of 25 per cent affordable being required to enable an easier progress of planning applications. Levene Property Group works with many developers who express concerns because of the constraints imposed by the requirement to include affordable homes into their projects. We are currently involved in a scheme that may not be viable because of the effects of affordable housing on the scheme.

 The added cost and/or lower Gross Development Value (GDV) can tilt the balance whereby the profit/risk involved on a project for residential development is such that the project is not worth embarking on or, at the very least, affects land prices and the amount of land brought forward for development.

 The mix of affordable housing with private housing often has a negative effect on the desirability of the private homes and consequently their sale price.

 Levene Property Group is involved in a prime development with penthouses overlooking a park with associated affordable housing on the site. Inevitably, this does deter some buyers and, therefore, value and sale price. The effects of implementing affordable housing into luxury development certainly affects both land and property values and is a constraint on developers, however it is strongly argued that this is a small price to pay to prevent segregated zones of cheap affordable homes similar to the 1960s construction of council tower blocks.

 The integration it encourages is better for society and inspires the less wealthy but, as a concession to developers, it is common for there to be segregation within the schemes themselves. For example, the privately owned apartments are often larger and better located with views, whilst the affordable apartments tend to be set away from these parts of developments. To reduce social segregation within the development, the Pepperpot method of incorporating social or affordable housing is certainly more likely to succeed.

The theory is that by spreading the mix of private and affordable homes within a development, much like sprinkling the distribution, better integration of the affordable home owners will be encouraged. Whilst this is probably true, it would likely have a more severe effect on the value of the scheme and, in many areas, will prevent the scheme proceeding.

 Levene Property Group frequently works with developers to advise them about how values can be maximised within these schemes and how the added expenses can be minimised.

 An open-minded approach is necessary from all parties involved, including planners, purchasers, developers and councils, who need to understand not only the socio-economic integration but the financial consequence of their stipulations such that social/affordable housing is only insisted upon when it is the best use of the opportunities available. This is because in many less affluent areas it can render schemes not viable or not sufficiently attractive and perpetuate the housing shortage.

 In more affluent areas it can reduce values to such an extent that the alternative of higher Section 106 payments and increased Council Tax payments over the longer term would be more beneficial to enable cash-strapped local authorities to meet the needs of those living within their area.

 Article supplied by Matt Sanders of Levene Property Group Limited    matt@levene-surrveyors.com