Affordable Housing SPD

(29)Affordable Housing Requirements

The Amount of Affordable Housing

The Council will require 40% of the total (gross) number of dwellings provided on the site to be affordable. Where a scheme is amended to increase the number of dwellings, following the grant of planning permission, a proportionate increase in the amount of affordable housing will also be required.

Policy H2 (Affordable Housing) sets out the affordable housing requirement on residential development sites (see Appendix i for full policy). All schemes providing self-contained units of accommodation, whether in new-build or conversion schemes, will be subject to the policy.

It is expected that the affordable housing will be provided on the development site. This will ensure that new developments contribute towards mixed and balanced communities.

Rounding of fractions

There will be occasions where meeting the affordable housing requirement will not result in a round number of dwellings. For example, if a development is of 16 dwellings, the 40% affordable housing requirement is for 6.4 houses. In such cases, the fraction shall be rounded up to the nearest whole number– in this instance to 7 dwellings

This approach will ensure that applicable sites will deliver at least 40% Affordable Housing, thereby ensuring the delivery of much needed housing opportunities.

Site Size

Where the site is a subdivision of a larger site or adjacent to another potential housing site, the site size for threshold purposes will be taken to be the larger development site. Thus where a site has been subdivided, or is in separate ownerships, the site size will be all the sites taken together.

In determining whether two or more adjacent development sites should be considered as one, the council will consider the following:

• whether a previous application incorporated parts of both sites;
• whether the sites are inter-dependent in any way – for example, functionally or physically;
• whether there is a community of interest between the two owners; and/or
• whether there is a reasonable prospect of developing both sites together

In applying the threshold of 10 units, the Council will have regard to the density of the development as well as the numbers of units proposed. For example, there may be instances where a scheme, which provided less than 10 dwellings, is judged to have an inappropriate density in order to circumvent the policy requirement. In such cases the Council may refuse the application if the density of the development is contrary to local and national policy.

Site Viability

It is expected that developers will be aware of their obligations in respect of affordable housing, and other planning requirements, at the outset and that the financial implications of these will have been taken into account prior to negotiations on the purchase of the land. Where applicants claim that they are unable to

provide 40% affordable housing because this would make the scheme unviable, the Council will require written evidence of the costs of the scheme. It is common practice that the Council will ask its independent viability expert to review the applicant's submission, the reasonable costs of which is borne by the applicant

In cases where the Council is satisfied that the scheme could not be viable with 40% affordable housing, officers will negotiate with the applicant on either the mix of homes to be delivered or the numbers to be provided.

In doing so, they will take into account the affordable housing priorities in that particular location and the nature of the overall development.

Vacant Building Credit (VBC)

As per para 63 of the NPPF in order to support the re-use of brownfield land, where vacant buildings are being reused or redeveloped, any affordable housing contribution due will be reduced by a proportionate amount, equivalent to the existing gross floorspace of the existing buildings. This calculation should be submitted to the authority for approval at the point of application. This Credit does not apply to vacant buildings which have been abandoned or have been vacated for the sole purpose of redevelopment. VBC can be applied for on sites that demolish a vacant building to make way for housing development, and for applications bring a vacant building back to use as dwellings.

The proportion of the vacant building floor space as part of the total new floor space should be used to calculate the proportion of the affordable housing required by the policy, as summarised in the simple formula:

Illustrative example:

• a proposed new development for 100 homes (with a floor space of 125 sq. metres each) results in total proposed floor space of 12,500 sq. metres.
• Policy H2 requires 40% affordable housing - which equates to 40 affordable homes and 60 market homes.
• However, there are existing vacant buildings on the site with a floorspace of 5,000 sq. metres
• The difference between the gross floorspace of the vacant buildings and the proposes new build floor space is 7500 sq m
• Therefore the affordable Housing requirement on this site is (7500/12500)*40= 24%. This equates to 24 dwellings.

Alternative Developer Contributions

In line with paragraph 62 of the NPPF and policy H2 of the Local Plan, the presumption is that the affordable homes will be provided on the development site. This will ensure that the development provides a mix and balance of homes. The preferred approach is where the developer builds the homes and transfers them to a Registered Provider (RP).

There may be exceptional circumstances where it is not possible to provide affordable housing on the site. This is provided for within Policy H2 of the Local Plan and the supporting text (paragraphs 4.26-4.27), although the developer will be required to demonstrate why it is not practicable to deliver affordable housing on-site. Circumstances could include, for example, a small conversion scheme where it is not possible to separate the affordable housing from the market housing and where this would present difficulties in terms of management arrangements and service charges.

