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Is it Crunch Time for Affordable Housing?
27 November 2008
Whilst Hewitsons welcome the Chancellor's announcement in the Pre-Budget Report that more money for new affordable homes will be available, we suggest that Councils need to look at ways of bringing forward existing affordable housing commitments under Section 106 Agreements.
The National Housing Federation has warned that unless the money is used to pay builders of new affordable homes higher grant rates, the supply of new affordable housing could come to a standstill next year.
Due to the credit crunch, Housing Associations have found it increasingly difficult to raise money from banks and to find buyers for shared ownership units.
Existing commitments to provide affordable housing under Section 106 Agreements may not now be realistic and whilst the government and local planning authorities want to see more homes built, this will not happen unless the development is viable.
One way in which Hewitsons may be able to help is by renegotiating existing Section 106 commitments. It is possible to vary a Section 106 Agreement with the Council's consent and in the current economic climate, Councils may be prepared to reconsider Section 106 obligations with a view to bringing forward the affordable housing.
Renegotiating affordable housing clauses may have implications for the number of affordable homes and the distribution within the site and there may be knock-on effects for other contributions. For example, an education contribution may need to be reduced if fewer affordable homes are to be built on the site.
Whilst the new money for affordable homes is welcome, the hope is that it will be applied in a way which allows the affordable homes to be built.
Re-visiting existing Section 106 Agreements and considering the viability of the development in the light of the need to bring forward the affordable homes may well enable some of the homes to be built.
The credit crunch has badly affected the ability of Housing Associations to raise money. Now is the time to consider practical ways in which affordable housing commitments may be brought forward, otherwise 2009 really will be crunch time for affordable housing.
For further information contact Karen Dennett, Principal Solicitor.