Affordable housing is needed, but is it deliverable?

By - Tuesday 15th July, 2014

Labour swept into power in Croydon in May, and one of their stated priorities was to increase the provision of affordable housing. Tom Lickley examines whether this is possible

High land values near transport hubs can limit affordable housing viability, as is the case with Saffron Square Tower.
Photo author’s own.

As the dust settled on the Labour Party’s victory in Croydon in late May, questions turned to whether they could deliver on their ‘Ambitious for Croydon’ campaign. One of the key aims, if not the key aim, was to provide a greater level of affordable housing than the previous administration, with a minimum of 30% of units in new property developments in the town required to be affordable.

Admirable, yes. But is it feasible?

For most small to medium developers, affordable housing can be welcomed if it is viable. Admittedly, profit margins are lower on affordable housing. Countering this, it is considerably lower risk having a viable development with affordable housing as the demand for the properties – and therefore ease of selling – is that much higher. It is easier to sell to an audience in need of housing than it is to set up and run a marketing campaign overseas.

However, the key to that is ‘viability’,and that price is dependent on the cost of land, and in particular, the landowner. If the landowner is unwilling to sell at a certain price – and with high demand seeing land costs soar in central Croydon, this is a problem – then a high provision of affordable housing is not worth the risk to the developer’s own viability appraisal.

Increasing population, a rise in real incomes and an undersupply of housebuilding for the past quarter of a century have created a toxic mix

Can Croydon Labour therefore feasibly do anything to support this? Save for lobbying for national legislation which forces landowners to sell land that they are holding, there is very little that they can do to incentivise developers to buy expensive land with marginal viability. That is, unless they offer cash breaks or partnerships; but with the council mired in debt, only taxpayers will be able to subsidise this.

  • House prices will remain high throughout London, as long as there is high demand and short supply. With the population growth of London and Croydon showing no signs of a slowdown, demographically Croydon faces a huge challenge to keep up with housing needs.
  • The most realistic solution is intentional ‘cooling’ of the market – a deliberate stalling of the market through various legislative measures, which leads to prices falling. However, this is difficult to apply to Croydon, or to the UK in general.

There is no simple answer. It is not the individual fault of the local Conservatives, the local Labour Party, developers or landowners. Increasing population, a rise in real incomes and an undersupply of housebuilding for the past quarter of a century have created a toxic mix which has put developing affordable homes out of the reach of many developers – and buying homes above the ‘affordable’ bracket impossible for most.

High land values near transport hubs can limit affordable housing viability, as is the case with Saffron Square Tower.
Photo author’s own.

Tom Lickley

Tom Lickley

Contributing a variety of roles to the Citizen since early 2013, Tom now focuses upon regeneration, urbanism and real estate writing. He is a strategic communications consultant specialising in the real estate sector, and counts a number of the world's largest investment and fund management companies amongst his clients.

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  • doubledoubt

    Look at what camden has done brilliant combining commercial development with 40 percent social housing it must be planned but that does not mean small builders can not be a part see theoblackwell blog….finance officer..?Labour camden

  • Ian Marvin

    It’s possible to increase the stock of social housing in the borough and you only have to look around to see the huge number of housing association developments under construction in the borough at present. However the issue of affordable housing and how it relates to a living wage is a key issue and beyond the control of a single authority. As long as someone can work full time and still not be able to afford to house and feed themselves we have a fundamental structural problem as a society. That’s what needs to be addressed, leadership needs to come from central government.

  • RSDavies

    We all talk of affordable housing but few of us define it in a truly meaningful nor explore what the implications are. In terms of creating affordable housing the issue sits squarely with central government rather than local government.
    If we go back to the early 1970′s the stock definition of affordable housing was understood as being 36% of a man’s wage. It was a time when the majority of women either stayed at home to look after children or worked part time. It was presumed that only a man consistently earned money from 16 to 65. At that time the average woman in employment earned 52% of what an average man earned.
    In the 1990′s the Halifax presented a report that argued that as women entered the workforce in large numbers and legislation required that lenders had to take into account joint earnings, that the cost of housing rose to absorb the apparent increase in available money negating any real benefit that the presence of an employed women in a household.
    However during the same period the government had ensured that the supply of social housing was limited by preventing local authorities from building council houses and awarding sitting tenants the right to buy the properties at highly advantageous discounted prices. Housing associations, despite the hoopla associated with them, failed to deliver sufficient units at a cost effective price to the market. Arguments that the market would respond were specious. The reason that public bodies had intervened in the 19th C to build homes was simply that the market didn’t and couldn’t provide good properties to the market that could be afforded by the average family.
    Part of the problem is that land and individually owner properties are regarded as prime investment vehicles and those owning them do not want their investments to be devalued by mass construction of low cost housing units. The nation could solve its housing crisis through a massive national programme to build homes using the most modern techniques, probably largely prefabicated. But we don’t do this even though it would have a beneficial impact on our domestic economy.
    The situation for Croydon is compounded further by the failure of successive governments to recognise that by promoting the Southeast of England at the expense of the rest of the country, we have created a situation wherein one company after another has located in the Southeast with no regard by goverments for the supply of affordable housing. So today what was in 1914 a skilled manual worker’s home is not only affordable to the professional classes, and the poor are left to reside in often poorly maintained over-crowded conditions.
    All of this of our making, driven largely by short term greed. As such it can be undone at a cost. The real question is whether we are prepared to pay that cost, or whether we understand what the overall costs are. If we deny the poor access to affordable housing we place then in a downward spiral where the little they earn is consumed by rent, leaving them nothing to invest in their own improvement, and thus in practical terms the supposed universal opportunities to progress are largely denied them. When this occurs their is social breakdown, increased crime and on occasion riot, all of which cost the property owning class directly or indirectly – either way you pay. So which is it better to do, build lots of low cost social housing; or build more prisons and employ more forces of law & order to contain them?
    Let no one forget that the Victorian entrepreneurs who built “Great Britain” gave their support to public works and built facilities for the poor did so not out of altruism, but to protect their property interests from the mob.