In such instances, the Council may agree to a financial contribution in lieu of the affordable housing. This financial contribution would be used to support the provision of affordable housing in other locations. The contribution will be calculated on the basis that the site size, in terms of dwellings, is equal to 60% of the gross housing provision, and that the other 40% is to be provided elsewhere. This takes into account the increased number of market dwellings provided on the site (100% as opposed to 60% - see Table below).

*all numbers rounded up to the nearest whole number

Alternatively, the Council may consider the provision of the affordable housing on an alternative site if such a site can be identified and secured for the provision of housing to meet the needs of the district. As with the example cited above, the amount of affordable housing to be provided off-site will reflect the increase in the number of market homes which can be provided on the development site itself.

In the case of both financial contributions and off-site provision, the details of the arrangements will be set out in a planning (Section 106) agreement, a template for which is provided at the end of this SPD.

Calculating the Off-site Contribution

In calculating a commuted sum the following approach will be used:

Step A

The applicant must provide details of the different types and sizes of homes within the proposed scheme. The Council, in liaison with the developer, will determine what proportion of each of these house types would be required to be affordable if the Council's affordable housing policy were to be met. The key consideration should be meeting the overall provision of affordable bedspaces (40%) and the ratio between social and intermediate bedspaces.

Step B

The applicant must provide details of the open market value (OMV) of these identified affordable homes. This should be based on local evidence of similar schemes and supported by a valuation prepared by an RICS Registered Valuer.

Step C

The applicant must submit evidence to demonstrate how much an appropriate Registered Provider [RP] would purchase the affordable housing units for on the basis that the dwellings remain affordable units. This can be provided as either a) as a cash price for each affordable unit or b) as a % of the OMV for affordable home types the RP would normally pay (i.e. the RP transfer rate).

The applicant should calculate the 'cost to developer' if the affordable units were to be provided on site. The cost will be equivalent to the difference between the open market value and the price that the Registered Provider would be prepared to pay, e.g. If a house is worth £200,000 on the open market and a registered provider would purchase the property for £120,000 then the 'cost to developer' would be £80,000. Similarly, if the RP would pay 60% of the OMV for a house the developer would bear the remaining 40% of the value, i.e. the 'cost to developer' would be £80,000.

Appropriate evidence is considered to be a letter from at least two Registered Providers that are active in Warwick District. The Council will use the average RP transfer rate to calculate the cost to developer. In the absence of submitted evidence that has been endorsed by the Registered Providers the Council will use its own evidence to determine the 'cost to developer'. This evidence is likely to be based on recent transactions across the District and is therefore likely to change over time.

Step D

Once the total 'cost to developer' is calculated for the scheme the Council will include an uplift to the financial contribution to reflect the fact that if the affordable homes are provided off-site the number of homes in the total scheme actually increases, as detailed in the previous section.

Affordability and Tenure

The affordable homes to be provided must meet the definition of affordable housing as outlined in Annex 2 of the NPPF (see Appendix (ii) for details). However, within this definition there are different types of affordable housing needs which we must meet. These include the range from those households with sufficient funds/income to enter the intermediate market to those whose needs can only be met in the social rented sector. The 2013 SHMA, reaffirmed by the 2015 update, demonstrated a need for a minimum of 85% social rented housing and a maximum of 15% intermediate housing unless the developer can demonstrate that such a mix is inappropriate on the particular site.

Taking the above, the usual split of tenure types that the Authority seeks is;

These may vary site to site and early engagement with Council officers is recommended who will be able to advise the required tenure mix for a specific site.

This tenure split may be revised by subsequent SHMAs or successor documents, at which point this above advice will be amended to represent the most recent and robust evidence.

Housing Types and Sizes

A mix of dwelling types and sizes (both market and affordable) will be required on all sites in order to create sustainable communities. In determining the types of homes, developers should have regard to the nature of the site and the needs of the District as well as the guidance in this SPD. The Council has produced a housing mix guidance document that distills the findings of the most recent SHMA, and help developers design policy-appropriate schemes.

However, this SPD seeks an affordable housing mix that differs from that modelled in the SMHA. The SHMA notes the following;

"Our strategic conclusions in the affordable sector recognise the role which delivery of larger family homes can play in releasing supply of smaller properties for other households; together with the limited flexibility which one-bed properties offer to changing household circumstances which feed through into higher turnover and management issues." [para 9.39]

Individual authorities may therefore decide to provide an alternative proportion of one bedroom homes, in particular taking account of the fact that one bedroom homes:

• make no provision for future household growth;
• restrict opportunities to have guests to stay;
• restrict opportunities for people to exercise access rights to their children;
• do not accommodate couples who need a bedroom each, for example because of disability; and
• do not present an attractive option for people looking to downsize.

