Housebuilders should change terms to make affordable housing schemes viable

Councils may need to reduce the amount of money they ask for from developers on schemes that include affordable housing, a City law firm has said.

Trowers and Hamlins, which has advised on a large number of social housing deals, said the credit crunch was jeopardising a growing number of social housing developments.

The firm said councils and developers might need to revise the terms of scheme that include social housing which were negotiated before the downturn to ensure they remained viable.

The firm said developers should consider completing the affordable housing element of such schemes first in order to help their cashflows.

Partner Jeremy Hunt said developers might break their schemes into smaller phases each carrying less risk. They could also introduce a viability test so that they did not have to proceed to the next phase until market conditions allowed them a reasonable financial return.

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