The provision of affordable housing in the United Kingdom is an issue of major concern to the government and the citizenly. One of the mechanisms used in the delivery and increasing the number of the affordable homes is the provisions outlined in the section 106 of the Town and County Planning Act of 1990. Section 106, also known as planning obligations facilitates the availability of affordable housing by outlining the obligations that should be followed when building new homes. The section requires an agreement to be reached with the council, the developer of the homes and the parties involved in the site to be developed in away that guarantees that there will be proportional spread of affordable homes throughout the area (Orfield, 2006). The section outlines the agreements that guide the development and the utilization of land. Its aim is to control the use of land by providing for compensation to the community for the effects of the development for example, loss of space, and to ensure that there are affordable houses within the development. This section mitigates against the effects of the development by ensuring that there are affordable housing across the UK.
In addition, it provides for the agreements to include the provision of affordable housing by the developers. These agreements are not consistent since each agreement is customed for each case. The agreements are discussed with the planning officers of the council for the area with the developer and owner of the land before the plan for the site is submitted. The negotiations end up with a list of requirements called heads of terms that are then drafted legally by all the parties in the development (Williams, 2008). The councils can provide contributions to the developer to fund the construction of affordable housing as outlined by the guidelines in the section. The planning officer of the council proposes the amount that suits the development and the criteria of allocation as stated in the Supplementary Planning Guidance. The needs for affordable housing are recognized through the parish plans and the discussion with the local parishes helps council to make decisions about the amount of section s106 contributions that will be will be spent on affordable housing for the area (Robert, 2001). These contributions by the council are monitored and evaluated by the section 106 monitoring and implementation officers which ensure that the contributions are used within the time frame and in the right criteria for section 106 agreements.
The section 106 outlines the type and size of affordable housing in regard to area and the pattern of distribution. It also the timeframe of constructing affordable house, the policy also states the affordable rent rates and the also contains guidelines on the selling price of the houses. It also outlines the people who can rent or buy the property as well as the criterion for selling of the affordable units constructed. Section 106s provisions are an effective mechanism for providing affordable housing in the United Kingdom and studies have shown that once the development of the affordable houses gets underway, most of them are completed while still observing the provisions of the section 106 (Bryne, Diamond, 2007). In most cases, the section 106 provisions are implemented fully but these provisions face many challenges especially recently in the wake of global financial crisis. Most of the weaknesses of the section 106 chapter were exposed by the credit crunch and the global financial crisis. The credit crunch has caused two major consequences to the housing markets .one is the drop in shared market ownership and the other is government increasing its efforts on affordable Low Cost Housing Ownership (LCHO) to keep the house markets trading and maintaining a lifeline in the markets.
Since the credit crunch began, low cost housing has been a major agenda and policy for the United Kingdom government. Although there are successes in the implementation of low cost housing schemes through the provisions of the section, one of the major issue that has been highlighted by the credit crunch is the service operates on a small scale that makes it to have little impact on occupation of excluded houses. Another problem that has come to light in the wake of the credit crunch is that the affordable houses scheme is a popular method of guaranteeing home ownership but it is not given the right advertising it deserves. There are also complains that the system is designed in a way that suits home owners and not the purchasers (Mork, et al, 2006). The funding of the United Kingdom government into the affordable housing through section 106 is a major area for government subsidy. The credit crunch has caused drop in house prices but has not made the house ownership more affordable due to high lending rates still experienced. Therefore the need for government subsidized home ownership will not go down.
The UK government has continued to emphasise on the need for low cost housing to keep the market going on e.g. in 2008 the UK government launched a new shared equity fund called Home Buy Direct that was aimed at clearing the backlog of properties through an equity fund. The economic crisis and the fall in house prices have not made the prices affordable for houses to fall as was the expectation because the crisis has a complex nature of economic conditions (Burgess, Mork, Whitehead, 2007). The credit crunch has caused an increase in the liquidity in the housing market and there has also been a tightening of the lending rules as well as the fall in demand for housing due to lower income wages and unemployment. A fall in housing cost, the length of time that these properties take to sell has also increased and the construction activity of new house have fallen the rate of lending mortgages has also fallen and the government launched strategies to keep the market up like the homebuyer direct. Many developers in order to meet the changes have started to offer cheap affordable housing alternatives that operate as LCHO.
