蜜芽传媒

THIS TRANSCRIPT WAS TYPED FROM A RECORDING AND NOT COPIED FROM AN ORIGINAL SCRIPT.听 BECAUSE OF THE RISK OF MISHEARING AND THE DIFFICULTY IN SOME CASES OF IDENTIFYING INDIVIDUAL SPEAKERS THE 蜜芽传媒 CANNOT VOUCH FOR ITS COMPLETE ACCURACY

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FACE THE FACTS听

The Affordable Housing That鈥檚 Unaffordable听

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TRANSMISSION: Wednesday 8th January 2014听 1230-1300听听听听听 蜜芽传媒 RADIO 4

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Actuality

Okay Mr Page, here are your keys to your new flat, I hope you enjoy many years living in this property.

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Well this means a new life, new start.听 I mean if I can move in tomorrow I would.

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Waite

After spending years renting a third floor flat in which he struggled to manage the stairs, 63-year-old Roland Page has a new ground floor home in Norfolk and at 拢90 a week it鈥檚 one he can afford on his pension. There鈥檚 a chronic shortage of homes like this one 鈥� homes within the reach of people on low incomes. As Chancellor George Osborne said last week, it鈥檚 a long standing problem.

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Clip from 5 Live

Osborne

The number of social homes in this country shrank a lot over the last 15 years 鈥� around 400,000 fewer social homes at the end of the period of the previous government.听 But what we鈥檝e committed to is a big expansion over the next three or four years.听 Aspiration is not just about wanting to own your own home it鈥檚 also wanting to have your own home as a social tenant.

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Waite

To help increase the number of so-called 鈥渁ffordable homes,鈥� this government and the last one, told house-builders to include some such properties within new housing schemes. Thus inclusion of affordable properties is generally made a condition of getting planning permission to build new homes.听 Yet, today on Face the Facts, we reveal how developers are building whole estates without a single affordable home on them using a recent change in the law to tear up these long-standing agreements.

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Meanwhile, only one in five of the largest councils in England and Wales told us they were meeting their obligation to build new affordable social housing. In fact, just 43,000 new affordable homes were built in England and Wales in 2011-12, while the number of households priced out of the property market 鈥� either to rent or to buy - is around 1.75 million.听听

Rachel Fisher is Head of Policy at the National Housing Federation, the umbrella organisation for housing associations.

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Fisher

They鈥檙e kind of older and vulnerable, it could be because they鈥檝e got specific health needs and so you know having a particular property would be very expensive.听 Or it could be because they鈥檙e just in a low wage job and they can鈥檛 afford to pay whatever the market rents are.听 It鈥檚 a huge need and it鈥檚 not spread equally across the country.听 In really expensive parts of the country, so say London or Cambridge or York, you鈥檝e got very large waiting lists and people who are in quite desperate circumstances and being housed in insecure accommodation and B&Bs.听 So we are seeing an increasing need for affordable housing as we鈥檝e basically just seen the market just continue to go up.

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Waite

In Norfolk, a couple of miles outside the seaside town of Cromer, work is underway on a new housing estate - what the developer Hopkins 蜜芽传媒s calls "a beautiful collection of traditionally crafted homes". There will be 50 in all, some are already finished. "The Pensthorpe" - a four bedroom detached - can be yours for just shy of 拢350,000 or "The Banningham", a three bed semi for around the quarter million mark. What we've come to see though is marked in grey on the brochure's map, where it is discretely titled simply "Affordable Housing".

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Page

Come in, welcome to my new flat.听 Now this is going to be my living room, TV and me settee鈥檚 here, easy chair there for my back.

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Waite

When this estate got planning permission in 2011 the council insisted that alongside the grand Georgian style residences, it should include a block of affordable properties. And now it鈥檚 finished, one of the first social tenants to be moving in is 63-year-old Roland Page who鈥檚 spent the past two years on the council waiting list.

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Page

Well the main thing about it it was a ground floor and the fact that it鈥檚 got a little space for the garden out there, I鈥檓 going to sit out there and have my cup of tea in the mornings.

