Affordable housing: ‘It cannot be purely a burden for the developer’

Affordable housing: 'It cannot be purely a burden for the developer'

Property developers are often cast as “pantomime villains” when it comes to affordable housing, according to Omni Capital..

Property developers are often cast as “pantomime villains” when it comes to affordable housing, according to Omni Capital.

The specialist lender was responding to claims by Islington Council which recently said that some developers had manipulated the development viability process to build fewer homes.

Islington and other councils have also said that developers sometimes disregard planning policies by claiming they cannot afford to build affordable homes because they have paid so much for the land.

Councillor James Murray, Islington Council's Executive Member for Housing and Development, said: "Londoners desperately need more affordable housing, and we need to make sure developers are making a fair contribution.

“However we, and many other councils across London, are concerned that developers are using the viability process to argue they can’t afford to provide much or any affordable housing because they paid too much for land.”

But Bob Sturges, Head of Communication at Omni Capital, has questioned the extent to which developers are obliged to build affordable housing.

He said developers have already contributed a great deal to addressing the housing crisis, despite often being cast as “pantomime villains”.

He told Development Finance Today: "Developers are not charitable or philanthropic organisations.

“They, like all successful private enterprise, follow the money.

“They are often required to pay generous subsidies towards future affordable housing schemes or commit to mixed-used sites. In doing so, I would argue they are making a measurably greater and beneficent contribution than their detractors.”

Other development finance experts feel that councils could address the shortage of affordable homes by co-operating more extensively with developers.

Scott Marshall, Operations Director at Roma Finance, believes that councils should partner developers to offer more land for affordable schemes.

He told DFT: “With the spiralling cost of land in recent years, it’s no surprise that developers are facing a challenging time trying to acquire affordable land to build affordable houses.

“As local councils own land in their boroughs, one way of ensuring developers have access to land at the right price is to enter into joint ventures with the developers.

“Councils could then set aside a plot just for affordable housing, and this in turn would temper the prices developers need to pay for the right to build on that site.

“Otherwise, if left to market forces, the cost of land could mean the government’s goals for affordable housing could be difficult to meet and fall at the first hurdle.”

Development lender Regentsmead backed this approach, saying that councils need to take a share of the responsibility along with the developers.

James Bloom, Chief Executive at Regentsmead, told DFT: “I am sure there are developers who inflate certain costings to avoid having social housing on their sites.

“However, with land and build prices rocketing over recent years, it is certainly not always viable for there to be social housing on some sites and for them to still be viable.

“Whilst it is vital for more social/affordable houses to be built, it cannot be purely a burden for the developer, whose projects then become unviable.

“It needs to be done in mutual co-operation between central and local government in conjunction with the developers.”

Gary Lederberg, Director of Affirmative Finance, supported this, and said that the lender frequently provides finance for developing affordable homes that are financially beneficial to developers.

He said: “We have assisted many developers over the years in connection with developing sites that include affordable homes and in some cases the entire site constitutes affordable homes.

“We fund affordable home schemes on a regular basis. Developers, housing associations and local councils can work together to build bespoke homes that are needed within certain areas.

“These projects can be financially viable when budgeted correctly.”


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