4.4 Inclusionary housing in South Africa 72
4.7.4 England 80
The 1990 Town and Country Planning Act granted powers to Local Planning Authorities (LPAs) to reject permission for development if the developer’s contribution to inclusionary housing is not included. Section 106 of the Act provides that a contemplated development must include a proportion of affordable housing using inclusionary zoning; the aim is to promote mixed or balanced communities. According to Crook and Monk (2011), this contributed to achieving inclusionary housing as all developers had to set aside 25% of the total number of units in their housing projects as affordable housing. These houses become part of the existing stock of inclusionary housing and allocated to the targeted income group on a rental or ownership basis at an affordable price irrespective of housing prices within the defined housing market. Since 1991, the government of England has used section 106 of the 1990 Planning Act to secure a proportion of affordable housing on housing sites over a given threshold size in areas where there is a visible lack of affordable housing. The LPAs have utilized the powers vested in them under this section to promote and sustain inclusionary housing using negotiations and a participatory approach. Targets range between 15 and 20%
of new supply and up to 50% in high growth areas such as in the South East and London, since the law is not specific on maximum supply targets. Instead it states that LPAs can demand according to need, but not exceed 50% of the housing supply.
Apart from the obligation to provide inclusionary housing, de-facto extraction of development value is another option pursued in England as a source of private funding for affordable housing. The developer is expected to make a contribution by either building affordable housing at lower cost (but of the same design and quality as those produced at the
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prevailing market rate) or letting the housing association purchase them using the social housing grant at existing use value. Alternatively, the developer may provide the land at a discounted price and the housing association may construct the affordable housing using the grant; in lieu of this, the developer may have to make an agreed financial contribution known as a committed sum to the LPA.
In order to offset the cost of these obligations, LPAs have also often allowed higher densities on a specific development site. According to Monk (2010), this allows the developer to receive a “quid pro quo” by being able to develop market rate housing as well as affordable housing units at higher densities than would otherwise have been permitted.
The process of arriving at the value of the developer’s contribution to inclusionary housing is another striking characteristic of the British system. Both the LPA and the developer use the residual valuation to calculate this value. This involves estimating the selling price of the housing, and calculating how many houses can be built on the site which the developers want to buy; the amount arrived at is deducted from the sale price as the contribution costs of providing inclusionary housing. The difference is what the developer is prepared to pay for the land after discounting the share of their affordable housing contribution (Crook et al.
2010). This was made possible by the 1947 Planning Act which nationalized land ownership.
This strategy has contributed to the provision of inclusionary housing in England (Crook et al. 2010; Burgess & Monk 2012; and Morrison & Burgess 2013). For example, 40,000 inclusionary housing units were produced in 2007 and another 48,028 in 2008.
Burgess and Monk (2012) further detail how the strategy has encouraged sustainable use of land in England, through the effective use of brown field sites, i.e., the already constructed inner city. According to these authors, it has also promoted and sustained social justice by enabling the poor to live side by side with the rich even in the most expensive areas of the country. Inclusionary housing development processes include demolition and redevelopment;
the design and provision of mixed use development of brown fields; and negotiation, purchase and high density development which according to Morrison & Burgess (2013) have spurred smart or compact city development.
Good examples of inclusionary housing sites in England include the Cambridge Urban Extension Greenfield Site, Newbury, West Berkshire Brownfield Mixed Site and developments in several other parts of the country. Other countries that have embraced the
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inclusionary housing strategy include Spain, Canada, Turkey, and Ireland, while examples of cities that have followed this route include Rome, the Rotterdam region in The Netherlands, Munich and Frankfurt. In conclusion, planning has been the major tool adopted to achieve inclusionary housing in England (Morrison & Burgess 2013).
Specific lessons from England’s inclusionary housing strategy include among others a comprehensive implementation strategy detailing the goals of the scheme, application requirements for who would be beneficiaries and the providers of inclusionary housing, the definition of affordability requirements and eligibility and incentives for providers. Security of tenure is another important lesson from this experience.
4.7.5 China
The primary objective was to launch an ambitious inclusionary housing project. This was to be accomplished by the state building 14 million rental housing units, while the Ministry of Housing and Urban-Rural Development would build 36 million rental units. However, the achievement of this noble objective was threatened by limited financial resources.
Shortly after the conceptualisation of the plan and in response to the housing price crisis in 2010, the state council introduced China’s version of inclusionary housing that is today known as “Peijian”. According to Gurran & Whitehead (2011), in order to address the nation’s financial constraints in meeting its objective of providing affordable housing and at the same time increase the supply of affordable housing without direct investment from the government, the regulations require developers to provide a certain percentage of affordable housing in all new developments. For example, the Jilin municipal regulation requires developers to include 5% of affordable rental housing in new developments. Other cities like Beijing and Hanjzhou have also adopted the inclusionary housing concept but have yet to codify the requirements through local ordinances.
Unlike the information available in for other parts of the globe, it is not clear what incentives the state offers to developers. The developer directly bears much of the cost of inclusion because in most cases local government does not discount the price of land. It neither offers a density bonus nor provides financial support. Leaman & Groves et al. (2013) note, that, this is why enforcement is somewhat limited; for example, occasional withdrawals of inclusionary rules were noted in Beijing. This is particularly true in the southern area, where land dedicated to an inclusionary housing project has been sold for state gain and in cities like
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Hangzhou where in 2012, the municipality withdrew the 10% inclusionary requirement to sell some pieces of land in order to address its decline in revenue.
The inclusionary housing strategy in China cannot be said to have been effective. One major reason is the novelty of the strategy in this part of the world because of the country’s long held land rules and beliefs of spiritual attachment to the land. Another reason could be the paucity of land resulting from the problem of overpopulation.