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Policy H7 Affordable housing tenure

H7

  1. The Mayor is committed to delivering genuinely affordable housing. The following split of affordable products should be applied to development:
    1. a minimum of 30 per cent low cost rented homes, allocated according to need and for Londoners on low incomes (Social Rent/ London Affordable Rent)
    2. a minimum of 30 per cent intermediate products which meet the definition of affordable housing, including London Living Rent and London Shared ownership
    3. 40 per cent to be determined by the relevant borough based on identified need, provided they are consistent with the definition of affordable housing.

These minimums will be reviewed in 2021, and if necessary, updated through Supplementary Planning Guidance.

  1. Only schemes delivering the threshold level of affordable housing with a tenure split that meets the requirements set out in part A can follow the Fast Track Route for viability.

As Table 4.3 demonstrates, the SHMA shows London’s significant need for low cost rental housing, however, the current national funding programme is focused on intermediate products which limits the Mayor’s ability to require higher levels of low-cost rented accommodation. The tenure splits set out in Policy H7 Affordable housing tenure provide sufficient flexibility to be tailored to meet local needs as well as ensuring that new development delivers a minimum level of low-cost rented accommodation and intermediate accommodation, contributing to the delivery of mixed and inclusive communities. These minimums will be reviewed in 2021 and, if necessary, updated through Supplementary Planning Guidance, taking account of future affordable housing funding agreements.

There is a presumption that the 40 per cent to be decided by the borough will focus on Social Rent/ London Affordable Rent given the level of need for this type of tenure across London. However, it is recognised that for some boroughs a broader mix of affordable housing tenures will be more appropriate either because of viability constraints or because they would deliver a more mixed and inclusive community. The appropriate tenure split should be determined through the Development Plan process or through supplementary guidance.

Table 4.3 - 2017 SHMA findings

Tenure1bed2bed3bed4+bedTotal% of total
Market10,6822,0434,1016,21023,03735%
Intermediate4,3343,4342,4091,69311,86918%
Low-cost rent21,3185,3112,4621,88130,97247%
Total36,33510,7888,9719,78365,878100%
% of total55%16%14%15%100%

Within the broad definition of affordable housing[48], the Mayor’s preferred affordable housing tenures are:

  • London Affordable Rent
  • London Living Rent
  • London Shared Ownership.

These are described in more detail below.

[48] See the Glossary for broad definition of affordable housing which is consistent with the 2012 NPPF.

London Affordable Rent is rent for households on low income with the rent level based on social rent levels. The NPPF defines affordable rent as up to 80 per cent of market rent, however, to ensure rents in London are genuinely affordable, the Mayor expects rents charged for homes let for London Affordable Rent to be set at benchmarks substantially below this level, based on traditional social rents. More detail is contained within the Mayor’s Homes for Londoners Affordable Homes Programme 2016-21 funding guidance. These homes will be allocated in accordance with need (based on the borough’s allocations policy).

London Living Rent (LLR) offers Londoners on average incomes a lower rent, enabling them to save for a deposit. The Mayor is introducing LLR as an intermediate affordable housing product with low rents that vary by ward across London. Where funded by the Greater London Authority, LLR will be a Rent to Buy product, with sub-market rents on time-limited tenancies, which will help households on average income levels to save for a deposit. As London Living Rent can be a step to homeownership, it can be considered as an affordable homeownership product[49].

[49] Further details on LLR can be found in the London Housing Strategy, draft for public consultation.

London Shared Ownership is an intermediate ownership product which allows London households who would struggle to buy on the open market, to purchase a share in a new home and pay a low rent on the remaining, unsold, share.

Other affordable housing products may be acceptable if, as well as meeting the broad definition of affordable housing, they also meet the draft London Housing Strategy[50] definition of genuinely affordable housing and are considered by the borough to be genuinely affordable.

[50] Mayor of London, September 2017, London Housing Strategy, draft for public consultation

Currently all intermediate rented products such as London Living Rent and Discounted Market Rent should be affordable to households on incomes of up to £60,000. Intermediate ownership products such as London Shared Ownership and Discounted Market Sale (where they meet the definition of affordable housing), should be affordable to households on incomes of up to £90,000. Further information on the income caps and how they are applied can be found in the Annual Monitoring Report. The caps will be reviewed and updated where necessary in the Annual Monitoring Report.

For dwellings to be considered affordable, annual housing costs, including mortgage (assuming reasonable interest rates and deposit requirements), rent and service charge, should be no greater than 40 per cent of net household income, based on the household income limits set out above. Boroughs should seek to ensure that intermediate provision provides for households with a range of incomes below the upper limit.

In addition to the income caps, boroughs may set other eligibility criteria for the intermediate units, reflecting local housing need. However, any local criteria including income caps below the maximum amounts set out above, should automatically cascade out to the London-wide eligibility criteria within three months to ensure that units are not left vacant. Re-sales and re-lets should be available to those meeting the London-wide income caps and not be restricted by local eligibility criteria. Homes should be made available through the new Homes for Londoners online portal.

To follow the Fast Track Route, the threshold level of affordable housing must adhere to the tenure split set out in Policy H7 Affordable housing tenure. Where a scheme is delivering more than the threshold, the tenure of the additional affordable housing (above the threshold) is flexible and should be agreed between the borough, Registered Provider and applicant.

If, when assessing a scheme under the Viability Tested Route, the evidence demonstrates that the threshold cannot be met, the affordable housing tenure split in Policy H7 Affordable housing tenure should be considered as the starting point for negotiations. It will, however, be for the borough, and the Mayor where relevant, to decide if there should be a greater number of affordable homes, or fewer homes at a deeper discount. Therefore Section 106 agreements should stipulate the tenure mix for a scheme and this should be consistent with the assumptions in the viability assessment.

To incentivise schemes that are largely or entirely affordable housing, schemes that propose 75 per cent or more affordable housing, consistent with the glossary definition of affordable housing, may be considered under the Fast Track Route whatever the affordable housing tenure mix as long as the tenure and type of home are supported by the borough and, where relevant, the Mayor, as being genuinely affordable. This should be determined on a case-by-case basis having regard to the housing need met by the scheme and the level of public subsidy involved.