Voluntary or Mandatory Measures?

There is some debate within the research literature over whether a voluntary (incentive-based) or mandatory requirement yields the highest overall housing outcome in terms of the number of housing units including the affordable housing component (Schuetz 2011). If the incentive mechanism encourages overall housing production, it is thought that the affordable outcome will also be greater than would occur via schemes which require a mandatory contribution (in effect, a ‘tax’) which might even deter some housing development. However, any deterrent effects of mandatory contributions are diluted if the requirement occurs over a wide geographical area and is able to be factored into land pricing at the time of acquisition.

In some jurisdictions, a clear policy framework specifies when negotiated contributions will be sought. In England, this occurs as part of the process for seeking planning permission, within the context of a local development plan which includes targets for affordable housing inclusion. In other jurisdictions, the framework might apply when land is rezoned or when planning controls are varied at the request of the developer. Under these arrangements, although the contribution is negotiated, this occurs within a framework for mandatory, rather than voluntary compliance.

One important advantage of the negotiated approach, whether or not compliance is mandatory, is the flexibility to adjust requirements in response to changed market circumstances. This can be important to ensure that the affordable housing obligation does not exacerbate viability issues during market downturns. However, the negotiation process involves considerable time and demands that local planners hold a level of development expertise. The use of a feasibility tool to model the viability of different potential requirements and affordable housing contribution types offers a more equal and transparent basis for negotiations.

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