Property developers are using a legal loophole to get out of building thousands of affordable homes, particularly in Manchester.
The housing charity, Shelter created a report to investigate property development and found that ‘viability assets’ reduced the number of homes built in over 10 local authorities in England.
This loophole has meant that over 2,000 affordable homes were not built last year – from the number that most councils required.
So, what are viability assets?
If developers can show that building more risks them reducing their profits below 20% then they can stop building on their site.
Once they reduce their spending on building affordable homes, they face no penalty for paying more on the land – because it means they recover that loss in building less, and making their profits over 20%.
The research done by the charity used the following cities: Birmingham, Brent, Bristol, Cambridge, Leeds, Leicester, Manchester, Newcastle, Oxford, Kensington and Chelsea, and Southwark.
The figures across the country are estimated to be much higher, and the research is now being shown to the government in order to patch up the loophole and ensure that the right amount of housing is being built to meet demand.
Shelter chief executive, Polly Neate, said: “What this research reveals is the scale at which developers are able to use legal loopholes to protect their profits and dramatically reduce the numbers of affordable homes available for people.
“Through freedom of information powers, Shelter has been able to reveal the extent to which affordable homes are required in local plans, only to be dropped by developers.
“The government needs to fix our broken housing system – and it must start by closing this loophole to get the country building homes that are genuinely affordable for people on middle and low incomes to rent or buy.”
Only 32,630 affordable homes were built between 2015 and 2016, and that is the lowest number on the record for 24 years. To highlight the difference, 61, 090 homes were built between 2010 and 2011.
This issue has now become one of political nature as labour has accused the Tories of allowing this loophole to be exploited for too long and the government ministers now look foolish for their promises to make property more affordable.