One of the major weaknesses exposed by the credit crunch and the financial crisis is the variability in the provision of low cost housing between regions and localities especially in the low-cost home ownership units. There is great variability in the scale affordable housing units within and between regions as well between localities. Example, in the north and west of England there have been the worst decline in sales of affordable houses while in the East of England the sale low cost housing ownership is high in certain areas such as the Cambridge (Department for Communities and Local Government, 2005). The credit crunch ahs also highlighted the variability of successes of the low cost housing ownership programs between regions.
Another problem highlighted by the credit crunch about the affordable housing market is problems in funding especially the case of mortgage financing. The credit crunch has made mortgage financiers become reluctant to financing low cost housing schemes because they are regarded as high risk ventures. Any developer of property who seems to pose a great risk is finding it hard to access mortgage finance which is delaying and halting the construction of new low cost housing alternatives. Mortgage financiers are finding it hard to lend to low cost housing ownership, programs because they are high risk low returns investment especially in the wake of the credit crisis (Mork, et al, 2006).
One of the major things that render the provision of the section 106 more marginal in guaranteeing affordable housing is speculative land acquisition. An example is the Thames Gateway growth area where developers have bought land and acquired the necessary agreements as pre the section 106 but instead of developing it they are just lying in wait in order to sell at high prices at the time of the next Olympics. Speculative land acquisitions are major issue that renders the effectiveness of section 106 to be marginal (Orfield, 2006). Site consolidation and parceling is another issue that has come up in the wake of the credit crunch as another hindrance to the applications of section 106 provisions to provide affordable housing sole ownership of land goes against section 106 provisions because they large scale developments are challenging and the owners are mainly concerned with sales revenue and therefore are reluctant to build and flood the market with affordable houses.
Although many affordable houses have been delivered through section 106, and research has proved that s106 has been working well in delivering affordable houses, there is great variance in the issued permission for plans and the number of completed homes. Another issue that has been raised in the wake of the credit crunch and financial crisis its the quality of the low cost houses provided by the through the provisions of the section some of the houses are deemed to be of poor quality. The major lesson that the credit crunch has highlighted about the affordable housing provision in the section 106 is that, the provision of more affordable housing through s106 is largely dependent on the resilience of the housing markets (Williams, 2004). When the markets are good and resilient, it is easier for the parties involved in the development of affordable house to negotiate for implementation of the section 106 protocols in full in turn delivering the desired numbers of affordable homes. When the markets are in recession like in the ongoing financial crisis and the credit crunch, implementation of the full section 106 presents many challenges that hinder the effectiveness of the provisions of the section in guaranteeing affordable housing.
In addressing the shortcomings of the section one of the major measures the government can embrace for implementing the section to the fullest is increased funding and diversification of the affordable houses scheme in order to increase the low rate of development of affordable houses to address the demand. The United Kingdom government should also come with mechanism as to address the discrepancies between the issue of permission plans and the completion of the affordable houses (Robert, 2001). In the long run, maintaining a well functioning money and housing markets is critical in securing more affordable hocuses via section 106 because the buoyancy of the market affects the implementation of the section.
The fall of house prices in the wake of the recession should not cause a relaxation on the commitment by the government to provide affordable housing .The focus should not switch to social housing because the affordable housing is tagged to the development of the housing market and it subsidizes on social housing. The credit crunch has impacted negatively to the implementation of the section 106 fully but the role played by this provision cannot be underestimated (Bryne, Diamond, 2007). It is up to the government to review and provide mechanisms for its full implementation even in the wake of challenging times like the credit crunch crisis which has impacted negatively on it. Since the houses in the UK have not become more affordable with the credit crunch due to high lending rates. When the credit crunch will be over, the cost of houses will go up and provision of housing through section 106 will continue to play a pivotal role in delivering affordable houses. Affordable housing sector will continue to play a role in the market dynamics although it is still a small sector in the housing markets in the United Kingdom.
