Affordable housing at risk from new levy, say Church of England and charities

Property groups, charities and the Church of England have urged the UK government to amend proposed changes to England’s planning system, warning that they risk causing a “significant reduction” in affordable housing provision.

In a letter seen by the Financial Times, trade bodies the National Housing Federation and British Property Federation, charities Shelter and Crisis and the Church told levelling-up secretary Michael Gove that a new levy to fund cheaper properties could worsen “pre-existing pressures” around supply.

One of the aims of the levelling-up bill, now going through parliament, is to overhaul the way developers fund local infrastructure improvements as part of their planning negotiations with local councils.

At present, “Section 106 agreements” mean developers negotiate with councils over their provision of local amenities, such as schools and clinics, in return for permission to build property.

Developers’ payments run into billions of pounds annually, with affordable housing accounting for 78 per cent of spending in the 2018-19 fiscal year.

The levelling-up bill plans to replace these payments with a sweeping “infrastructure levy” that will raise money for local authorities to fund affordable housing as well as infrastructure and non-infrastructure spending on “local services”.

In their letter, the groups said the proposed levy “risks a significant reduction in the delivery of affordable housing and homes for social rent through the planning system”.

It “could lead to the diversion of developer contributions away from affordable and social housing and towards other, unspecified forms of expenditure entirely unconnected to development”, they wrote.

The groups — which also include the Chartered Institute of Housing, Town and Country Planning Association and Greater London Authority — are backing amendments to the bill put forward by Labour peer Lady Diana Warwick and the cross-bencher Lord Richard Best, a housing expert.

One of Warwick’s amendments would prevent receipts from the infrastructure levy being spent on anything “other than infrastructure”, while Best is proposing mandating that 75 per cent of the levy be spent on affordable housing. The House of Lords is expected to vote on the bill in the coming days.

Critics claim the Department for Levelling Up has yet to publish any evidence or impact assessments to support the policy change, which was first proposed almost three years ago.

Developer contributions from Section 106 accounted for 47 per cent of all new affordable homes built in 2021-22. Developers usually have an obligation to provide low-cost housing on the same site as their project rather than elsewhere.

Ministers have previously said the levy will deliver at least as many affordable homes as the current system, but critics say the bill includes only vague wording about “the desirability of” councils to deliver affordable and social housing.

The letter’s signatories insisted that although they wanted to work “constructively” with Gove, they were “concerned by the government’s apparent willingness to press ahead with unevidenced planning reforms which risk worsening pre-existing pressures on the supply of affordable and social housing”.

The levelling-up department said it understood that the levy was a “significant change” but that it should still deliver as much affordable housing as before through a “right to require”. 

Under this new right, councils will be able to determine how much of the levy developers will have to pay on the provision of on-site affordable housing. But campaigners have said local authorities will be entitled to set the “right to require” at low levels.

The signatories said that either a proportion of developer contributions should be ringfenced or the government should “set baseline levels” around supply.