I was invited to give a short speech at the Society for Construction and Architecture in Local Government (SCALA) National Conference on ‘Affordable Housing in the National Parks’ at the Low Wood Hotel, Ambleside in October 2010. SCALA is now called SPACES. The speech was then published in the Winter edition 2010/11 of  ACES ‘The Terrier’ magazine.


Local people in South Lakeland don’t have much chance of buying a house in the district unless they’re wealthy.  Much of the local employment is in tourism, farming or forestry… so the wages are low.  The income-to-house price ratio is about 10 to 1 or higher in some parishes.  Chapel Stile has been a second-home village for years. It’s rumoured that Coniston is now 50% second homes and holiday lets.  Pubs, schools and village shops are closing because of a lack of local residents to use them.

South Lakeland District Council is my main client and I’ve been involved with its affordable housing schemes for over 20 years. South Lakeland has parts of the Lake District and the Yorkshire Dales National Parks within its boundaries.  So it’s not surprising that the main policy for the Council, both inside and outside the National Parks, is the provision of affordable housing for local people.

The Council goes about providing affordable housing in two ways:

The first method is by using Section 106 Agreements through its planning policies and the second method is by using its own land resources.  Someone else is going to talk about planning so I’ll concentrate on delivery through land resources.

Essentially I’m part of a small team.  The Housing Strategy Officer for the Council acts as client. He can draw on legal advice from within the Council and planning advice either from the Council or from the National Parks. My role in the team is to put the land deals together on behalf of SLDC by negotiating the Heads of Terms for the land disposals.

Basically SLDC sells its land cheaply to help make local developments viable and insists on giving preference to local people.   That sounds simple enough but it’s not.  It’s one thing to sell the land for that purpose but it’s entirely another to make sure that it is put to that use and that it stays like that on a permanent basis.  It’s no good selling land cheaply for development and then watching someone else making a profit from it and the houses then being lost to local people as the affordability disappears.  The Council wants permanency, or as near as they can get to it.

The planners try their best with S106 Agreements but they cannot guarantee that their policies will deliver 100% affordable houses for local people on the few sites that come forward. The Council can’t control what the National Parks decide. The Council’s fear is that, despite the National Parks best intentions, appeals against the S106 conditions might be successful or the Government might overturn affordable housing policy for some political whim.

When SLDC makes a site available for residential development it has to follow the same planning process as any other privately-owned site.  However, SLDC does not put its sites on the open market for sale.  It always looks for a partner – a Registered Social Landlord (a Housing Association as we used to call them) to buy the site and carry out the development.  This has one big advantage – the partner has a commonality of purpose with the Council – to provide affordable housing for local people. The RSL does all the feasibility and design and carries out the development using its own professionals – often using NPS Architects from the other side of the office.

Overwhelmingly SLDC looks to provide rented housing as the private sector tends to avoid this provision, although the Council does provide houses for sale at discounts when it’s deemed appropriate.   It also seeks to tie down the RSL to a tried and tested scheme that we have developed and refined over the last 20 years through the land sale.

The main ingredients of the scheme are as follows:

Affordability is achieved by introducing restrictive covenants to drive down the value of the land.  Basically the European Community doesn’t approve of the Council just giving its land away cheaply. So, if the Government is contributing Housing Authority Grant to subsidise the same scheme, and considers the Local Authority’s subsidy through cheap land to be ‘gratuitous benefit’, it will knock that amount off the Housing Association Grant – so it’s self-defeating.  However, if the land is sold subject to covenants that drive down the market value then the reduction in value is not a subsidy, it’s just land that is worth less than if there were no covenants imposed.

I believe that SLDC was the first Council to have its scheme approved under Sections 24-26 of the Local Government Act 1988.  In those days we had to apply for Secretary of State’s consent for each development.  Nowadays young Valuers in the office just take it for granted that they can use the well-being powers of the General Disposal Consent (England) 2003 … (economic, social or environmental well-being of the area).  They’ll never appreciate just how long I held my breath waiting for that first consent to come through.

