A government policy designed to help boost house building could wipe more than £1bn a year off Westminster city council’s affordable housing fund.
At the end of 2014, recently installed housing minister Brandon Lewis introduced a “vacant building credit” in a bid to help smaller developers build more homes across the UK.
However, the move has given large developers an unexpected windfall, enabling them to sidestep affordable housing payments.
At a planning meeting earlier this month, the Abu Dhabi Investment Council and Finchatton saw a potential payment of £17.6m shrink to just £8.6m on the conversion of the former US Navy HQ (pictured) at 20 Grosvenor Square, W1, to 36 luxury flats as a result of the change.
The new credit allows for buildings that are vacant when planning is secured for residential conversion to only pay an affordable contribution on any new space. Prior to its introduction, the provision was levied on the full size of the building.
John Walker, director of planning at Westminster council, said: “This is going to be a dramatic amount of money for any council to lose in its affordable housing pool, but if we look at Westminster and the amount of high-value projects going through planning, we could be losing affordable housing payments upwards of £1bn every year.
“The policy is a gift to large developers, which will see a significant positive impact on their profits, but a big blow for councils struggling to achieve affordable housing targets.”
Robert Davis, deputy leader of Westminster city council, added: “This has serious implications, as it threatens our capability to deliver much-needed housing in central London. We therefore intend to open immediate discussions with the Department for Communities and Local Government to emphasis to them the consequences of these changes – as we believe that many London boroughs as well as other cities across the country, will face a similar impact as that which will be experienced in Westminster.”
London boroughs Camden, Islington, Southwark and Kensington & Chelsea will also be hit by the new credit, said experts.
London mayor Boris Johnson, who set a target of building 55,000 new affordable homes in the capital between 2011 and 2015, declined to comment.
Lewis denied that the introduction of the credit had backfired.
He said: “It’s crazy to tax empty buildings being brought into productive use. Such tariffs hinder regeneration and lead to the blight of empty, boarded properties.”
Simon Grundy, regional director in Indigo Planning’s Leeds office, said the credit would help areas outside London where house price inflation has been minimal.
“This easing of affordable housing obligations will encourage developers to more readily commit to residential conversion projects,” he said. “At the same time, it will help councils to meet their new home delivery targets.”
Daniel Farrand, joint head of planning and environment at law firm Mishcon de Reya, warned that some councils may contest the guidelines.
“Councils are taking advice on the credit,” he said. “Given the potential sums involved for large developments, it is only a matter of time before it is worth someone’s while to test that approach on appeal or in the courts.”