In addition, it provides for the agreements to include the provision of affordable housing by the developers. These agreements are not consistent since each agreement is customed for each case. The agreements are discussed with the planning officers of the council for the area with the developer and owner of the land before the plan for the site is submitted. The negotiations end up with a list of requirements called heads of terms that are then drafted legally by all the parties in the development (Williams, 2008). The councils can provide contributions to the developer to fund the construction of affordable housing as outlined by the guidelines in the section. The planning officer of the council proposes the amount that suits the development and the criteria of allocation as stated in the Supplementary Planning Guidance. The needs for affordable housing are recognized through the parish plans and the discussion with the local parishes helps council to make decisions about the amount of section s106 contributions that will be will be spent on affordable housing for the area (Robert, 2001). These contributions by the council are monitored and evaluated by the section 106 monitoring and implementation officers which ensure that the contributions are used within the time frame and in the right criteria for section 106 agreements.
The section 106 outlines the type and size of affordable housing in regard to area and the pattern of distribution. It also the timeframe of constructing affordable house, the policy also states the affordable rent rates and the also contains guidelines on the selling price of the houses. It also outlines the people who can rent or buy the property as well as the criterion for selling of the affordable units constructed. Section 106s provisions are an effective mechanism for providing affordable housing in the United Kingdom and studies have shown that once the development of the affordable houses gets underway, most of them are completed while still observing the provisions of the section 106 (Bryne, Diamond, 2007). In most cases, the section 106 provisions are implemented fully but these provisions face many challenges especially recently in the wake of global financial crisis. Most of the weaknesses of the section 106 chapter were exposed by the credit crunch and the global financial crisis. The credit crunch has caused two major consequences to the housing markets .one is the drop in shared market ownership and the other is government increasing its efforts on affordable Low Cost Housing Ownership (LCHO) to keep the house markets trading and maintaining a lifeline in the markets.
Since the credit crunch began, low cost housing has been a major agenda and policy for the United Kingdom government. Although there are successes in the implementation of low cost housing schemes through the provisions of the section, one of the major issue that has been highlighted by the credit crunch is the service operates on a small scale that makes it to have little impact on occupation of excluded houses. Another problem that has come to light in the wake of the credit crunch is that the affordable houses scheme is a popular method of guaranteeing home ownership but it is not given the right advertising it deserves. There are also complains that the system is designed in a way that suits home owners and not the purchasers (Mork, et al, 2006). The funding of the United Kingdom government into the affordable housing through section 106 is a major area for government subsidy. The credit crunch has caused drop in house prices but has not made the house ownership more affordable due to high lending rates still experienced. Therefore the need for government subsidized home ownership will not go down.
The UK government has continued to emphasise on the need for low cost housing to keep the market going on e.g. in 2008 the UK government launched a new shared equity fund called Home Buy Direct that was aimed at clearing the backlog of properties through an equity fund. The economic crisis and the fall in house prices have not made the prices affordable for houses to fall as was the expectation because the crisis has a complex nature of economic conditions (Burgess, Mork, Whitehead, 2007). The credit crunch has caused an increase in the liquidity in the housing market and there has also been a tightening of the lending rules as well as the fall in demand for housing due to lower income wages and unemployment. A fall in housing cost, the length of time that these properties take to sell has also increased and the construction activity of new house have fallen the rate of lending mortgages has also fallen and the government launched strategies to keep the market up like the homebuyer direct. Many developers in order to meet the changes have started to offer cheap affordable housing alternatives that operate as LCHO.
