Changing affordable housing rules will kill off smaller developers, it is claimed

As the law stands, developments of 10 homes or fewer are excluded from the requirement to provide or contribute to affordable housing provision. But London mayor Sadiq Khan’s new draft London plan encourages boroughs also to contribute to affordable housing delivery for smaller sites when setting out their plans for development.

Adam Hesse, land and planning director of land broker Aston Mead, said:

‘This move will sound the death knell for many SME developers whose numbers have already dropped by around 80% over the past 25 years.

‘The brutal truth is that affordable homes sell for close to the price they cost to build. They can be more easily incorporated into large sites, where there is profit to be made elsewhere. But for sites of only 10 homes or less, the numbers often simply don’t stack up. This means that smaller brownfield sites, the very areas that towns and cities want and need to develop, continue to lie dormant and unused.’

He pointed out that proposals to reform the Community Infrastructure Levy (CIL) include details on extracting further money from landowners and developers to pay for affordable housing, as well as other social and physical infrastructure such as schools and roads.

Hesse said:

‘The proposed changes would be yet another tax that small and medium sized developers simply cannot afford to pay. They already struggle to secure funding in the first place, but additional restrictions or contributions would make the schemes unworkable.

‘It may be possible for the really big developers to absorb this sort of hit, as the multi-million increases in their pre-tax profits have recently shown. But small sites are the engine rooms of UK development. They are invariably built by smaller firms who have proportionately higher costs, and with an economic viability that is often on a knife edge.

‘So we should be doing everything we can to boost their productivity, rather than squeezing them so hard that they go out of business.’