There’s been an interesting decision by the Mayor of London regarding public sector land sales and affordable housing. According to MayorWatch, for a site in Greenwich, the Mayor has instructed Transport for London to sell a site on condition that it is developed with 50% affordable housing. Since there is highly likely to be a trade-off between the value of the land to a housing developer and the proportion of required affordable housing, by some bizarre logic this is being framed a “cut-price” land sale by the FT. In reality, all the Mayor is doing is trading off cash receipts from land sales for more affordable housing. The really notable thing that the Mayor has done then is to effectively override the requirement to obtain “best value” i.e. to maximise cash receipts. The 35% affordable housing policy requirement in Greenwich is actually being exceeded.
The comments of the Conservative the London Assembly transport spokesperson illustrate the trade-offs that are occurring.
Selling TfL’s land with a massive 50% affordable housing requirement ensures it will be sold for well under market value. He should have checked if it was legal before promising this requirement, as all bodies have to achieve best value when selling public property. The Mayor should face facts and ditch this affordable housing requirement before he bankrupts TfL any further.
Basically, the Mayor is trading off revenue for transport in return for more affordable housing.
The privileging of “market value” here is typical. Market Value is not an objective, value-free fact. It depends on assumptions – not least about the level of affordable housing that would have to be delivered. Developers will make bids for the site on the expectation of the level of affordable housing that they think they will have to deliver. If this is 50%, the price achieved will reflect the Market Value based on a requirement of 50% affordable housing. If developers assume (a policy compliant) 35%, then the Market Value will be based on assumed provision of 35% affordable housing. If developers assume that they can get away with 13% affordable housing (the average in 2015 in Greater London), the Market Value obtained will be based upon…
So the Market Value of a site is determined by, among other things such as house prices, construction costs etc., policy on affordable housing and the ability of planning authorities to enforce their policy. The affordable housing requirement could be higher. Why 50%? Why not 60% or 70% in some sites? The whole site could be transferred to a Registered Provider to develop 100% affordable housing. From a public policy perspective, the trade-offs should be made explicit and transparent. But – calling it a “cut-price deal” is misleading nonsense.