KEY LEARNING POINTS
- National planning policy enables private homebuilding to be delivered through local affordable housing policies. Councils should define how private homebuilding can be treated as affordable housing in their planning policies, and any special conditions that may need to be met
- Councils can use exception sites to deliver many forms of affordable private homebuilding – from discounted serviced plots and self finish housing to community-led projects. Cross-subsidised housing can unlock further opportunities
- Rural exception sites are an effective way of creating a steady stream of affordable privately built homes
Private homebuilding is often perceived as being mainly the preserve of high earners. It is however perfectly possible for councils to facilitate reasonably priced opportunities for people to build their own homes through the introduction of local policies or other initiatives.
For example councils can adopt affordable housing policies that permit modest new privately built homes on exception sites in rural areas. Councils can also facilitate opportunities through their conventional approaches to delivering affordable housing - from discounted market sale to shared ownership and homes for social rent.
These opportunities would help to fill the void between traditional affordable homes and market housing.
PRIVATE HOMEBUILDING AS AFFORDABLE HOUSING
National policy context
Affordable housing is defined in the National Planning Policy Framework (NPPF) as social rented, affordable rented and intermediate housing that is provided to eligible households whose needs are not met by the market. Although this definition does not explicitly refer to private homebuilding this form of housing can be considered as ‘affordable’ if it is consistent with the definition and can deliver social rented, affordable rented and intermediate housing.
The delivery of private homebuilding through affordable housing policies is now well established in Local Plans. The Government’s recent consultation on the ‘Right to Build’ also acknowledges that councils can allocate specific sites in their Plans with a requirement that a proportion of the development is delivered for affordable private homebuilding, and then work with a housing association or another party (eg. Community Land Trust) to bring forward suitable opportunities.
Further detail on the scope of the definition of affordable housing in national policy is set out in Annex 1 of this Briefing Note.
Private homebuilding as ‘intermediate’ housing
Intermediate housing provides homes for sale or rent at a cost above social rent, but below market levels. This can include shared equity (shared ownership and equity loans), other low cost homes for sale and intermediate rent, but not affordable rented housing. Low cost market housing is also excluded.
Private homebuilding would meet this definition where: -
- Serviced building plots are made available below market value and are subject to a legal agreement that restricts the resale value of the completed property to below market value
- Homes are built as shared ownership properties – for example where a housing association or council constructs the homes to the waterproof ‘shell’ stage and then enables private homebuilders to enter into a special form of shared ownership lease to complete the property. Once the work is satisfactorily completed this earns the homebuilder an equity share in the property, which means they need a smaller mortgage or a lower deposit
In both cases prospective homebuilders would need to meet local eligibility criteria - for example, by demonstrating that they earn less than a certain income level, as is the norm with prospective tenants of affordable homes. They would also have to sign a legal agreement that restricts the resale value of the finished property to below market value, for example to 60 per cent or 80 per cent of the equivalent market value. This has the effect of ensuring that the property will remain an affordable home in perpetuity. When imposing any restrictions it is recommended that councils seek mortgage advice to ensure the development is mortgageable and includes special provisions for a Mortgagee (lender) needing to take possession of the property. An example of this approach is in Shropshire Council’s use of an exception site policy – see our case study on the 'Build Your Own Affordable Home' programme, Shropshire.
There are numerous examples of private homebuilding projects that have been delivered this way. For example in Norwich and Felixstowe the Orwell Housing Association has built eight ‘self finish’ homes on a shared ownership basis, in Devon local families in Broadhemptston have recently completed six new low cost homes on land that was classified as a rural exception site - and in Bicester, Cherwell District Council has delivered 21 shared equity ‘shell’ homes for families on modest incomes.
There are detailed Case Studies on these available in the Further Reading section at the end of this Briefing Note.
This is one of many Briefing Notes that explain resourcing, planning, land, finance, demand, marketing, consumer support and various technical issues. To see the full range of guidance click here.
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This Briefing Note will be revised when the Regulations to support the commencement of the Self-build and Custom Housebuilding Act 2015 and the Government’s Right to Build policy are finalised.
Private homebuilding as ‘social rented’ and ‘affordable rented’ housing
Social rented housing are homes that are usually owned by councils, housing associations or similar providers. Guideline target rents are set nationally.
