Draft London Plan includes new affordable, student, co-living housing requirements

The Draft London Plan was published on 29 November 2017 and is open for consultation until 2 March 2017 and due for examination in autumn 2018. It is a strategic spatial development plan dealing with transport, the environment, economic development, housing, culture and health and health inequalities policies.

The policies are comprehensive but for the purpose of this article we focus on three matters being affordable housing, student accommodation and co-living.

Affordable Housing

There is no statutory definition of “affordable housing” however the National Planning Policy Framework (NPPF) sets out three key categories:

• Social rented - housing which is owned by local authorities and private registered providers at guideline target rents.
• Affordable rented - housing let by local authorities or private registered providers of social housing to householder who are eligible for social rented housing. Rent controls apply that require a rent of no more than 80% of the local market rent (including service charges, where applicable).
• Intermediate housing - homes for sale and rent provided at a cot above social rent, but below market levels. These can include shared equity, other low cost homes for sale and intermediate rent, but not affordable rented housing.

The Draft London Plan Policy H7 “Affordable housing tenure” sets out that affordable housing provided on development sites (being a threshold minimum of 35% of units, other than for public sector land and other strategic designations where 50% will be the threshold) should be subject to the following split:

• a minimum of 30% low cost rented homes, allocated according to need and for Londoners on low incomes (Social Rent / London Affordable Rent)
• a minimum of 30% intermediate products which meet the definition of affordable housing, including London Living Rent and London Shared ownership, and
• 40% to be determined by the relevant borough based on identified need, provided they are consistent with the definition of affordable housing.

Only those schemes delivering the threshold level of affordable housing with a tenure split that meets the requirements set out above will be permitted to follow the Fast Track Route for viability assessment which we have previously reported on.

The above policy introduces the following new tenure types in London:

• London Affordable Rent -  for households on low income with the rent levels based on social rent levels. The NPPF defines affordable rent as up to 80% of market rent, however, to ensure rents in London are genuinely affordable, the Mayor expects rents charged for homes let for London Affordable Rent to be set at benchmarks substantially below this level, based on traditional social rents. Further details are set out in the Mayor’s Homes for Londoners Affordable Homes Programme 2016-21.
• London Living Rent - offers Londoners on average incomes a lower rent, enabling them to save for a deposit. This will be an intermediate affordable housing product with low rents that vary by ward across London. Where funded by Greater London Authority, LLR will be a Rent to Buy product, with sub-market rents on time-limited tenancies.
• London Shared Ownership - this is an intermediate ownership product which allows London Households who would struggle to buy on the open market, to purchase a share in a new home and pay a low rent on the remaining, unsold, share.

In addition to income caps, it is anticipated that boroughs may set other eligibility criteria for the intermediate units, reflecting local housing need.

Student accommodation

Policy H17 “Purpose-built student accommodation” introduces an affordability requirement in terms of the provision of student accommodation.  In addition to several other criteria the draft policy states that Boroughs should seek to ensure that “at least 35% of the accommodation is secured as affordable student accommodation as defined through the London Plan and associated guidance”.

The purpose of this affordability criterion is to ensure that students with an income equivalent to that provided to full-time UK students by state-funded sources of financial support for living costs can afford to stay in such accommodation. 35% of bedrooms must be affordable at this income level. The definition of “affordable student accommodation” is “a PBSA bedroom that is provided at a rental cost for the academic year equal to below 55% of the maximum income that a new full-time student studying in London and living away from home could receive from the Government’s maintenance loan for living costs for that academic year”. Further guidance is expected as the loan no longer exists.

If 35% affordable student accommodation is not met by a development proposal, it will be considered under the Viability Tested Route which we have previously reported on.

If accommodation is not secured for use by students and for occupation be members of one or more specified higher educational institutions as set out in policy H18 of the Draft Local Plan it will not be considered as purpose-built student accommodation or meeting a need for purpose-built student accommodation; and the development proposal will be considered as large-scale purpose-built shared living and be assessed by the requirements of Policy H18.

Co-living

Policy H18 of the Draft London Plan makes clear that large-scale purpose-built shared living is a “sui generis non-self contained market housing”.

In order to qualify as large-scale purpose-built shared living, a development or block or phase within a development must be at least 50 units. This accommodation is seen as providing an alternative to traditional flat shares and includes additional services and facilities, such as room cleaning, bed linen, onsite gym and concierge service. The explanatory text to the policy states that in order to ensure that such development meet specific housing need and do not become hostels, tenancies should be for a minimum of three months. The policy criteria which must be met by development proposals are that:

• it meets an identified need
• it is located in an area well-connected to local services and employment by walking, cycling and public transport, and its design does not contribute to car dependency
• it is under single management
• its units are all for rent with minimum tenancy lengths of no less than three months and
• communal facilities and services are provided that are sufficient to meet the requirements of the intended number of residents and include at least:
  • convenient access to a communal kitchen
  • outside communal amenity space (roof terrace and/or garden)
  • internal communal amenity pace (dining rooms, lounges)
  • laundry and drying facilities
  • a concierge
  • community management, and
  • bedding and linen changing and/or room cleaning services
• the private units provide adequate functional living space and layout, and are demonstrably not C3 Use Class accommodation
• a management plan is provided with the application
• it delivers a cash in lieu contribution towards convential C3 affordable housing. Boroughs should seek this contribution for the provision of new C3 off-site affordable housing as either an:
  • upfront cash in lieu payment to the local authority, or
  • in perpetuity annual payment to the local authority.

In both cases developments are expected to provide a contribution that is equivalent to 35% of the residential units to be provided at a discount of 50% of the market rent. If a lower contribution is proposed the scheme will be subject to the Viability Tested Route set out in Policy H6 of the Draft London Plan.

Although it is considered that this type of housing contributes to affordable housing, it is not considered a suitable form of affordable housing as it generally consists of bedrooms rather than housing units. It is for this reason that a financial contribution will be required towards off-site affordable housing.

Comment:

The Draft London Plan takes some interesting and bold steps in terms of seeking to define a distinct housing market from the national norm. The introduction of new types of affordable accommodation will present a new challenge to developers to accommodate broader categories of occupiers and to factor these in to their financial models. 

The requirement for affordability in relation to student accommodation is maybe a natural next step in the maturing of the purpose-built student accommodation sector. The challenge it presents though is that the cost to institutions of developing such schemes must be kept within reasonable tolerances otherwise the fallback may be that they leave it to the private rented sector to accommodate demand in housing that is not purpose built for students and which will take up housing stock that may otherwise be suitable for families. 

Finally it is encouraging to see co-living dealt with by planning policy. The challenge to developers is that the policy criteria sets out a series of minimum requirements and it places the onus firmly on developers to demonstrate that their proposals meet an identified need.