As I am totally ignorant on these matters, I asked for clarification from a friendly developer.His reply:“In the typical mixed scheme, there are two parties - the overall developer, and the RSL. The developer has to provide affordable housing to get planning permission, and they can only sell to a RSL. There may be an open market, (if it is a "windfall" site) or the site's affordable housing may already be bagged by one RSL (This is to do with Housing Corporation grant allocation, which can be site specific, making it difficult for other RSLs to bid).The price the developer will get from the RSL will be well below the open market value, typically 50%. This price is negotiable these days, whereas it used to be set by formula, but it is still artificially low, because only RSLs can bid.The RSL makes money on the deal. Although they let the flats at a sub market rent, as Mr Sheerins says, they get Housing Corporation Grant, and they do not have to pay full price for the units. Although they are non profit making, they do have to be financially solvent (i.e. trade at a surplus of income over expenditure) and they pay their directors extremely well. The developer makes a loss on that part of the scheme, but of course a profit on the scheme overall. We try, and usually succeed, in getting the RSL payment to cover the actual building cost of the flats, which leaves the land, design, management and financing costs of the affordable part as a "tax" on the private part. This is usually about a third to a half of the total cost of affordable part. The overall effect?1. The land value drops a bit (the developer cannot pay quite as much for the original site) so a little less land is redeveloped.2. The private units cost more (fortunately the London market can just about handle the price hike) so fewer people can buy on the open market 3. There is great pressure to build at higher densities. There was almost an unwritten offer from the OPDM - we will let you build at high density if you give the RSLs housing at below cost, so we can increase affordable housing supply but without coughing up more Housing Corporation Grant. Outside of the South East, where the land is a much smaller proportion of the total cost of provision, Mr Sheerins is often right and affordable housing can be built under the rules at a profit. Around here, there is not a hope.On the whole, I consider the whole thing to be ridiculously Byzantine and somewhat counterproductive. I am in favour of a more explicit roof tax, but that is just my personal opinion.”
Nigel Moore ● 7193d