What percentage of a scheme must be affordable housing?

There is no national percentage. Each local plan sets its own requirement based on local need and viability, commonly somewhere in the region of 20 to 40 percent of homes but genuinely area-specific. Smaller sites, commonly around ten units or fewer, are generally exempt, with lower thresholds in some designated rural areas.

What is the difference between social rent and affordable rent?

Social rent is set by a national formula and is the most heavily subsidised, well below market levels. Affordable rent is capped by policy, commonly up to around 80 percent of local market rent including service charges, so it sits higher than social rent but still below the open market.

How does affordable housing affect land value?

Affordable homes transfer to a registered provider well below open-market value, so they reduce blended GDV. Because land value is the residual left after costs and profit, most of that reduction comes out of the price you can pay for the land, which makes the affordable proportion one of the most sensitive inputs in the appraisal.

Can the affordable housing requirement be reduced?

Yes, through a viability assessment. Where a policy-compliant level would make the scheme unviable against a benchmark land value and a competitive return, national policy allows the proportion to be negotiated. Authorities scrutinise these cases closely and often attach review mechanisms to recover value if the scheme outperforms.

Affordable housing requirements and what they do to land value

Threshold Guides · 9 min read · England & Wales

Affordable housing is where planning policy meets your residual most directly. Every affordable unit generates far less revenue than an equivalent market home, and that gap comes almost entirely out of land value. This guide explains the main tenure types, why the required proportion varies so much between areas, and how the affordable requirement flows through a residual appraisal.

What counts as affordable housing

National planning policy defines affordable housing as homes provided to those whose needs are not met by the open market, covering both affordable routes to rent and affordable routes to ownership. On a development it is usually secured through a Section 106 agreement, the legal agreement that fixes the number of affordable homes, the tenure mix, how and to whom they transfer, and who is eligible to occupy them. It is a planning obligation, not a goodwill gesture, and it runs with the land.

The main tenure types

Social rent. Rents set by a national formula, well below market levels. This is the most heavily subsidised tenure, typically owned or managed by councils or housing associations (registered providers).
Affordable rent. Rents capped by policy, commonly up to around 80 percent of local market rent including service charges. Higher than social rent, it was introduced to stretch limited grant further.
Shared ownership. The buyer purchases a share of the home and pays rent on the remainder, with the option to buy further shares over time (staircasing). It lowers the entry cost of ownership.
First Homes. A discounted market sale product for first-time buyers, sold at a discount to market value that is passed on to future eligible buyers in perpetuity, subject to price caps. National policy sets a minimum discount and the caps, with some local discretion.
Other intermediate products, such as discounted market sale or rent to buy, appear in some local plans.

Why the requirement varies by area

The proportion and the tenure split are set locally, in each authority Local Plan, informed by an assessment of local housing need and by viability evidence. As a result the required affordable percentage is a genuinely local number, commonly expressed as a range and often somewhere between roughly 20 and 40 percent of homes, but set area by area rather than nationally. Many authorities also specify the tenure split, for example a majority for rent with the remainder intermediate, and national policy has at times required a proportion of the affordable homes to be for ownership. National policy generally exempts smaller sites, commonly those around ten units or fewer, with lower thresholds in some designated rural areas. Always confirm the local position rather than assuming a figure.

How affordable housing hits GDV

The mechanism is simple and unforgiving. Market homes are sold at open-market value. Affordable homes transfer to a registered provider at a price well below open-market value: rented tenures often transfer at a large discount, shared ownership somewhat less. So a slice of your scheme generates a fraction of the revenue that the same floorspace would earn as market product. Blended GDV falls accordingly, and because land value is the residual left after costs and profit, that reduction flows almost entirely into the price you can pay for the land.

Consider 100 homes with a 30 percent affordable requirement: 30 affordable and 70 market. Suppose the market homes would each generate about £300,000, and the affordable units transfer to a registered provider at roughly half that, say £150,000 each (illustrative figures, not policy). The affordable units then bring in around £4.5M rather than the £9M they would as market homes, a £4.5M reduction in GDV. With build costs and target profit broadly unchanged, most of that £4.5M comes out of what you can pay for the land. That is why the affordable percentage is one of the most sensitive inputs in the entire appraisal.

Viability and negotiation

Where a policy-compliant level of affordable housing would make a scheme genuinely unviable, national policy allows a viability assessment to be submitted, and the affordable proportion can be negotiated. The assessment weighs the scheme against a benchmark land value, broadly the existing use value plus a reasonable premium, and a competitive return for the developer. This is a legitimate mechanism rather than a loophole, because land values, build costs and affordable requirements do not always reconcile. But authorities scrutinise viability cases hard, often require them to be published, and frequently attach review mechanisms that claw back value if the scheme outperforms its forecast.

Getting it into your appraisal

Treat the affordable requirement as a core input, not an afterthought. You need three things: the market value of the market homes, from local comparable evidence; a realistic transfer value for each affordable tenure; and the policy proportion and tenure split. Blend them into GDV, then run the residual at the policy level and at any level you might realistically negotiate to, so you can see land value across that range. Threshold gives you the robust market side, turning sold records into achievable rates per square foot, comparables and a maximum land bid built on market values, which you can sense-check against live £/sqft by area. Overlay the affordable proportion and transfer values on top, and remember that your net developable area and mix determine how many units that percentage applies to in the first place.

Frequently asked questions

What percentage of a scheme must be affordable housing?: There is no national percentage. Each local plan sets its own requirement based on local need and viability, commonly somewhere in the region of 20 to 40 percent of homes but genuinely area-specific. Smaller sites, commonly around ten units or fewer, are generally exempt, with lower thresholds in some designated rural areas.
What is the difference between social rent and affordable rent?: Social rent is set by a national formula and is the most heavily subsidised, well below market levels. Affordable rent is capped by policy, commonly up to around 80 percent of local market rent including service charges, so it sits higher than social rent but still below the open market.
How does affordable housing affect land value?: Affordable homes transfer to a registered provider well below open-market value, so they reduce blended GDV. Because land value is the residual left after costs and profit, most of that reduction comes out of the price you can pay for the land, which makes the affordable proportion one of the most sensitive inputs in the appraisal.
Can the affordable housing requirement be reduced?: Yes, through a viability assessment. Where a policy-compliant level would make the scheme unviable against a benchmark land value and a competitive return, national policy allows the proportion to be negotiated. Authorities scrutinise these cases closely and often attach review mechanisms to recover value if the scheme outperforms.

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Data referenced in Threshold is displayed under the Open Government Licence (HM Land Registry Price Paid Data, EPC Register, ONS, UK HPI). All figures produced by Threshold are statistical estimates for site appraisal, not RICS valuations.