A Developer's Nightmayor - Bold Words from Sadiq Khan?
Will Khan deliver more housing?
Khan has promised 50,000 additional homes per year and 300,000 homes built by 2020.
The new Mayor has not yet set out in detail how he intends to achieve this. Over the last five years the average number of homes built per year has been circa 22,500 so he has certainly aimed high.
It is not simple to instantly increase house building. Khan can’t force a developer to build more homes and the scheme must be viable before they do so. He will need to make more sites available, increase the rate of building and make the planning process more efficient.
Can Khan deliver more sites?
He has indicated that more brownfield sites will be made available for developers.
In theory this sounds great. However, Khan will not be able to achieve his housing target on brownfield sites alone. Greenbelt sites will still be required although he ruled this out in his election manifesto.
Developers will need to carefully consider the environmental clauses within their standard contracts to ensure that they are adequate for purchasing a brownfield site.
What is Khan’s policy on Affordable Housing?
The Mayor wants half of all new developments to be affordable housing.
This is an unpopular policy especially with developers who are concerned that it will make schemes unviable.
The drafting in contracts and s.106 agreements will be key to ensure that the definition of affordable housing is as wide as possible. We have already seen ‘starter homes’ creep into the definition and this is likely to become common practice (starter homes will be required by statute). Local authorities will have to be more amenable to using a wider definition. The policy is unlikely to be achievable in the near future.
Will Khan lobby to change the Mayor’s planning powers?
Khan will set guidelines for which developments he will ‘call in’ and review the London Plan in respect of issues include basements and design.
Early signs suggest the Mayor is prepared to use his extensive powers to call in applications for his own determination to deliver his election promises - increased transparency about the circumstances in which he will do so is to be welcomed. Developers and landowners alike will need to track his proposed alterations to the London Plan as they have the potential to impact upon viability.
Will Khan put Londoners first?
Khan will use planning conditions to ensure homes are marketed to Londoners before overseas investors.
Such measures may restrict competition by prohibiting overseas investors from investing in the scheme until the right time in the cycle – i.e. after Londoners have had the opportunity to invest. Other schemes may have reached that part of the cycle and it is possible that overseas investors may be lost to competing developments. Conversely, this works both ways.
Some developers rely heavily on overseas investors to make a scheme viable and the Mayor has to be careful not to deter a substantial source of investment. If affordable housing quotas are strictly maintained at 50% of any development then prices of private homes may need to rise to make the development viable for a developer. However, this is highly unlikely as it could only be overseas investors who would be likely to pay these higher prices.
Sadiq Khan or Sadiq Khan’t?
Only time will tell whether he can or can’t deliver. There are certainly some challenges for developers ahead but this may be election talk. We will have to see in practice whether Sadiq Khan stands firm on his promises, over his four year term, which may then be a worry for developers.
This article was written by Alexander Gold.
For more information, please contact Alexander on +44 (0)207 427 6436 or via Alexander.Gold@crsblaw.com.