Cardiff needs more homes, but Council is not doing all it could to increase supply

High rise living. Picture by Percy

Cardiff has dropped its requirement on developers for affordable homes in the city centre

By Lyn Eynon

Cardiff News Room has published another long Housing Q&A defending Council’s housing policy. Much of the Q&A in taken up defending Council’s record on affordable homes, pointing to its council home building programme, support for Housing Associations, and affordable homes on LDP strategic sites. It also claims to have negotiated more than £100m in S106 contributions since 2016/17.

Excluded from living centrally

None of that answers the charge that Council allows developers to exclude affordable units, and pay no or negligible S106, on large developments at so-called ‘windfall’ sites around the Centre and Bay. A 30-storey tower on Guildford Crescent was approved this month with minimal S106. The effect of this is to exclude anyone who cannot afford market rents from living centrally.

The Local Development Plan says Council will seek 20% affordable units in Brownfield developments. But it has abandoned this, with the Q&A arguing, “Private developers can only provide what they can afford, and the cost of land and the cost of materials have risen significantly in recent years.”

This ignores the demand side. From the adoption of the LDP in January 2016 until March this year, house prices rose by 23.3% in Cardiff while UK construction costs rose by just 14%. This gap should have made it more, not less, viable to include affordable housing within new developments. Post- lockdown rises in construction costs will ease as global supply chains adjust, while house prices are also rising rapidly. Developers are not holding back on residential projects with planning permission.

From the adoption of the LDP in January 2016 until March this year, house prices rose by 23.3% in Cardiff while UK construction costs rose by just 14%. This gap should have made it more, not less, viable to include affordable housing within new developments.

As for the ‘cost of land’, the Q&A gets its economics backwards. Land is not produced, so does not have a cost. Its market price is determined by the rents or prices that properties on it command, which is why developers are willing to pay more for land in central Cardiff than on the edge of town. Understanding this is essential to answer the question, ‘can developers afford S106 contributions?’

For a project to proceed, its Gross Development Value (the sale price of built properties) must cover construction costs, developer profit, the price of land, and S106 contributions. If developers expect Council to waive S106 they will be ready to pay more for land, competition for which will drive up its price. If Council insists on S106, or applies a non-negotiable Community Infrastructure Levy, then the price of land will fall. Waiving S106 benefits landowners at a cost to the community.

No doubt the big house builders, who dominate the market, would at first test Council’s resolve by dropping plans to build housing the city needs. But if Council keeps its nerve, the price of land will come down. Landowners will in the end prefer a reduced price to sitting on land that brings no return. Readiness to use compulsory purchase powers could accelerate this.

UK Government guidance on viability is explicit that “Under no circumstances will the price paid for land be a relevant justification for failing to accord with relevant policies in the plan.” In justifying dropping its own LDP policy on affordable units by referring to the ‘cost of land’, Cardiff Council is deliberately ignoring this guidance, harming those who need a home they can afford.

More needs to be done

Cardiff needs more homes, but Council is not doing all it could to increase supply. Local authorities are able to charge a premium of up to 100% of the standard rate of council tax on long-term empty or second homes. But Cardiff charges a premium of just 50% on empty homes and no premium on second homes. Why? Using this power to its full extent would bring more of these onto the market. The money raised could also ease the burden on residents of council tax rises.

Cardiff Council is helping to tackle the city’s housing crisis through its council home programme, and that should be welcomed. But it could do much more to tackle the obstructive power and privilege of big developers and landowners. Residents who need affordable homes should come first.