Negotiating more affordable homes

Housing is a big issue in the UK. In simple terms: we aren’t building enough affordable homes to keep up with increasing demand. This has lead to soaring house prices and a reliance on insecure and expensive private rented properties.

We see policy at a national and local level responding to this. The Mayor of London has created a draft new London Plan, which requires 35% of homes on new property developments to be affordable. But there’s a loophole; one that allows big property developers to negotiate down the amount of affordable homes.

Viability-wha’?

Following the recession in 2012, it was a risky time to start building homes. So, property developers were given some wriggle room. They could negotiate how many affordable homes were built if they showed it put them at risk financially.

This gave rise to an entire industry surrounding what’s known as viability.

In short, it’s a developer weighing up if a new property development is viable: how much the building work will cost, and how much money they’re set to make. This is done through a document called a viability assessment.

If cost vs value comes out as a zero-sum, it’s looking pretty bad for affordable housing provision.

So these viability assessments were introduced to encourage more home building in uncertain times. But now they are a way for neighbourhoods to lose out on promised affordable homes at the expense of developers’ profits.

Deep dive into discovery

FutureGov are working with London Borough of Southwark, who are leading the way on rethinking viability assessments to speed up the building of affordable homes. This is what we learned from discovery: why viability assessments aren’t working, and what we plan to do about it.

Viability assessments are used as a negotiation tool

Viability assessments were once a true assessment of whether a development was viable. But now they’re purely used as a negotiation tool. This back-and-forth discussion results in high costs and delays to the planning application process.

There is a power imbalance between councils and property developers

As part of negotiations, council officers, property developers and the consultants working on their behalf find evidence to show what is (or isn’t) possible. Property developers can pay for specialist expertise and access expensive data subscription services. Councils cannot afford to pay for the same expertise.

Viability assessments are not standardised

Viability assessments are manually compiled from the ground up each time. They are not regulated by professional standards (although this may change) and have no consistent format.

Redressing the power balance

With these challenges in mind, local authorities need to be clever about how they level the playing field with developers. Through better use of digital tools and data, we can equip councils to negotiate higher levels of affordable housing.

Viability assessments don’t need a one-size-fits-all planning portal. Instead, there is a need for a series of API-first, connected tools that do one thing well at critical points in the journey. What would underpin these is an evidence base that brings together the best quality data from multiple sources.

This underlying evidence base would build up a picture of what’s expected for, say, the price of bricks. It would flag when figures from a viability assessment fall outside of the expected range. Council officers can then negotiate with developers, backed by evidence.

Applications would also be triaged based on complexity. This would speed up policy-complaint and simple applications and target officer time to focus on the higher value, more complex property developments.

Where to begin?

During this discovery we wanted to prove it was possible to bring together data from multiple sources. This data prototype brings together two live datasets to suggest if property prices are within the expected range.

We created two further design concepts that illustrated how the viability assessment process could be improved to negotiate more affordable homes.

The viability assessment checker is a tool to support developers when they are building their planning application. The applicant can put in figures from their viability assessment and know if what they’re submitting is within the council’s expected range.

The review and comparison tool enables council officers to investigate applications in more detail, choose sites to compare a submission to and export scenarios to support negotiations.

These tools capture viability information in a standardised format and present it back in context. This will result in quality, targeted negotiations with developers to increase affordable housing on new developments.

So what?

This discovery phase identified the need for a number of products and services, supercharged by quality data, to negotiate more affordable homes for neighbourhoods.

But a series of insights and concepts from a discovery phase won’t solve our housing crisis.

Instead, London Borough of Southwark is exploring moving into a design and build phase. The experience of testing and iterating prototypes with real users and real data will help the team learn what’s technically possible, iron out unforeseen problems and learn how things will work in practice.

Moving this work into the next phase will be a bold and tangible step towards delivering more affordable homes for our communities.