Solutions

Close the viability loophole

Close the viability loophole

Stop private developers from evading affordable housing requirements.

Behind the massive decline in affordable housing are policy choices that have led to a greater dependence on private developers for housebuilding. These developers take advantage of the viability system, whereby developers are able to negotiate down their affordable housing contributions, to hold communities to ransom and evade affordable housebuilding.

Viability tests are a legal loophole within planning policy that means developers can reduce their affordable housing commitments if their profits slip below competitive’ levels – which the major housebuilders define as around 20%. It allowed developers to overpay for land, safe in the knowledge they could recoup the costs later by going back on their commitments and squeezing out affordable housing.

Reforming the planning system by closing viability loopholes and strengthening the obligations on developers are ways that land price increases can be collectivised. Developers would have to factor these more fixed contributions to affordable housing and other community benefits into their bids on land, making it cheaper overall.