Affordable rented housing are homes that are owned by councils, housing associations or similar providers. The properties are let to households who are eligible for social rented housing. In this form of housing the rent is controlled and cannot be more than 80 per cent of the local market rent.
Private homebuilding would comply with these definitions if the homes are built on a ‘build to rent’ basis. In this model eligible private homebuilders use some of their own labour, usually in exchange for training opportunities, to help build their own homes. In some cases rents are reduced because of the free labour input from the residents and lower build costs. In other cases residents receive a one-off payment in compensation for the work they have done on the home to invest in furnishings etc. These schemes usually require a specialist housing agency or willing housing association to lead, fund and organise the development. Where such schemes are considered councils are advised to seek tax advice to ensure there is no adverse impact on housing benefit entitlements.
Defining private homebuilding as affordable housing
Councils can facilitate affordable housing opportunities through their local planning policies. Local Plans should define how private homebuilding can be considered as affordable housing, and set out any special conditions that may need to be met
For example, in Walthamstow, Circle Housing and the London Borough of Waltham Forest jointly delivered ten homes for rent by working with a local community group. The members of the group were all eligible for social housing, and many were previously in overcrowded private rented accommodation. The residents had a big say in the design and layout of the homes, and they did some of the decorating, fitted the kitchens and completed the landscaping in exchange for being fast tracked through the social housing allocation process (see our case study on Third Sector Private Homebuilding Projects).
Which type of affordable housing is most appropriate will depend on local circumstances and local demand taking account of a council’s local registers (see our Briefing Note on Assessing demand for private homebuilding).
Examples of different council approaches
Councils can facilitate affordable housing opportunities through their local planning policies. The benefits of this are: -
- A Local Plan policy will deliver clarity, as it will define the form of housing a council will accept as affordable. This then helps to streamline local decisions on planning applications
- Clear Local Plan policies can provide greater confidence to local people who may wish to consider building their own affordable homes. People need to understand how the rules will be applied - such as any size limits, or the requirement that the home can only be resold below market value to ensure it remains affordable in perpetuity
The following examples illustrate the different policy approaches councils are taking.
Dartmoor - recognises that most affordable housing will continue to be provided by registered providers, but other local organisations such as self-build groups and community development trusts can also play an important role, provided the homes remain affordable for local people into the future. The council acknowledges that the private sector can help with the development of small infill sites where the sale price or rent, size and occupancy are controlled through a Section 106 agreement. The council will allow privately built (intermediate) and ‘self-build’ housing subject to meeting local affordability criteria and there being a restriction on the rent or sale price of the property each time it is re-let or sold. Cross-subsidy with market housing may also be acceptable on exception sites, including open market self-build.
Exmoor - permits new build, including private homebuilding, where: -
- It is in a named settlement or in a rural community in the open countryside
- The site relates well to existing buildings, any development is proportionate in scale, and will conserve or enhance the traditional pattern of the rural community and the local landscape character
- There is a proven local need for affordable housing, and the proposed residents meet local occupancy criteria. These conditions will be secured in perpetuity through a planning obligation
- The homes will be affordable for local people, and will remain so in perpetuity
Where development is allowed the council will remove permitted development rights, to control any future extensions to the homes.
New Forest - enables privately built homes through the council’s affordable housing policies. These allow for up to 30 per cent low-cost market housing (such as starter homes, private homebuilding and extra-care properties) to be built on greenfield sites that are released specifically to meet an identified local need for affordable housing. The remainder of these sites will be expected to deliver at least 70 per cent affordable housing (comprising 40 per cent social rented housing and 30 per cent intermediate housing).
Purbeck - the ‘Affordable Housing SPD’ (April 2013) recognises private homebuilding as affordable housing as long as it remains affordable in perpetuity. This is enforced by a legal agreement as part of the planning permission to ensure that the property cannot change ownership without the written consent of the council. The council will only give permission for the property to be resold if it is satisfied that the new purchaser is paying the prevailing affordable price, and meets the terms of the planning agreement.
