Proposed Developer Contributions for Social Housing

08 October 2014

DSD?s proposals to introduce a system of ?Developer Contributions for Social and Affordable Housing, its implementation and potential impact

The public consultation period has recently closed on the DSD’s proposals to introduce a system of “Developer Contributions for Social and Affordable Housing”. This follows the publication of the department’s consultation document in June this year and the results of the consultation, along with the department’s views on the responses received, will be published some months thereafter. Alongside the DSD’s consultation, the DOE have been running its own consultation on the delivery mechanism for the new housing policy, which would take the form of a new Planning Policy Statement 22. Essentially it would contain the nuts and bolts of the scheme and how it would be implemented and enforced.

The basic proposition is that every development over a certain threshold – 5 units is suggested – will be required, by way of planning conditions or obligations, to make a contribution to affordable housing (which is defined as social rented housing and/or shared-ownership housing) with the level of contribution determined by the profitability of any given scheme. The contributions can take the form of a certain number of affordable housing units on site or off-site (but within the general locality), a commuted sum of money or a combination of affordable units and a commuted sum. Preference, however, would be given to housing units on site, with commuted sums being the least preferred option. A simple commuted sum with no housing contribution would only be acceptable where building affordable housing at the development or in the vicinity “is not feasible” but even where the affordable housing need has been met in the particular locality a commuted sum would still be required. This characterises the scheme more as a straightforward development tax. Commuted sums received would be ring-fenced for use by the DSD in affordable housing schemes elsewhere in the Province.

The department’s proposed level of contribution for a particular scheme, that is to say the proportion of affordable housing to be in included in the scheme or the commuted sum to be paid, will be tested against “an economic viability model” and if the calculation results in an overall development profit for the developer of 15% or more then the test will be passed. The department promises teams of specialist valuers and financial appraisers to negotiate with developers.

The department’s proposals share many of the characteristics of the Community Infrastructure Levy (“CIL”) that operates in many parts of England and Wales and which came into effect in 2010 although CIL is more focussed on raising funds and, as the name suggests, these are spent on a much wider range of infrastructure than just affordable housing.

The devil will be in the detail, clearly and the proposals contained in the consultation paper beg numerous questions. No doubt many in the industry will already be turning their minds to ways of mitigating the level of contributions or avoiding them entirely. We can expect some level of anti-avoidance provisions to be included at all stages of the consenting process, from the Planning Policy Statement through to the planning conditions/obligations relating to the specific scheme. We can also expect the potential impact of the scheme to be front and centre in negotiations between developers and landowners.

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