Affordable-Homes Ruling Could Affect Small Developers
Rules that stipulate developers must have a certain percentage of affordable homes in residential developments were brought in to try to prevent buyers from being priced out of certain areas. Historically, smaller developers have been made exempt from the rules in an attempt to get the country building again. However, new legal challenges could have an impact on this and mean that small developments are no longer financially viable.
Most developers are required to make a certain contribution to the affordable-housing stock on each of their schemes. The government introduced an exemption to this ruling for the smallest schemes as a way of encouraging local and niche developers to start work on projects. This was especially important given the country's chronic shortage of houses. It allowed compact spaces in rural and urban areas to be transformed into residential developments.
This exemption could now be under pressure as two local authorities in England, West Berkshire and Reading, have brought successful challenges against the exemption. The councils have argued that it could impact negatively on the number of affordable houses that are built.
Impact on Small Developments
At the moment these are just isolated cases. However, if the challenges start to spread to other parts of the country, it could reduce the number of smaller developments that begin. Ultimately, this could have a negative impact on the overall number of new properties in the UK, which would further affect the country's housing shortfall.
Those developments with fewer than ten properties are likely to be the hardest hit if these challenges increase, as developers may find they are no longer financially viable. Small schemes are often run on extremely tight budgets, and any additional costs could see developers pull out of projects. These types of developments are often focused on specific features that local buyers are looking for, such as small starter homes or more palatial properties with a Grand Design balcony. The developers understand the local market and target their properties appropriately.
Rather than increasing the number of affordable properties that are built in the UK, these challenges could reduce the number of properties that people have to choose from. This could also impact on the future value of land, and this will cause even more housing problems at a time when many people are looking to buy and get on the property ladder.