HOW DO WE PAY FOR AFFORDABLE HOUSING?
1 January 2015
I am putting up some brief posts about affordable housing, both for rent and for purchase, looking at questions like how many, local support and opposition, how affordable, who decides? However, I am going to start with a question that is often avoided by campaigners, How do we pay for affordable housing? This underlies all the others; without funds, nothing gets provided. My focus is on Cornwall.
All major parties are pledged to increase the number of houses, including affordables, but are less transparent about how the latter will be paid for. The last Labour government solved the question of funding largely by the building of very little affordable housing; the current Tory Libdem government savaged government funds for affordable housing when it came into power and insists any funds to housing associations are for houses at unaffordable rents, ironically called affordable rents; in consequence at present we too much depend on subsidies from the developers and builders of open market houses who, as part of their proposals, include a proportion of affordables.
The subsidy arrangement opens up two issues.
First, what proportion of the houses on a development should be affordable? Developers and council officers and members and the public may have different views.
Second, the proportion and number of affordable houses on a development is considered in terms of financial viability: overall development costs and profit are objectively weighed against the cost of subsidising affordable houses in the development, an entirely reasonable approach in the current subsidy arrangements, and often the viable number of affordables is lower than the council and public would wish to see. Between developers and the council there may be legitimate differences about the viable number; there may be core differences about the proportion of affordable housing in developments; and there may also be differences in the proportions sought of affordables that are for purchase and for social/affordable rent. Generally, the arithmetic of financial viability is not opened to public scrutiny.
Sometimes developers offer money in lieu of affordables on site and for them to be built elsewhere, usually an unspecified place.
These two issues, proportion and viability, which are resolved by negotiation between developers and council, have tended to limit the absolute number of affordable houses built in Cornwall and their proportion of all houses built.
Unless central government or Cornwall Council or ‘anti-housing’ campaigners come up with large funds, the present subsidy scheme, with its difficulties, will continue. This means the provision of affordable housing depends on the building of open market houses and the hard truth is that if you oppose the building of open market houses, you are thereby in practice opposing the building of affordable houses. Calls for the building of only affordable houses are presently financially unrealistic whatever other arguments about that there may be.