London mayor Sadiq Khan has laid down a marker on affordable housing and viability assessments in the capital by rejecting an amended proposal for the former New Scotland Yard building.
BL Developments wants to increase the number of homes on the site at 8-10 Broadway, Westminster, but crucially has set out no plans to build extra affordable units.
The site, home to the Metropolitan Police Service for 50 years, was sold by the previous mayor, Boris Johnson. He declined to intervene when planning permission was granted for a development offering a £10m affordable housing payment and 10 affordable homes (4% of the total) in April last year.
BL Developments then sought to expand the scheme from 268 to 295 homes, but with no increase in affordable units or payment in lieu. The amendment in this case was made under section 73 of the Town and Country Planning Act 1973. This requires the proposal to be considered as a new application and for that reason must take into account any changes in policy or guidance.
The move follows his decision soon after he became mayor last year to recruit a team of viability experts to scrutinise how much affordable housing is included in all planning applications referred to him. They found that the application at 8-10 Broadway not to offer extra affordable homes nor any payment in lieu would fail to deliver the maximum amount of affordable housing possible.
The decision also follows the adoption of the mayor’s supplementary planning guidance (SPG) on viability and affordable housing, which states that developers offering at least 35% affordable housing without public subsidy could expect a quicker, more certain route through the planning system.
Khan said of his decision: “A shortage of affordable homes is at the heart of the housing crisis in our city. The scheme put forward for this site is simply unacceptable: it fails to provide the maximum amount of affordable housing that could be delivered on this landmark site.
“This is a site that has only recently been transferred from public ownership and sits within one of the most expensive areas of the country. Having carefully considered the evidence available to me, I have decided to refuse permission for this amended application.”
That is the mayor’s view, but what do some of the capital’s leading planning consultants think the decision says about Khan’s approach to viability?
The mayor’s refusal of the New Scotland Yard scheme continues his strong stance on increasing affordable housing delivery. Central to the mayor’s approach, as outlined in the recently adopted viability supplementary planning guidance (SPG), is the valuation of land in accordance with its existing use value plus a suitable landowner premium.
Gone are the days of purely market valuations and the price paid for land being inserted into viability appraisals that have limited regard to local planning policy. In general, especially within the competitive London context, market valuations of land are generally higher than an existing use-plus approach, meaning affordable housing and other section 106 obligations sometimes need to be negotiated down to help to make a scheme viable.
It may take a while but the continuation of the mayor’s strong approach to land valuation may help in moderating landowner expectations of the value of their land when being released for development.
This refusal is a clear indication from the mayor that he intends to mean business with the new affordable housing and viability supplementary planning guidance, as published in August.
There will be no simple way through for anyone in London looking to deliver less than the 35% target for private land (or 50% for public land) set out, even, and perhaps especially as indicated in this case, someone who has recently purchased a site from the public sector.
The SPG sets out that what is expected from public land is more than what can ordinarily be delivered by the market. This statement from the mayor has demonstrated that he considered that the New Scotland Yard site, which had until recently been public land, should not be let off from any of its obligations under the new SPG.
We know that the mayor has been keen to get this SPG in place for a while so that it can be used to inform decisions such as these. What will be interesting to see next is what impact this will have on what is able to be delivered. Will any parts of the market be in a position to deliver the amounts of affordable housing required and to benefit from the potential of the fast-track approach?
If the mayor of London is serious about delivering a sustainable supply of affordable homes in London, he would be better off incentivising the market to do the right thing. Simply put, the mayor does not control the supply of development sites or the allocation of funding capital, and by making the process of development more challenging he runs the risk of adding to an already toxic mix of a shortage of homes and unaffordable prices.
A blanket approach of seeking 35% affordable housing across all development is potentially counterproductive and, far from increasing the delivery of affordable housing and creating a city for all Londoners, it runs the risk of reducing the overall number of homes being built.
If we are to counter the fact that the overall number of affordable homes being built in London fell 5% to 6,423 in the 12 months to March, the mayor could take a leaf out of the book on mayoral community infrastructure levy - in other words, take a little affordable housing from a lot of development while making the process as simple as possible. Another option is to support an alternative market model to increase the volume of homes being delivered at lower prices for all Londoners.
Since taking office, the mayor has focused on what he sees as an inadequate amount of affordable housing being provided in London through the planning system. The SPG was published for the first time in August 2017 and this application is an early indication of the line that the mayor is taking in assessing applications against its provisions.
Clearly the amount of affordable housing provided in this application (3% by unit) is very low in comparison with the financial viability assessment threshold of 35%, so it is not surprising that the Greater London Authority reviewed the applicant’s viability assessment both internally and by using external consultants.
The applicant made an offer of a further unit (which raises the proportion to 3.7%) but on the proviso that no viability review would be required. However, factors such as the recent transfer of the site from public ownership and Westminster being one of the highest-value areas in the country make a decision to accept this low level of affordable housing politically difficult for the mayor to support.
The publication of the SPG makes this sort of decision easier for the mayor, but it will be interesting to see whether the developer appeals against the ultimate decision.
5 September 2017
24 August 2017
16 August 2017