commercial property 47


Giving the housing shortage a shot – in the arm, or in the foot?


The housing supply shortage continues to be a serious issue nationally, and especially in our region. The consequent upward pressure on property prices is being felt strongly in the Solent and Thames Valley areas. Although there are some arguments that this bolsters consumer confidence which in turn fuels a resurgent economy, the basic problem of building enough homes and ensuring that the market is not prohibitive for first-time buyers cannot be ignored, writes Peter Fellows of Coffin Mew


This in turn leads to calls for increased affordable housing supply through developer contributions on new build sites (either by way of building the affordable units and delivering them to housing associations, or by way of financial contributions towards provision elsewhere).


However, ultimately the need to bring a better balance to the housing market, and thus to avoid the pressure of a price bubble, surely means that the central drive should be to unlock development potential generally, in order to ensure the overall housing supply grows; in simple terms if the supply is closer to meeting the demand, the prices should stop accelerating away from wage growth.


Many will therefore be disappointed to hear that the courts have this summer issued a decision which has erred on the side of increasing the requirements for contributions towards formal affordable housing, but in a way which will probably see fewer houses being built in the short to medium term.


At a stroke, many smaller schemes . . . have been rendered completely unviable


Until this recent decision, regional residential developers, typically delivering housing schemes of up to 10 new homes on smaller sites, have not had to make provision (either on site or through financial contributions) towards formal affordable housing on those smaller sites. There was logic to that exemption. Smaller sites do not offer the same economies of scale of larger estates; they are often compact brown field sites that can be relatively expensive and difficult to develop. Government policy was designed to unlock these tricky sites to enable them to be brought forward for development in a viable way and so help to alleviate the chronic housing shortage.


That has now all changed. Two local authorities in the Thames Valley – Reading and West Berkshire – challenged this exemption, arguing that it would have


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – OCTOBER 2015


a negative effect on affordable housing numbers. The court backed those authorities and so the exemption has been removed. Local Authorities and housing associations operating within an environment of decreasing central funding, and under pressure to deliver affordable housing, will welcome this latest development, but if projects are moth- balled due to perceived unviability the pluses may be neutralised by the minuses.


At a stroke, many smaller schemes – typically held under option by developers while they seek planning permission – have been rendered completely unviable, because the negotiated land price is no longer supportable when the burden of a financial contribution towards affordable housing is added to the site‘s overheads. Put simply, those deals cannot now proceed so those houses will not be built, unless landowners accept some pretty crushing drops in land prices.


That is surely unlikely to happen in the short to medium term, partly because of natural human reluctance to crystallise such a disappointment, but also because there is every indication that there will


www.businessmag.co.uk


be a further challenge in the courts to seek to overturn this decision and restore application of the previous government policy.


Even if that challenge is successful, we now sit in a period where the hiatus is in effect adding to the housing shortage. The demand is not shrinking, so the prices become increasingly unaffordable. It is hard to see how this decision helps the problem at all. The contributions that can in theory now be demanded on smaller sites are unlikely to be paid because those sites will simply be mothballed or abandoned.


Peter Fellows is a partner at Portsmouth and Southampton law firm Coffin Mew.


Details: peterfellows@coffinmew.co.uk www.coffinmew.co.uk


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52