One of the major weaknesses exposed by the credit crunch and the financial crisis is the variability in the provision of low cost housing between regions and localities especially in the low-cost home ownership units. There is great variability in the scale affordable housing units within and between regions as well between localities. Example, in the north and west of England there have been the worst decline in sales of affordable houses while in the East of England the sale low cost housing ownership is high in certain areas such as the Cambridge (Department for Communities and Local Government, 2005). The credit crunch ahs also highlighted the variability of successes of the low cost housing ownership programs between regions.
Another problem highlighted by the credit crunch about the affordable housing market is problems in funding especially the case of mortgage financing. The credit crunch has made mortgage financiers become reluctant to financing low cost housing schemes because they are regarded as high risk ventures. Any developer of property who seems to pose a great risk is finding it hard to access mortgage finance which is delaying and halting the construction of new low cost housing alternatives. Mortgage financiers are finding it hard to lend to low cost housing ownership, programs because they are high risk low returns investment especially in the wake of the credit crisis (Mork, et al, 2006).
One of the major things that render the provision of the section 106 more marginal in guaranteeing affordable housing is speculative land acquisition. An example is the Thames Gateway growth area where developers have bought land and acquired the necessary agreements as pre the section 106 but instead of developing it they are just lying in wait in order to sell at high prices at the time of the next Olympics. Speculative land acquisitions are major issue that renders the effectiveness of section 106 to be marginal (Orfield, 2006). Site consolidation and parceling is another issue that has come up in the wake of the credit crunch as another hindrance to the applications of section 106 provisions to provide affordable housing sole ownership of land goes against section 106 provisions because they large scale developments are challenging and the owners are mainly concerned with sales revenue and therefore are reluctant to build and flood the market with affordable houses.
Although many affordable houses have been delivered through section 106, and research has proved that s106 has been working well in delivering affordable houses, there is great variance in the issued permission for plans and the number of completed homes. Another issue that has been raised in the wake of the credit crunch and financial crisis its the quality of the low cost houses provided by the through the provisions of the section some of the houses are deemed to be of poor quality. The major lesson that the credit crunch has highlighted about the affordable housing provision in the section 106 is that, the provision of more affordable housing through s106 is largely dependent on the resilience of the housing markets (Williams, 2004). When the markets are good and resilient, it is easier for the parties involved in the development of affordable house to negotiate for implementation of the section 106 protocols in full in turn delivering the desired numbers of affordable homes. When the markets are in recession like in the ongoing financial crisis and the credit crunch, implementation of the full section 106 presents many challenges that hinder the effectiveness of the provisions of the section in guaranteeing affordable housing.
In addressing the shortcomings of the section one of the major measures the government can embrace for implementing the section to the fullest is increased funding and diversification of the affordable houses scheme in order to increase the low rate of development of affordable houses to address the demand. The United Kingdom government should also come with mechanism as to address the discrepancies between the issue of permission plans and the completion of the affordable houses (Robert, 2001). In the long run, maintaining a well functioning money and housing markets is critical in securing more affordable hocuses via section 106 because the buoyancy of the market affects the implementation of the section.
The fall of house prices in the wake of the recession should not cause a relaxation on the commitment by the government to provide affordable housing .The focus should not switch to social housing because the affordable housing is tagged to the development of the housing market and it subsidizes on social housing. The credit crunch has impacted negatively to the implementation of the section 106 fully but the role played by this provision cannot be underestimated (Bryne, Diamond, 2007). It is up to the government to review and provide mechanisms for its full implementation even in the wake of challenging times like the credit crunch crisis which has impacted negatively on it. Since the houses in the UK have not become more affordable with the credit crunch due to high lending rates. When the credit crunch will be over, the cost of houses will go up and provision of housing through section 106 will continue to play a pivotal role in delivering affordable houses. Affordable housing sector will continue to play a role in the market dynamics although it is still a small sector in the housing markets in the United Kingdom.
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