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Proposals to overhaul the definition of affordable housing

Following Theresa May's speech to the National Planning Conference on Monday, a consultation has been published on the proposed amendments to the National Planning Policy Framework (NPPF).

There are a number of changes that are considered but one which will be important to housing developers from the public, private and voluntary sectors is the proposed amendments to the definition of affordable housing. The Government proposes that housing for sale or rent will only constitute “affordable housing” if it comprises one of the following (as more specifically defined in the draft NPPF):

  • Affordable housing for rent
  • Starter homes
  • Discounted market sales housing
  • Other affordable routes to home ownership

There are some key points to highlight in relation to this. Firstly, we have for a long time been awaiting further guidance from the Government in relation to the precise form that Starter Homes will take. Although the changes bring Starter Homes within the definition of affordable housing for the purposes of planning policy, we will not have a complete understanding of the proposals and what they will mean for housing delivery until the necessary secondary legislation has been introduced to give form to the proposals as they were first mooted in the Housing and Planning Act from 2016.

It is notable that Rent to Buy is now included within the definition of “other affordable routes to home ownership”. We expect that in many circumstances the Rent to Buy model will provide an effective means by which to secure the delivery of affordable housing from a site.

In terms of rental products, a simple change of emphasis is proposed so that social rent and affordable rent are dealt with together as “affordable housing for rent” which is effectively defined as properties rented in accordance with the Government’s rent policy or at least 20% below local market rents (including service charges). Such properties must however be rented by a registered provider (RP) unless they are included as part of a “Build to Rent” scheme. Although the stipulation of an RP’s involvement would appear to be restrictive the definition of Build to Rent is relatively wide and therefore it seems to be the case that local authorities and others could let affordable housing at an affordable or social rent provided that the stock is part of a “Build to Rent” scheme.

A final point to note is that there is a requirement for the affordable rented products to remain affordable housing in perpetuity or for any subsidy to be recycled. In practice this will mean that local authorities will stipulate that the recycling of subsidies must be confined to their administrative areas which fails to recognise that the operation of RPs is not restricted in this way and that RPs will often look to support the delivery of affordable housing from a number of local authority areas.

If you consider the proposed changes may affect your business then please do not hesitate to contact Kamran Hyder to discuss this further. If you would like to respond to the consultation, any comments should be provided by 10 May 2018.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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