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Waite

It has to be ground floor because you鈥檝e got big problems with osteoarthritis.

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Page

Yes, I had to basically retire and I鈥檓 living on a pension.听 Back, my knees and my hips I鈥檝e got to have replaced.听 I was a builder so a place like this is absolutely fantastic, it鈥檚 over the moon really.

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Waite

And are you living in a housing association property at the moment?

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Page

I am not, no, I鈥檓 living in private accommodation above the top of a hotel, three flights of stairs, I just can鈥檛 cope with that anymore.听 So I鈥檝e had to 鈥� I鈥檓 having to move.

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Waite

It鈥檚 called an affordable home, what鈥檚 that mean for you, is the rent achievable for you?

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Page

It鈥檚 called an affordable home because the private rents, especially round Cromer, are enormous really.听 I鈥檓 paying just over 拢100 a week and this will be less with more facilities and better quality accommodation.

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Waite

Roland Page owes his brand new home in Cromer to what's called a Section 106 agreement, signed by North Norfolk District Council and the developers. The contract stipulates that 16 of the 50 homes on the estate be sold at a discount to Victory Housing Trust whose chief executive is John Archibald.

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Archibald

They鈥檙e built basically to the same standard across the whole scheme, it鈥檚 easier for the developer to do that.听 So these are by no means cheaper alternatives.听 The difference on this site is our houses here are semi-detached and of course we鈥檝e got flats.

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Waite

And what sort of demand is there for housing like this?

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Archibald

Massive demand and if we could double the houses we could fill them ever so easily.听 We鈥檝e got 1700 people on the waiting list and about 250-300 vacancies each year, so if you do the maths you can see that you鈥檝e got many years鈥� worth of pent up demand and that鈥檚 assuming that the waiting list doesn鈥檛 grow anymore.

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Waite

So Section 106 is very important then as a means of housing associations like yours getting new properties?

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Archibald

Absolutely, as it is we鈥檙e struggling to meet demand but if you took away the Section 106 agreements you鈥檇 take a third of our housing development programme away just like that.

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Waite

In England and Wales, around 60% of all new affordable homes result from Section 106 agreements. Every council sets a figure for what percentage of new homes built in their area need to be affordable - typically it is around 20%. But inevitably being forced to sell one fifth of its new builds at a discount to a housing association is not particularly welcomed by Britain鈥檚 house builders especially in places where property prices seem to be constantly rising. Richard Jones is from the construction consultancy EC Harris.

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Jones

In the worst case somewhere like Westminster where the average price of open market units is probably 拢1200, 拢1300, 拢1500 a square foot, the amount that they would get for the affordable housing would probably be somewhere around 拢200 per square foot.听 The fundamental point is that a house builder or developer won鈥檛 develop unless he鈥檚 going to make money out of it.听 Quite often he owns options on land, so he doesn鈥檛 actually own it but he owns options on that land with the landowner and therefore if he can鈥檛 create some viability out of the development he won鈥檛 develop, he鈥檒l move away from that option.

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Waite

And if a developer does threaten to walk away then the council can have little choice but to agree to a lower proportion of affordable housing because as the statutory bodies charged with providing housing, councils need more affordable homes and having some is better than having none. Indeed the house builders typically own or have options to develop an estimated five years鈥� worth of house building land, so they can credibly threaten to build somewhere else. 听Also if by being forced to build affordable homes developers can show that their profit margin will fall below the industry benchmark of 20% the council is obliged to reduce its demands on affordable housing. All too often the negotiation between council and developer seems an unequal one.

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Mind your footing.

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Twenty miles inland from Cromer, the market town of North Walsham. On a prime piece of land next to its railway station and the main road into town is the now brick-strewn site of the former HP foods factory, derelict since 2002. Jacqueline Belson is the town's mayor.

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Belson

It was a very busy employment area of the town and it was a huge loss to lose it.听

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Waite

And now as we look across well it鈥檚 just a wasteland isn鈥檛 it?

