Housing crisis can only get worse after affordable housing contribution decision, FMB chief says

Published:  04 August, 2015

A High Court decision to strike down exemptions from affordable housing contributions for small developments will exacerbate the housing crisis, according to the Federation of Master Builders (FMB).

A High Court ruling on Friday (31 July) ordered the removal from the government's national planning practice guidance of a policy introduced to exempt small developments from affordable housing contributions, as well as the suspension of the vacant building credit, introduced in November 2014.

Brian Berry, chief executive of the FMB, said: “This decision threatens to accentuate the housing crisis by casting a dark cloud on small local builders at just the time when these firms are beginning to show signs of real growth. In the 1980s, there were more than 10,000 small and medium-sized enterprise (SME) house builders in the UK, building two thirds of all new homes. There are now fewer than 2,500 SME house builders and between them they build less than one third of all new homes.

“The reasons for this decline are complex, but the burden of planning obligations which has been placed on small sites and added to over time, is a significant contributory factor to this.

“This decision comes just at the point at which more and more sites are being subject to Community Infrastructure Levy (CIL) charges. Taken together, this will push up demands on small house builders to unprecedented levels. Up until only a few years ago, planning guidance contained a national indicative minimum site size threshold of 15 dwellings for affordable contributions.

“As such, the Government’s decision last year to move back to a ten unit threshold is hardly an unreasonable step. Rather, it recognised that the small firms which invariably build out small developments have proportionately higher costs and do not necessarily have the muscle or inclination to challenge local authority demands for affordable housing. The likely response is that they will avoid attempting to build on certain sites full stop and because of this there will be less homes of all description.

“In the FMB’s 2014 House Builders Survey, half of all respondents said that there were sites which they would otherwise be interested in but which they believed would be unviable due to likely Section 106, CIL or other obligations.

“Small firms which invariably build out small sites will often prefer to avoid bringing forward developments rather than risk conflict with local authorities, with which they will need to work with on an ongoing basis. In addition, large numbers of small commercial sites with low current use values which would be more productively turned over to housing will now not come forward without this policy in place.

“I would urge the Government to stand its ground on the principle of the ten unit threshold. It could seek to address reasonable concerns which some local authorities have – for instance, there could be some flexibility allowed to local authorities with a very high proportion of small sites.

“However, the Government should strongly defend the principle of the exemption – it is not appropriate to impose the same level of obligations applied to large multi-million pound developments to the smallest of developments being brought forward by the smallest firms,” Mr Berry added.

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