Infrastructure levy could “severely undermine” affordable housing delivery, warns NHF boss

The government’s proposed infrastructure levy risks “severely” undermining the delivery of new affordable homes, the boss of the National Housing Federation has warned.

Kate Henderson, chief executive of the housing association trade body, writing in a Sunday Times piece yesterday, said that the scrapping of section 106 planning requirements in favour of a new developer charge could lead to money being diverted away from new affordable housing. The NHF and other affordable housing bodies are calling for stronger protections to be put in place to ensure this doesn’t happen.

Under the current system, developers agree a proportion of homes that must be affordable in a new scheme as a condition of planning, with councils setting policies for their preferred percentages for affordable housing.

However, under the infrastructure levy proposed by the government, this system will be replaced with a tax on development based on the final gross development value of a scheme.

The NHF believes there is a risk the money raised from the levy will be used by councils for orther purposes than new affordable housing.

Henderson dismissed a requirement in the Levelling Up and Regeneration Bill requiring councils to “have regard to” the level of affordable housing when setting levy rates as “vague” and wants stronger protections included.

She wrote: “As the bill stands, there is no duty on local authorities to spend the levy receipts on affordable housing; only a vague requirement to “regard … the desirability of” affordable housing.

“With councils under enormous financial pressures, this means that money from the levy risks being diverted away from affordable homes and towards other unspecified forms of council spending.”

Henderson said section 106 last year delivered 26,000 affordable homes, around 44% of the total built last year.

She wrote: “Without necessary protections to ensure affordable homes continue to be funded, at least at present levels, this policy could quickly and severely undermine the delivery of new affordable homes”

Henderson was one of 18 housing sector figures to write to Gove earlier this month warning of the levy’s potential impact on affordable housing delivery.

>> See also: New infrastructure tax to be levied on schemes’ gross development value

>> See also: Warning of ‘complete collapse’ in local plan making

The letter called on the government to amend the bill to strengthen the requirement for councils to set levy rates at a level that would not result in a loss of affordable or social housing.

The letter’s signatories included Gavin Smart, chief executive of the Chartered Institute of Housing and Geeta Nanda, chair of the G15, along with the Church of England.

Meanwhile, shadow housing minister Matthew Pennycook last week tweeted that Labour would not take forward the levy if elected.

An extremely wide range of organisations have concerns about the government’s new infrastructure levy and rightly so because it will secure less affordable housing and infrastructure than the current system.

A Labour government would not take it forward.https://t.co/yzZ6UeNNDe

— Matthew Pennycook MP (@mtpennycook) February 22, 2023

Junior DLUHC minister Baroness Scott last week told the House of Lords that councils will not be able to negotiate affordable housing downwards as they can under section 106, offering “significant protection of affordable housing delivery over the present system”.

She said the government “is committed to the delivery of on-site affordable housing through the levy, and to delivering at least as much, if not more, affordable housing than at present.”

She said: “We will also introduce through regulations a new ‘right to require’, which will allow local authorities to require developers to deliver a set proportion of their levy liability as onsite, in-kind affordable housing.”