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Belson

As you enter North Walsham this is one of the first things you see and it鈥檚 atrocious 鈥� there鈥檚 rubble everywhere, it鈥檚 overgrown, the fences are kicked down 鈥� it鈥檚 a complete eyesore and looks like a bomb鈥檚 hit it quite frankly.

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Waite

But grand regeneration plans are now afoot. The owners of the land are Hopkins 蜜芽传媒s, the same firm behind that development in Cromer where Roland Page has set up home. And six weeks ago Hopkins鈥� proposal for another of their housing estates came before the council.

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Read

North Norfolk District Council, Development Committee meeting 21st November 2013.

Agenda item 5:听 Planning permission application for 176 dwellings, open space and car park

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Waite

A hundred and seventy six dwellings with a mixture of flats, terraced houses and larger detached homes. Under North Norfolk Council鈥檚 affordable home quota of 20% that would mean a welcome 35 properties offered at below market prices for people on low incomes via a local housing association.

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But Hopkins 蜜芽传媒s application came with a caveat:

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Read

Based upon current revenues and costs the development of this land is economically unviable and therefore a relaxation is sought with regard to the provision of affordable housing.

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Well more than a 鈥渞elaxation鈥� really, Hopkins 蜜芽传媒s didn鈥檛 intend to include any affordable housing at all.

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Belson

Well I was at the meeting where it was discussed and everybody that came from North Walsham 鈥� the district councillors and the town council 鈥� all spoke against the application.听 People deserve to have that chance to have an affordable house and a big firm like this, putting up this many houses, should offer some.

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Waite

As is standard practice Hopkins 蜜芽传媒s submitted to the council what is called a 鈥渧iability assessment鈥� which in this case showed the development would be insufficiently profitable with the low cost homes included. Within these assessments, according to consultant Richard Jones, there are a series of forecasts and assumptions which affect the conclusion.

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Jones

Within a viability equation you have an input which is all about value, so someone has to assess what the value of those properties are.听 Well you could create a realistic range with plus or minus 5% and no one could argue with that.听 The same with costs, certainly a variation of plus or minus 2陆% say, so if I took a view that I was going to be at the minus 5% value and the plus 2陆% on cost it has quite an impact on the amount of affordable housing that I鈥檓 saying is viable to provide on that site.

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Waite

In other words if you minimise what you鈥檙e likely to be able to sell the properties for and maximise what your likely costs are going to be that can distort things quite dramatically?

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Jones

It can yes.听 Fiddle鈥檚 probably to starker a word but people certainly can play with the figures to maximise their position if you like.

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Waite

And that was a concern North Norfolk District Council had with the figures supplied by Hopkins 蜜芽传媒s. The council officer responsible for assessing the submission reported quote:听 ".. concern that some of the costs in the report are too high" and indeed the council made the firm supply more information. Nevertheless the development was agreed by the council with no affordable housing provision.听 And that鈥檚 angered some locals not least because the case for its exclusion was made in a document 鈥� that viability assessment 鈥� which few are allowed to see due to an obligation of commercial confidentiality to Hopkins 蜜芽传媒s. David Robertson of North Walsham Town Council believes the District Council should have employed an independent expert to assess Hopkins鈥� figures.

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Robertson

I would have thought that anybody would turn round and say okay we鈥檝e got your figures, we鈥檙e going to have them professionally looked at so that we know that the decision we鈥檙e making is right.听 How can we be expected to make a reasonable decision when we don鈥檛 have all of the facts and figures?听

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Waite

But what about the point of view which is better to have a development of 176 new homes on this eyesore site, that鈥檚 something that you鈥檝e got?

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Robertson

We鈥檙e between a rock and a hard place, purely because we want to see it developed but not at the cost whether we鈥檙e going to get nothing.

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Waite

Construction consultant Richard Jones believes councils can be outwitted in such negotiations.

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Jones

In order to be able to negotiate around viability you need to have experts on both sides that really understand it.听 I would question in a lot of instances whether the local authorities have that expertise to be able to really understand and to be able to negotiate around that appraisal.

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Waite

So they鈥檙e at a disadvantage?

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Jones

In some instances that鈥檚 very true.