The covenants that we impose to drive down the value are:

  1. The development on the land has to be used for locals only. We define who qualifies.
  2. The houses built upon it have to be the sole or main residence of the occupier – so no holiday homes.
  3. SLDC must have nomination rights to say who lives in the houses – 100% of all initial lettings and 75% of all re-lettings – the maximum that the Government will permit.
  4. The houses must be permanently rented
  5. The rents must be affordable.
  6. And most importantly – There must be a clawback to protect the reduction from unrestricted market value if anyone gets around these clauses – so that they cannot profit from it. We fix the clawback as a percentage against the developed value of the individual units on the ground so that it rises and falls with market value over time. That safeguards the value of the Council’s contribution and makes it less attractive for anyone seeking to make a profit.

The effect of those covenants generally is to devalue the land so that we end up with a clawback of around 20% of the unrestricted developed market value of each unit.  We often pass on the land for a nominal figure if the site has problems.  And believe me, we ran out of good sites years ago.

Now everything is contaminated, floods, has steep gradients, lacks access or services or both.  Abnormal expense is incurred in resolving wildlife issues with bats, newts, crayfish, badgers.  The good news is that the foxes have moved to the cities. The bad news is that, based on a number of recent sightings, they are being replaced by panthers and pumas.  I’m sure that they’ll be protected soon and we will have to provide habitats for them in the back garden of every new unit.

Every site is next door to a hostile public who doesn’t want to see it built upon. They always claim to know that it’s been a Town or Village Green since the Doomsday Book – even if those same residents just moved up from London last week.

We impose those covenants even if there is a S106 Agreement requiring similar conditions because to have them in the Transfer of Title provides a ‘belt and braces’ approach – another obstacle to prevent anyone trying to get around them.

You’d think that, having helped to make the scheme affordable through a cheap site and reserved it for locals, that the RSL would welcome us with open arms.  After all, we both have the same aims in mind. .  Unfortunately it doesn’t work like that.  Government grants are getting smaller and the RSL either has to use its own reserves or go to the banks, or both, to fund the schemes.  That means having to satisfy the RSL Board and the Bank and the Homes and Communities Agency that their investment is secure.

The RSL will claim that it cannot agree to the locals-only restriction.  They say… What if there aren’t enough locals who want to live in the houses?  As if that will ever happen?  So we have to have a cascade effect – locals from the surrounding parishes get first preference, then the entire district, then Cumbria, then the world, then the universe.  But we start back again at the beginning with the local parishes for any re-lettings.

The RSL will claim that it cannot agree to permanently-rented houses.  They say … What if no-one wants to rent and everyone wants to buy and we lose money and the bailiffs come knocking?  As if that will ever happen?

So we have to have exceptions to protect the RSL’s and the Bank’s funds.  The RSL cannot decide just to stop letting but it has to be allowed to sell where required by:

Act of Parliament

Order of the Court

By the Mortgagee in possession

Or by the Housing Corporation

… But not just because the Housing Association feels like it.

The RSL will claim that they cannot agree to a clawback.  They say …Values can go down; what if the Banks won’t lend to us?  Well that might happen.

So we have to postpone the clawback in favour of the RSL. In other words, if things go so badly wrong that the RSL is forced to sell to satisfy its creditors then the Council can only recover its clawback share after the other creditors have been paid out.

We also agree that the clawback will only apply after discounts are allowed in the event of say a future Right-to-Buy type scheme being introduced by the Government.  We also agree that it won’t apply to transfers of housing stock between RSLs providing the covenants remain intact.

From a Valuer’s perspective, you might imagine that it tends to go against the grain to give land away.  It does and it hurts … but to avoid lengthy and pointless negotiation the Council and the RSL agree to accept a neutral Valuer’s opinion of price subject to the covenants.  The same goes for abnormals that affect the valuation – we agree to accept a neutral QS estimation of costs.

As you can probably imagine, the legal documentation to record those terms and conditions can be a bit of a nightmare for the lawyers … but they don’t deserve any sympathy because they’re well paid.

However, despite all the obstacles, this policy has been very successful for over twenty years.  Although I don’t keep records, we’ve produced a lot of houses over that time and not one of them has been lost from that original purpose.

So – that’s just a sample of the hoops that we have to jump through to provide local and affordable and permanent schemes in South Lakeland.

I’ll finish with a question – with the cuts in grants announced this week, will we still be providing local and affordable rented houses under the new Government?

Thank you for staying awake.