Teignbridge - enables private homebuilding to be considered as affordable housing if: -
- Occupation is restricted to households in need of affordable housing, as defined by appropriate official criteria. For example this could be the criteria used by the local housing authority for social and affordable rent housing, or the Homes and Communities Agency’s criteria for intermediate housing
- The price or rent is limited to no more than 80 per cent of market levels in perpetuity. Where this is not possible, for example where the right to acquire applies, receipts must be recycled for alternative affordable housing provision
- Where an acceptable registered provider cannot be secured to take ownership of affordable housing, a cascade of potential providers will be agreed, including other registered providers, Teignbridge District Council, Community Land Trusts and finally private sale (but with a Devon occupancy restriction)
Our Briefing Note on Examples of how councils use the planning system to encourage opportunities sets out similar approaches used by other councils, including Eden, Cornwall, Stratford on Avon, Swale and West Oxfordshire.
Where the viability of some market sites is questionable, we understand that some councils are considering offsetting some of their affordable housing quotas in return for low cost private homebuilding opportunities.
Consider which affordable tenure may be most suitable
There are a range of ways of delivering private homebuilding through affordable housing policy – councils should consider which is most suitable given their local circumstances and other factors such as the ability to offer secure tenancies to people in social rented housing and local demand
Exception site policies can play an important role in delivering affordable private homebuilding opportunities.
Many rural areas face significant housing challenges with house prices, on average, almost 7% higher in rural areas than they are in urban areas. These constraints impact on labour and entrepreneurial mobility and undermine local and national economic growth.
National policy context
The Government’s 10-point plan to help boost rural productivity wants all villages in England to expand in an incremental way, provided there is local agreement.
The NPPF asks councils to be responsive to local circumstances and plan housing development in rural areas to reflect local needs, particularly for affordable housing. The Framework identifies rural exception sites as an appropriate tool for this purpose.
The NPPF recognises that small sites that would not normally be used for housing can be designated as rural exception sites if the land is used to provide affordable homes, and the affordable housing is secured in perpetuity.
Most affordable housing exception sites accommodate households that are either current local residents or have an existing family or employment connection. National policy allows some market housing on an exception site, provided the local council thinks it is appropriate and where it would help provide significant additional affordable housing to meet local needs. This could be in situations where, for example, affordable homes cannot be delivered without grant funding. Starter Homes are also considered an appropriate form of housing on exception sites.
This flexibility presents significant opportunities for councils to support affordable and low cost private homebuilding opportunities.
Exception sites can provide many forms of private homebuilding
There is scope for rural exception sites to deliver private homebuilding in two main ways: -
- Including limited private homebuilding (as a form of market housing) on part of the site, alongside conventional affordable housing
- Providing private homebuilding across the whole of an exception site, subject to the majority of the homes meeting affordable housing criteria
The tenures and type of private homebuilding can vary and should always look to respond to local demand. Where possible such housing should also look to take account of opportunities to cross-subsidise affordable housing provision.
EXCEPTION SITES CAN DELIVER MANY FORMS OF PRIVATE HOMEBUILDING
- Discounted serviced plots – sold at below market value with conventional restrictions being applied to meet local affordable housing polices. This would unlock affordable housing for the local community and give local people an opportunity to build their own home
- Self finish housing - this could be provided by a housing association and sold at below market value to local people in housing need, or available on a shared ownership basis. This could also include Starter Homes (see Briefing Note How the planning system can generate more opportunities)
- Higher value custom build homes - these could be offered by a custom build developer on a design and build basis, and they could be used to cross subsidise the provision of other affordable private homebuilding options, or conventional affordable housing
- Community-led group homebuilding projects – this could be delivered by a range of different organisations provided they meet affordable housing policies
Different council approaches
These examples illustrate the different approaches councils are taking.
Teignbridge - allows private homebuilding to be treated as affordable housing on rural exception sites provided: -
- The homes match the needs (in type and scale) of local households that have a strong connection with area
- The homes adjoin a settlement and do not have a disproportionate impact on local environmental or historical assets
- The homes are subject to a planning obligation which retains all of them as affordable housing in perpetuity for people with a local connection
- The price paid by the housing association or other appropriate housing provider for the land is limited to £10,000 per plot, or £300,000 per hectare
Where there is a proven need but there is no available public grant to fund the affordable homes, some open market housing can be included on the site.