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Waite

Hopkins 蜜芽传媒s declined to appear on the programme today but in a statement told us:

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Read

We believe the granting of our application was the right decision. It delivers much needed homes to the area and regenerates a brownfield site. Furthermore, the new homes are specifically targeted at the starter end of the market and hence are more 鈥渁ffordable鈥� in other ways.

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Also to make up for the absence of any social housing, the company has proposed an 鈥渦plift clause鈥� which means it will share 50/50 鈥� with the council - any profit over 20% that it makes on the development.

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And it鈥檚 not just new building schemes where there is controversy over affordable home provision. It鈥檚 also happening on sites, like this one, where agreements between council and developer were signed long ago. Indeed a new law was introduced last April which allows builders to renegotiate what they鈥檝e already negotiated if they believe circumstances have changed. Like here in the suburbs of Cambridge where a prime piece of land owned by the giant house builder Persimmon has been under lock and key since 2006.

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Crabtree

I鈥檓 Roger Crabtree, I chair the Rustat Neighbourhood Association.听 We鈥檙e now standing at the site of the old Water Board, which was a very attractive 1930s building.听 It鈥檚 been knocked down and this is where the new development is due to take place.听 You鈥檒l see in the background and maybe hear the noise that there鈥檚 a mass of development going on around this particular area of Cambridge, it鈥檚 a massive development in this area, Cambridge is a boom city 鈥� employment is growing apace, housing hasn鈥檛 followed suit, desperately, I think, we need many more family houses and affordable houses.

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Waite

And this site was going to help. When planning permission was granted back in 2006 Persimmon was committed to making 43 of the 143 homes affordable. Still an achievable figure you might think, when you consider that house prices in Cambridge last year rose by 10%. But last September 鈥� just a few months after that new law was introduced allowing renegotiation of old agreements - Persimmon wrote to the city council with a change of plan.

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Read

Please take this letter as our formal application under the Growth and Infrastructure Act for an amendment of the affordable housing level. We look forward to the application being validated as soon as possible.

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The new percentage of affordable housing Persimmon now proposed for the site was wait for it鈥�. zero. Otherwise, they argued, they would struggle to make any sort of profit at all. A claim met with disbelief by locals.

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Crabtree

We think that the figures are very doubtful just on the basis of common sense.听 If you look at what鈥檚 happening with Cambridge house prices, going up by a massive amount today and the site鈥檚 not going to built on for another two or three years, it is very difficult for us to comprehend that Persimmon can actually say the site is non-viable with the 43 houses.

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Waite

Well Cambridge City Council did commission independent advice to assess the figures in Persimmon鈥檚 viability assessment. The result? A report which raised questions, for example, over Persimmons estimates of building costs, and of the prices the builder reckoned the properties would command, which were, and I quote, 鈥渟ignificantly below market expectations鈥�.

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The upshot was that the council returned to Persimmon suggesting a revised figure of eight affordable homes for the site 鈥� less than the original 43 鈥� but better than Persimmon鈥檚 most recent proposal of zero.听

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The scheme will now go ahead but it鈥檚 still a matter of regret to Councillor Lewis Herbert, who attended the planning meeting, that the new legislation requires a decision on the developer鈥檚 request for fewer affordable homes within 28 days - meaning, he believes, the council was 鈥渂ounced鈥� into making a decision.

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Herbert

We just thought that it should have been renegotiated a lot harder.听 If on the basis of a couple of weeks they鈥檇 gone from nought percent to six percent affordable housing, who knows what might have happened with a couple of months hard work?

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Waite

We did ask Persimmon to take part in an interview. Instead in a statement they told us:

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Read

We operate at all times within the government鈥檚 planning policy and build affordable homes for hundreds of communities each year.听 The viability test was overseen by independent agents appointed by the 蜜芽传媒s and Communities Agency. All aspects have been checked by the council鈥檚 own agents.

