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12 September 2022
More stringent affordable and social housing requirements are set to take effect in Northern Ireland next year but housebuilders that are ready will be able to exploit significant demand.
As Northern Ireland's housing market matures, new Local Development Plans are being rolled out across its 11 council areas – leading to a substantial increase in the use of Section 76 agreements under the Planning Act (Northern Ireland) 2011. The policy is essentially Northern Ireland's version of Section 106 agreements in England but is far less frequently used.
However, following the preparation of new Local Development Plans across all 11 Boroughs, housebuilders and developers in Northern Ireland will see a substantial increase in its use when it comes into full force next year.
Under the emerging Plan Strategy policies prepared by each council, housebuilders and developers will have to provide affordable and social housing once their proposals meet or exceed a certain threshold.
While the move is arguably positive for lower-income families, key workers and first-time buyers, it poses problems for housebuilders and developers, which will need to consider section 76 before moving ahead with new developments.
The new policy could have a significant impact on the housing market – potentially even increasing existing schemes and costs by up to 20%. Housebuilders and developers will therefore ask whether it's the homebuyers or they themselves that will have to foot the bill.
What the Affordable Housing Targets Mean
When the updated policy comes into full force next year, each council in Northern Ireland will set their own requirements and thresholds. However, it is predicted that they will operate in a similar way to Belfast City Council's Policy HOU5: Affordable Housing.
This states that any development with more than five units will need a planning agreement where 20% are social or affordable housing. The aim is to offer more opportunities to families, key workers, first-time buyers and those on lower incomes.
HOU5 guidelines also state that affordable housing must be provided as part of mixed-tenure development, integrated with general needs and not readily distinguished in terms of external design, materials or finishes.
Developers have several options for providing affordable housing, which will be agreed with the local authority. This can include shared ownership, renting to own, help-to-buy loans, affordable rent, and discount market sales. Importantly, developers must secure affordable and social housing by way of section 76 in advance if they are to obtain planning permission.
Where developers can demonstrate that it's not suitable or viable to meet the policy in full, the council will consider appropriate alternatives on a case-by-case basis.
Larger housebuilders may already be familiar with meeting similar guidelines and financial commitments to the council. The pressure will therefore be likely to fall on smaller and mid-size developers, which will feel the squeeze because they haven't previously had to consider factors such as affordable housing costs.
How Current Schemes are Being Affected
Although Section 76 will not come into full effect until next year, some developers are experiencing pressure from local authorities to meet their requirements – especially in Belfast, where the council is already exercising it as a draft policy.
In fact, any housebuilder or developer of any residential scheme needs to be aware of the changes, so that it can be prepared for what these may entail. Those in the process of planning or submitting applications are likely to be assessed against the new affordable housing policy and have to meet Section 76 requirements.
Having submitted their planning applications far in advance, some housebuilders are now having to reconsider these to comply with the new requirements. As a result, they can incur significant new costs – up to a six-figure increase in certain cases – prompting some to abandon their plans altogether.
One ongoing example is the case of a developer that had to reduce the price of its social housing scheme due to the requirement to introduce a car club and free travel passes, which needed to be borne by the purchaser. These costs were introduced last minute and implemented through the planning agreement at a late stage.
The key message for housing professionals is to be aware of the changes and go back to the drawing board if necessary, so that they comply with the new requirements rather than experiencing delays or unpredicted fees.
Opportunity Knocks for Those Prepared
By familiarising themselves with the policy and its implications, developers and housebuilders can ensure they meet the new criteria, factor in additional costs, and make the necessary plans.
Those developers and housebuilders that plan can take advantage of Northern Ireland's blossoming demand for housing, which is a result of more job opportunities and an influx of young, educated people who stayed home during the pandemic.
For instance, while in previous years graduates moved overseas, following pandemic-related restrictions there are now more remaining in Northern Ireland and settling in to the work-life balance it offers.
There are also now better career opportunities in Northern Ireland. Belfast in particular is gaining a global reputation as a cyber security hub, with the Centre for Secure Information Technologies now the largest cyber security centre in Europe. The city is also a site of expansion for highly regarded global firms such as PwC. Furthermore, Belfast is due for significant investment from both of its major universities, which are revitalising the city with new student accommodation.
Northern Ireland is a golden opportunity for housebuilders and developers – but only those who are prepared for Section 76 can take full advantage of the growing housing demand.
[Authors of this article are Chris Bryson of Gravis Planning and Drew Nesbitt of Wilson Nesbitt Solicitors]