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Khan's affordable housing dream will die without small-site exemption

Compared to his more verbose predecessor, Sadiq Khan has so far proven to be a relatively low-profile mayor.

But on the issue of housing – the subject that will likely define his time in office – Mr Khan has finally set out his stall with the recent publication of his housing strategy.

During the mayoral campaign, Mr Khan tapped into an understandable feeling of frustration among Londoners over the cost of buying or renting a property – and his tough line on affordable housing obviously resonated with many. Nevertheless, his much-publicised 50 per cent affordable housing target on all new housing projects risked looking like good politics but bad policy.

Why? Well, if this was implemented across the board with no flexibility, it would result in fewer homes being built, affordable or otherwise. The one-size-fits-all 50 per cent target would have been potentially devastating to the viability of small schemes and would run counter to the underlying need to expand supply.

For a smaller housing development, where the economics can sometimes be difficult to make work, adding requirements for multiple affordable housing units can result in the whole development becoming unviable, meaning that nothing at all gets built.

This would have ruled out hundreds, if not thousands, of smaller projects across the capital.

Compromise solution

Viability is more likely to be an issue on small brownfield sites. Developing these sites can involve technical complexities, remediation costs and other difficulties that quickly raise the upfront cost in a way which can be very difficult for smaller builders.

On such sites, where the volume of homes being built is low, the priority must be to ensure the development goes ahead. After all, these sites will typically be of the small infill variety favoured by local communities. Taken individually these sites are small beer, but the cumulative potential of them is enormous. This brings me to Mr Khan’s compromise solution.

“On sites where the volume of homes being built is low, the priority must be to ensure that the development goes ahead”

The promise is that developers can secure exemptions from viability assessments on their schemes in exchange for agreeing to deliver a minimum of 35 per cent of those homes as affordable. This should see the delivery of homes speed up and affordable housing contributions rise.

Challenging numbers

Certainly, 35 per cent is a more sensible level than 50 per cent. But this will likely still cause difficulty for smaller developers.

If 35 per cent is genuinely unreasonable, larger firms will be much more likely to contest the target with their local authority. However, your typical SME may not have the resources to challenge. SMEs might find themselves subject to protracted viability assessments and other negotiations, with no guarantee of success.

All this could inject further red tape and uncertainty into a process that is already seen as hazardous, further deterring many small builders from getting involved in housebuilding.

What Mr Khan’s policy means for most SME housebuilders in the capital will rest on whether the devolved power of the mayoralty will allow him to overrule the government’s decision – recently upheld in the high court – that sites of 10 homes or fewer are exempt from affordable housing requirements. This is still unclear.

The mayor must see the value in upholding the government’s exemption for smaller sites.

Good policy is good policy, regardless of the politics.

Sarah McMonagle is director of external affairs at the Federation of Master Builders

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