We鈥檝e discovered that Persimmon has attempted to reduce its affordable housing commitments using the new legislation elsewhere. Ashfield District Council in Nottingham considered an application in July to remove all 12 affordable homes from an estate being built on an old colliery. Persimmon said that otherwise they would achieve an "unacceptable" profit margin of 15%. They said houses in the development were not selling as hoped. But the council rejected the application: council tax records showed that homes on the estate were steadily being occupied, there was nothing stalled about the development at all. Indeed, when we called the sales office two weeks ago, we were told that it was now sold out.

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Persimmon told us they had been unable to find a housing association prepared to take on the affordable houses. A claim Ashfield District Council says it is currently investigating.

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For the first half of last year Persimmon reported a 40% increase in pre-tax profits to 拢135 million.听 And the fact that such apparently buoyant companies have been seeking to renegotiate their affordable housing agreements dismays Rachel Fisher from the National Housing Federation,

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Fisher

What the government was trying to do was in good faith, it was basically saying we recognise that there are stalled sites and that in some instances these stalled sites would be able to go forward were you to reduce the amount of affordable housing contribution.听 But actually local authorities don鈥檛 just make the figures up in terms of how much affordable housing is needed in their area, so the idea that then you can just kind of come in and say we think that actually this scheme isn鈥檛 going to be viable and the thing that鈥檚 negotiable is affordable housing, despite the fact that this is an objectively assessed need in your area, that鈥檚 really problematic for us.听 And when you look at developer profits, which we鈥檙e now seeing 鈥� all the major house builders are reporting profit margins back to where they were.听 So it鈥檚 an easy target.

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Waite

Such an easy target that there are wheelbarrows of cash to be made by avoiding building affordable housing if the website of one company 鈥� called Section 106 Management 鈥� is to be believed.

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Read

Do I really have to pay for affordable housing?

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You explain your development project to us. We analyse your project and tell you how much you can save.

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At this point there鈥檚 a cartoon illustration of a customer standing by a palm tree in a loud Hawaiian shirt, doffing his builders hard hat.

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Read

You go on a nice holiday with the money you鈥檝e saved.

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In the next cartoon, a builder is bent double trying to push the wheelbarrow of cash he鈥檚 saved.

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Read

We conclude the negotiations and you save thousands on your Section 106 contributions.

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Robin Furbey is the man who runs the company which he says advises some of the smaller house builders in the country.

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Furbey

I believe that I offer an honest and straightforward service where we look at the data that鈥檚 available and advise people honestly whether we can help them or not.

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Waite

But I鈥檓 talking about their intentions 鈥� do they come to you because they really want to know what their responsibilities are or because they鈥檇 like to save a lot of money and not build so many affordable homes, thank you very much?

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Furbey

Most of them are coming to me because they鈥檙e frankly struggling.听 People have a very fond idea that property developers are all rich and run around in Porches and the reality is very different.

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Waite

To quantify viability you say, we use specialist spreadsheets that give a more realistic vision of profitability, I mean do you really mean to say that the developers who contact you need your spreadsheets to show them their costs, don鈥檛 they already know what these are and how viable their projects are going to be?

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Furbey

Well you have to remember that most of my developer clients are doing one project at a time, they鈥檙e not terribly financially literate鈥�

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Waite

But they wouldn鈥檛 have even bought the land Mr Furbey surely if they hadn鈥檛 done some basic calculations?

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Furbey

Well I find that they鈥檙e perhaps not as literate as you might think in this regard, some of them haven鈥檛 even bought the land yet, they鈥檙e looking at their alternatives.

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Waite

And they鈥檙e not spreadsheets, dare one say, that sort of emphasise their costs and minimise their profits?

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Furbey

No, no quite the reverse, I mean these 鈥� the one I use is called the Housing Corporation Economic Appraisal tool and that was developed by the Housing Corporation to show what is and isn鈥檛 viable.听 So we鈥檙e using the tools that the affordable housing business uses to show what or isn鈥檛 viable.

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Waite

Can I ask you about these 鈥� I mean the word has to be blatant images that you use on the website 鈥� a satisfied customer, you show, standing under a palm tree? They will save, using your services, on avoiding section 106 contributions.

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Furbey

Well it鈥檚 鈥� shall we see 鈥� as with all forms of advertising we鈥檙e using an info graphic that is designed to tolerably convey a simple approach to a complicated problem.听 These developments simply wouldn鈥檛 happen at all if I wasn鈥檛 able to help these clients because they wouldn鈥檛 be economically viable.听 I鈥檓 really swimming with the tide of what is needed in this country to get the economy moving.

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Waite

There is a sunset clause built in to the new legislation which means it will only run for three years. But during that time, by the government鈥檚 own estimate, 10,000 affordable homes will be lost 鈥� the price to be paid, it says, for unlocking 75,000 open-market homes. We invited the local government minister Brandon Lewis to take part today but in a statement we were told:

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Read

Too much development has been stalled because of economically unrealistic agreements negotiated at the height of the housing boom under the last administration. This results in no development, no regeneration and no community benefits at all. By renegotiating such agreements more market housing and more affordable housing will be built than would otherwise be the case.

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Waite

Using the Freedom of Information Act Face the Facts set out to assess how widespread is the renegotiation of Section 106 agreements. Of the 50 largest councils almost half of those who responded told us that they鈥檇 had to agree to a reduction in affordable home provision in Section 106 agreements with developers in the past five years. And more than a quarter have received applications to reduce social housing since that change to the law in April 2013.听听

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But there are sound business reasons for that, says John Stewart of the 蜜芽传媒 Builders Federation, which represents most of Britain鈥檚 major house builders.

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Stewart

This is a long term very high risk business that house building is.听 If you鈥檙e a small developer and you have to raise development finance the bank will say to you, okay I want a 25% margin on that site or I won鈥檛 lend you the money.

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Waite

I mean a lot of people listening might ask why does a developer have to take 20% or 25%, why not 15% and build some affordable homes?

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Stewart

Because let鈥檚 say the city demanded 20% margin for house building and consistently a company performed with 15%, well that company would be pretty lowly rated wouldn鈥檛 it and eventually would probably be taken over by somebody.听 So you have to meet the expectations of your investors.

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Waite

So you think the act refers to sites that were stalled and where the cost of section 106 agreement was holding back development but why should the viability information be kept confidential?

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Stewart

In some cases house builders I understand do go completely open book but it鈥檚 not 鈥� the idea that a house builder should sit down with a councillor, who鈥檚 not part of the company, and reveal all their commercial data is unrealistic, why should any company have to do that, this is extremely sensitive, extremely confidential information?听 There may be examples of people who have tried it on, I鈥檓 sure there are, there is in any walk of life鈥�

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Waite

What鈥檚 your view of that 鈥� you鈥檙e the trade body, what kind of behaviour is that?

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Stewart

Well we can鈥檛 be responsible for the behaviour of鈥�

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Waite

But you don鈥檛 condone it, this is what I鈥檓 trying to get at?

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Stewart

Well it鈥檚 not for me to condone it or not, it鈥檚 irrelevant what I think.听 The point about it surely is that the local authority is there to protect its own interests and the interests of the voters in its local area and the local district and it is incumbent on the local authority to be professionally advised that they are negotiating on a pretty equal footing and that they鈥檙e not having the wool pulled over their eyes and if they have the wool pulled over their eyes in a sense you haven鈥檛 got anyone to blame but themselves.

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Waite

I wonder if there is a degree of resentment there, that maybe some of your members feel affordable housing is something that councils ought to do or housing associations should be building?

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Stewart

There is almost a philosophical issue about whether house builders should have to provide subsidised affordable housing and the analogy that鈥檚 often used is you don鈥檛 expect Sainsbury to give away food to people who have very low incomes or BMW to give away every fourth car鈥�

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Waite

Do developers think of it sometimes a bit like that?

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Stewart

They do sometimes think of it a bit like that but I think that in truth I think the industry鈥檚 just got used to it.听 But there is a bigger issue 鈥� there is a question of whether we鈥檙e providing enough affordable housing in this country and I think most people in the affordable housing sector would say we鈥檙e not providing nearly enough, we need to figure some other way of adding to that number that comes through the private sector.听 The private sector will carry on doing that we need even more and that鈥檚 not really something that we can solve.

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