This council applies this paragraph to provide more two-beds and fewer one-beds but with the total of the two within the sum of the above two ranges, i.e. 55-65%. This recognises that there are households with a one-bedroom need (single people and couples) that will be accommodated

in shared ownership properties (where the housing assessment is based upon ability to pay not household size) and bungalows for older people where the under-occupation charge does not apply. This ensures that there are sufficient properties to address one-bed and two-bed needs.

The SHMA does not require any of the typologies to be provided as single story dwellings. However, the authority recognises that there is significant demand for such properties and the provision of bungalows as part of the affordable housing mix is encouraged as below.

Where there is evidence of need, specialist or supported housing or sites for gypsies and travellers may be accepted in lieu of general needs affordable housing.

Housing Costs

Affordable housing for rent must meet the definition set out in the NPPF. The test of affordability for intermediate housing is based on the relationship between the occupation cost of the property and average income levels. This relationship is tested using a "multiplier" which, in this District, is a maximum of 3.5. Another test of affordability for intermediate housing is that the occupation costs should not exceed 33% of average income of newly forming households.

In summary, the following principles should be taken into account in setting housing costs:

• In rented housing, rents should be at or below Housing Corporation benchmarks and within the limits prescribed by the Rent Service for receipt of full housing benefit.
• In intermediate housing, the rent charged on un-owned equity should be at the target level set by the Housing Corporation (2.75% of un-owned equity per annum in 2007)
• In intermediate housing, the maximum multiplier applicable between occupation costs and average income is 3.5.
• In intermediate housing, occupation costs should not exceed 33% of average income

The affordable rent level, which includes service charges, should be no more than the Local Housing Allowance caps for each area and in this District, are normally no more than 70% of open market value.

Affordability in Perpetuity

The Council will need to ensure that the affordable homes remain affordable for as long as they are needed. The best way of ensuring this is by transferring the homes to a Registered Provider.

In cases where a RP is not involved in the delivery of the affordable housing, the Council will require the provider to agree to the retention of the homes in perpetuity in a planning (Section 106) agreement. Exceptions are made for mortgagees in possession of the affordable homes, people who have "staircased" to 100% ownership and people who have exercised their "right to acquire" an affordable home.

Starter Homes – 15 years post sale resale and lettings restrictions

Discount Market Sales – sold at least 20% less than market value determined by local incomes and local house prices. Provision should be made to ensure housing remains at a discount for future eligible households.

Meeting Local Needs in Perpetuity

The Local Plan policy sets out the basic principles which must be met in order to ensure that the homes meet local needs, in perpetuity, which cannot be met in any other way.

People with a demonstrable need to be housed in the locality Include:

• people who currently live in the parish and have done so continuously for at least the last 2 years and are seeking more suitable accommodation;
• people who have lived in the parish for at least 2 years out of the last 10 years;
• people who used to live in the parish and who have immediate family (mother, father, son, daughter, brother or sister) living in the parish;
• people who have relatives living in the parish to whom it is desirable to live near for support e.g. elderly relatives, young families; and
• people who have been permanently employed in the parish for at least 12 months.

The housing to be provided must meet the needs identified in the survey in terms of type, size and tenure. They should ideally be provided, and subsequently managed, by a Registered Provider.

However, other providers such as Community Land Trusts would also be acceptable providers. All organisations must have local management to ensure the effective maintenance of the dwellings.

The tenure of housing will normally be social rented. This is because other forms of subsidised housing, such as shared ownership housing, is often still too expensive for those in housing need. However, where there is evidence of such need, a small proportion of intermediate housing will be considered where the cost is affordable. Affordability of such homes is assessed by comparing the weekly cost of the property with the amount considered to be affordable to those earning the average income of newly forming households. Evidence of affordability will be required.

Affordable homes provided by way of a rural exception scheme will need to be secured to ensure that they are always only available to local people with a housing need. The preferred and most appropriate means of doing this is by involving a Registered Provider in the provision and subsequent ownership and management of the homes.

The homes should be made available both initially and subsequently to people who have a local connection and a proven housing need. Initial occupants should ideally be those identified in the housing needs assessment. If the property later becomes available, it will be offered firstly to people with a housing need and a local connection from within the village or parish in which it is situated. In the unlikely event that no one comes forward, the home will be offered to those from neighbouring parishes with a similar local connection to that parish and a proven housing need.

Social rented homes provided in a rural exception scheme will always remain in the ownership of the provider, usually a Registered Provider. There will be no opportunity for tenants to buy the home under the "right to acquire" scheme. In the case of shared ownership or shared equity properties, part owners will not be able to buy the homes outright. This will ensure that the homes remain affordable to local people and are never sold on the open market.