Viability ‘loophole’ costs City £24.5m in affordable housing funds

current view: Bernard Morgan House
The current view of Bernard Morgan House from Bowater House in the Golden Lane Estate. Photo: Chris Dorley Brown

The City has missed out on more than £24.5million in affordable housing contributions over the last five years from developers using a planning loophole to cut their affordable housing commitment, the Corporation’s planning chief has revealed.

More than half the development applications requiring an affordable housing contribution fell short of targets laid out in the City Local Plan, which dictates a compulsory 30% affordable housing on-site, or 60% equivalent on another site, or as a cash in-lieu payment.

Despite these projects failing to meet the guidelines, known nationally as Section 106, City planners have approved them under a loophole that allows developers to use ‘viability assessments’ to show that the level of social housing required would reduce its profit margin to the point of putting the development at risk.

Five of the nine applications requiring an affordable housing contribution that came before City planners since 2012 sought an independent viability study, bringing the total raised under the policy from £56,504,676 down to £31,931,748.

The Corporation’s planning and transport chief Christopher Hayward revealed the deficit at last week’s Court of Common Council in response to a question posed by Cripplegate councillor Mary Durcan.

Ms Durcan said residents in her ward were concerned Section 106 agreements were not being maximised in the City after a controversial 99-unit redevelopment of Bernard Morgan House (pictured) was green-lit in May with a substantially lower social housing contribution following a viability assessment.

“In the case of Bernard Morgan House the committee was informed that the payment in lieu would be less than half of what ought to have been collected under our policy,” she told the council.

“I understand that in many London boroughs this under payment would not be accepted.”

In August, London Mayor Sadiq Khan brought in new laws requiring all new developments offering less than 35% affordable housing to justify their contribution by way of a public viability assessment which, up until recently, were largely kept out of view. In delivering the figures Mr Hayward said that the Corporation had already commenced a review of the City Local Plan to “consider what changes are necessary to ensure the delivery of affordable housing going forward”.

Ms Durcan said that Corporation would need to follow through on making changes to protect its Section 106 policy from being exploited and that councillors and officers would be in communication to progress the issue from last Thursday’s meeting.

“I’m assuming what is done, is done and monies cannot be recovered, but this situation cannot be allowed to continue,” she said.

Lead image: Chris Dorley Brown