Purbeck - the ‘Affordable Housing SPD’ (April 2013) sets out a self-build rural exception site policy for single plots or group builds in and around settlements (including those in the Green Belt) where residential development would not normally permitted. The policy permits projects provided they: -
- Meet an identified local need that cannot otherwise be met
- Are on a site that is close to existing buildings or the site is served by sustainable transport that provides access to local services facilities
- The size of the site is consistent with the settlement hierarchy, of a character appropriate to the location and of high quality design
- Restrictions are imposed to provide affordable housing benefits for current and future occupiers
- The development does not harm the Green Belt (where relevant)
Households who want build their own home under this policy have to be on the council’s housing register. Properties are restricted to 100sq m gross internal floor space, and plots can be no more than 0.1 hectare. Resale is subject to the council’s housing allocations policy and capped at £140,000 (to ensure the homes are affordable). The policy also sets out a formula to calculate resale value.
Permitted Development Rights for extensions to homes are also removed to avoid incremental increases in floorspace and potential harm to the countryside.
Small numbers of market homes are allowed on exception sites to facilitate the provision of significant additional affordable housing to meet local needs.
Torbay - supports projects initiated by The Land Society, a not-for-profit organisation that seeks to maximise the provision of affordable housing.
Where there is a demand for privately built housing, including that identified through neighbourhood plans, the council will ask for plots to be provided by the landowner.
The council’s self build affordable housing and exception sites policy asks those bringing forward sites of 30 or more homes to provide at least 5 per cent of the plots to for sale to private homebuilders as an element of affordable housing.
The council also allows affordable private homebuilding to meet the needs of a local community on a rural exception site, provided: -
- There is a proven need for affordable housing from households that have a strong connection with the local community
- The site adjoins a settlement and does not have a disproportionate impact on local environmental, landscape, or historical assets
- The scale of development is limited to meeting the identified local need
- The homes are subject to a planning obligation that secures them as affordable housing in perpetuity and gives priority to people with a strong local connection
Where appropriate, the council will also ask the homes to be developed in accordance with an agreed Design Code.
Shropshire - has a well-established ‘Build your own Affordable Home’ scheme for single plot exception sites. This positively encourages local people to build their own affordable home to meet their own housing needs - so long as the site is in a recognisable settlement and its future value is controlled so that it remains affordable to other local people in the future.
The policy restricts the value of the property to 60% of the prevailing market value through a section 106 agreement. Size is limited to 100 sq m gross internal floor area and the home must be of good design and built to Code Level 3 standards. Permitted Development Rights are withdrawn.
Since 2009 the council has secured 256 affordable homes this way, and around 25-30 additional opportunities are coming forward annually.
Briefing Note Examples of how councils use the planning system to encourage opportunities sets out similar approaches used by other councils, including Cheshire East, Dartmoor, Tendring and West Dorset.
Exception sites facilitate many opportunities
Councils can use exception sites to deliver many forms of affordable private homebuilding – from discounted serviced plots and self finish housing to community-led projects. Cross-subsidised housing can unlock further opportunities
Delivering a steady stream of affordable homes in rural areas
Introducing exception site policies are an effective way of creating a steady stream of opportunities for people on modest incomes to build their own affordable homes
ANNEX 1: POLICY CONTEXT
The NPPF defines affordable housing as set out in the box below.
“Social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market.
Eligibility is determined with regard to local incomes and local house prices. Affordable housing should include provisions to remain at an affordable price for future eligible households or for the subsidy to be recycled for alternative affordable housing provision.
Social rented housing is owned by local authorities and private registered providers (as defined in section 80 of the Housing and Regeneration Act 2008), for which guideline target rents are determined through the national rent regime. It may also be owned by other persons and provided under equivalent rental arrangements to the above, as agreed with the local authority or with the Homes and Communities Agency.
Affordable rented housing is let by local authorities or private registered providers of social housing to households who are eligible for social rented housing. Affordable Rent is subject to rent controls that require a rent of no more than 80% of the local market rent (including service charges, where applicable).
Intermediate housing is homes for sale and rent provided at a cost above social rent, but below market levels subject to the criteria in the Affordable Housing definition above. These can include shared equity (shared ownership and equity loans), other low cost homes for sale and intermediate rent, but not affordable rented housing.
Homes that do not meet the above definition of affordable housing, such as “low cost market” housing, may not be considered as affordable housing for planning purposes.”
Extract from National Planning Policy Framework (Annex 2).
The following Case Studies offer useful insight into the issues discussed in this Briefing Note:
The NaCSBA Research & Development Programme is funded by the Nationwide Foundation and aims to promote the self-build and custom build sector as an affordable route into housing for a greater number of people in the UK.
For further information, please visit: