London build to rent will not be subject to standard affordable housing requirements, GLA confirms

Draft supplementary planning guidance (SPG) published by the GLA for consultation will permit planned private rented sector (PRS) schemes to provide their whole affordable housing contribution at discounted market rent, provided that the scheme meets certain conditions. Once in force, the SPG would also introduce a 35% flat rate for affordable housing provision on schemes built for sale.

Planning law expert Reza Newton of Pinsent Masons, the law firm behind Out-Law.com, welcomed the publication, which he said provided "the first major housing policy steer from Sadiq Khan since being elected as the mayor of London in May 2016".

"There are particular pressures on the housing market in London so it is positive to see the GLA taking steps to secure the delivery of housing schemes, including schemes with build to rent and affordable PRS," he said. "PRS will also begin to play a larger role in other UK cities, with plans announced for several large PRS schemes in Manchester, Birmingham and Liverpool."

"We still, however, await the Housing White Paper, which was intended to be issued alongside the Autumn Statement but its release has been delayed until January 2017. Whether the government follows the GLA's lead to encourage provision of PRS ahead of home ownership and how London local planning authorities respond to this SPG will be interesting" he said.

The draft SPG recognises the unique delivery and economic pressures surrounding new PRS developments, and accepts that some traditional affordable housing tenures are not suited to PRS schemes. 'Discounted market rent' for the purposes of the SPG is intended to be the GLA's London Living Rent (LLR), which is defined as a third of the local income calculated by London ward. However, the guidance is flexible on whether all of the discounted market rent must be set at the LLR, depending on other particulars of the PRS offer.

To qualify as a PRS scheme the development, or phase within a development, must consist of a minimum of 50 units, of which all must be for rent. The housing must remain as PRS for a minimum of 15 years. The units must be under unified ownership and management, with a prescribed level of onsite management and services provided, and made available under three-year minimum assured shorthold tenancies with no letting fees, reflecting the new national letting rules announced in the Autumn Statement. The PRS landlord must also be a member of an ombudsman scheme.

Affordable housing percentages and rent levels will need to be validated by way of a viability assessment in the usual way. It is also envisaged that 'graded' rent levels, rather than a scheme-wide fixed rent level, will be common.

On build for sale schemes, the SPG would introduce a flat rate for affordable housing provision. Where that rate is met, developers would no longer be required to produce viability assessments.

Reza Newton said that the 35% rate was "the first step taken by City Hall towards its long-term target of achieving 50% affordable homes in London housing schemes".

"The new 35% flat rate will be welcomed by developers and it is hoped that this will cut through the sometimes lengthy section 106 agreement negotiations and affordable housing review mechanisms," he said. "At a time where FOI requests and release of viability assessments are becoming more frequently required, the removal of the need to produce viability assessments will allow developers to protect their confidential and commercially sensitive information and to fix development costs and liabilities at the beginning of the development process."