Written evidence submitted by Crisis [NPP 33]

1. Crisis is pleased to respond to the Select Committee’s call for evidence on the DCLG’s Consultation about changes to national planning policy. Crisis is the national charity for single homeless people. We are dedicated to ending homelessness by delivering life-changing services and campaigning for change. Our innovative education, employment, housing and well-being services address individual needs and help people to transform their lives.

2. The focus of our evidence is the proposal to widen the definition of affordable housing, with the effect of including types of housing that may only be affordable to higher earners in parts of the country.

Summary

3. Our submission addresses the following points:
1. The UK’s long standing shortage of affordable housing is a driver of homelessness.

2. Since 2011 there has been a significant decline in the amount of affordable housing delivered through section 106 planning obligations. 

3. Since the creation of “affordable rent” under the Coalition government, most new subsidised rental housing in England and a proportion of relets are being let at rents of up to 80% market levels. The total stock of homes let at social rents has been declining over the same period.

4. There is a strong fiscal case for ensuring a continued supply of housing for rent at levels that low income households can afford. We believe that the expansion of affordable renting at the expense of social renting represents a false economy for the tax payer.

5. We strongly urge the Government to ensure that any revisions to the definition of affordable housing do not further undermine the delivery of genuinely affordable housing for rent through the planning system.  

6. We object strongly to the proposed widening of the definition to include products that may target higher earners because it risks further eroding the supply of new homes that are genuinely affordable to households on low incomes.

7. We believe that forms of housing targeted at higher earners should, for planning purposes, be additional to housing that is genuinely affordable to low income groups. We propose alternative changes to the affordable housing definition, to ensure local planning authorities are better able than now to deliver new homes that households on low incomes can afford.

The shortage of affordable homes

4. The UK’s long standing shortage of affordable housing is a driver of homelessness, as outlined in independent research carried out on behalf of Crisis and JRF, the Homelessness Monitor.[1]  The UK is facing a serious undersupply of new housing affecting households across the income spectrum - there is a consensus that net annual requirement for new homes in England is 240,000-250,000, a target that successive Governments have failed to deliver.[2] Studies indicate that the scale of additional social housing, at a cost affordable to those who cannot afford market housing, needs to reach 70,000-80,000 homes per year to meet newly arising need for housing, with a backlog of unmet need in the region of 500,000 households.[3]  The output of new low cost homes for rent has fluctuated over the past decade, consistently falling well below the levels needed, albeit with an increase in output last year (2014/15) when 50,300 new rented homes were delivered. However, these were mainly homes for affordable rent at up to 80% of market rent levels.

5. Prior to the introduction of the Localism Act 2011 and the NPPF in 2012, section 106 planning obligations contributed significantly to the supply of new affordable housing. From 2005/05 to 2009/10 between 30,000 and 38,000 new affordable homes (including social rent, affordable rent and low cost home ownership) were delivered each year through section 106.[4]

6. Since 2011, the supply of new affordable funded through section 106 planning obligations has declined significantly. In 2011/12 the total fell to 21,000 and by 2014/15 only 17,000 new affordable homes were provided in this way.[5]

7. Until 2012, planning policy guidance defined affordability in relation to what households could afford in any given locality; the term “affordable housing” was a generic term for a range of forms of subsidised housing incorporating intermediate products for households with incomes that could support home ownership at below market rates, and social rent for those who could not viably afford even subsidised homeownership.  In 2012 the definition of affordable housing was revised to refer to housing below market value, breaking the link between housing costs and local income levels. 

8. The Government’s intention now to expand the definition still further to include products such as Starter Homes, which are not affordable to households on or below average earnings in some parts of the country, will mean fewer new homes at prices within reach of low income households. 

9. The 2012 change to the definition of affordable housing is just one of a number of changes that have contributed to the reduced contribution made by the planning system to the output of affordable housing.[6] A further change in definition now risks exacerbating the problem still further. At a time of limited public resources this appears a wasted opportunity to ensure that planning contributions are maximised in the delivery of new affordable housing. We strongly urge the Government to ensure that any revisions to the definition of affordable housing do not further undermine the delivery of genuinely affordable housing for rent through the planning system.  

10. Lettings data are a way of understanding the scale of the problem we face. The scale of lettings to new tenants (as opposed to tenants moving between social rented homes) has dropped significantly over a 30 year period. In the decade to 2000/01 the number of social/affordable lettings each year to new tenants in England routinely exceeded 300,000; in the decade to 2009/10 it had fallen to an annual average of 256,000 lettings; between 2010/11 and 2013/14 the annual average was only 217,000.[7] 

11. There has been a drastic reduction in the provision of new homes that are genuinely affordable to those on low incomes. Less than 10,000 of the new affordable homes delivered in 2014/15 were for “social rent”,[8] at levels that were originally set with reference to a number of factors including local wage levels for full time manual workers.[9] Since the creation of “affordable rent” under the Coalition government, most new subsidised rental housing in England and a proportion of relets are being let at rents of up to 80% market levels. Social rents are on average much lower than affordable rents; in England as a whole the mean weekly social rent of £96 was less than 60% of the mean rent in the private rented sector, compared with affordable rents at 80% market levels.[10] Very little of the current supply of affordable housing is therefore actually affordable to low income groups.

12. The total stock of homes now let at social rents (as opposed to affordable rents) has been declining year on year: from 4.06 million homes in April 2012, to 3.99 million in April 2014, with a projected further decrease to 3.65 million by 2020.[11]

13. The lack of sufficient social housing is a factor in the increasing numbers of low income households have no choice but to resort to private renting with assistance from Local Housing Allowance to pay the rent, but there are concerns about the quality, security and affordability of this tenure for the lowest income groups.[12] At the same time, all forms of homelessness have risen. Last year 112,330 households in England made a homelessness application, a 26% rise since 2009/10.[13] In 2014, Government street counts estimated around 2,744 people slept rough on any one night across England, a rise of 55% on 2010.[14] 

14. Higher rents have enabled the Coalition Government to deliver an increased number of “affordable rent” homes and reduce capital investment in social housing. But this has meant more subsidy is required to meet the gap between rent levels and the amount low income households can afford to pay, intensifying the longer term trend of government spending moving from capital investment in bricks and mortar into the personal subsidy of Housing Benefit. This has been a significant driver of recent rises in Housing Benefit costs. In an assessment of the value for money of the Coalition’s Affordable Homes Programme, the National Audit Office calculated that, over 30 years, funding housing at social rents offers the better value for money for the taxpayer than charging higher “affordable” rents, “mainly because of Housing Benefit savings”.[15]

15. We believe that the expansion of affordable renting at the expense of social renting represents a false economy for the tax payer. There is a strong fiscal case for ensuring a continued supply of housing for rent at levels that low income households can afford, and we strongly urge the Government to ensure that any revisions to the definition of affordable housing do not further undermine its delivery through the planning system. 

Recommendations

16. Our submission focuses on paragraphs 6-12 of proposals for amending the National Planning Policy Framework (NPPF). Our comments also reference the legislative changes being introduced through the Housing & Planning Bill that would enable the Government to force Councils to prioritise the delivery of Starter Homes, a form of provision which will be affordable only to higher earners in many parts of England.

17. The current definition of affordable housing encompasses social rented, affordable rented and intermediate housing. The definition of intermediate housing includes a range of products for sale and rent so long as they are provided to eligible households whose needs are not met by the market and arrangements are in place to ensure homes remain affordable in perpetuity, or that subsidy can be recycled for alternative affordable provision. Whilst, eligibility is currently determined with regard to local incomes and house prices, the current NPPF definition does not include the phrase used in earlier iterations of guidance designed to ensure that housing is available “at a cost low enough for [eligible households] to afford”.[16]  This is a weakness that the present review could address.

18. Instead, the Government proposes to amend the NPPF definition of affordable housing so that it also encompasses housing targeted at higher earners, including Starter Homes and products that may not be subject (as required now) to “in perpetuity” or recycled subsidy provisions. Crisis objects strongly to the proposed widening of the definition to include products that may target higher earners because it risks further eroding the supply of new homes that are genuinely affordable to households on low incomes. Indeed, the Equalities Statement prepared by DCLG to accompany the present consultation notes that that broadening the affordable housing definition could result in “fewer numbers of existing affordable housing products being built”. It estimates that this “will have a negative impact” on groups within society “who are less likely to be able to access low cost home ownership products (such as starter homes)”. [17]

19. We are concerned also that if in perpetuity or subsidy recycling provisions are removed from the definition, the value of grant or other subsidy achieved through the planning system to part-fund the provision of subsidised home ownership products will be lost. Rather than widen the definition along the lines proposed by Government, we recommend that the definition is amended to ensure that affordable housing is made available at a cost low enough to be affordable to eligible households whose needs are not met by the market.

20. Our objection to the widening of the definition is heightened by the new duty proposed in the Housing & Planning Bill requiring councils to prioritise Starter Homes which, in some parts of the country, are only affordable to higher earners. This will diminish local planning authorities’ ability to meet the full range of local housing requirements that they identify through the local planning process and will have a significant impact on the already limited supply of housing available to meet the needs of low income groups, including people experiencing homelessness.  Whilst the Equalities Statement suggests that the broader definition will not necessarily lead to a significant switch to Starter Homes,[18] the Housing & Planning Bill contains clauses that can be used to force councils to ensure delivery of Starter Homes on specified sites and a duty to promote delivery of Starter Homes.  At a time when there is huge pressure on the already constrained supply of affordable lettings, Crisis believes the changes to the affordable housing definition proposed by DCLG will intensify the difficulties that low income households experience in finding a home, and risk exacerbating recent rises in homelessness. We therefore strongly oppose these changes.

January 2016