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A new challenge in the mix: Hotel developments to provide affordable housing?

It is no secret that this is a challenging time for the hotel industry in London with peak prices, a shortage of viable sites, uncertainty over labour and rising costs and taxes. Notwithstanding, one London Borough has decided that hotels should also be doing their bit to address the housing crisis.

In its draft City Plan, published on 12 November, Westminster City Council has proposed affordable housing requirements for many hotels in the Central Activities Zone.  In particular:

• hotels of 750m2 – 999m2 would need to pay a financial contribution for the provision of affordable housing; and

• hotels of 1,000m2 or more would have to provide 35% of their floor space as affordable housing.

The draft document has scant detail on how this would work in practice.  And whilst it does recognise that there may be some areas where a contribution might be more appropriate than onsite provision (provided the developer can demonstrate that it is not practicable or viable to provide it on site), the Plan is clear that in most cases the starting point should be affordable homes being provided as part of the same development.

The practicalities of onsite provision are unlikely to be the only issue. Assessing the viability of providing affordable housing may pose its own challenges.  Many local authorities have enough difficulty trying to apply their affordable housing assessment models to Build-to-Rent housing.  This does not bode well for trying to apply affordable housing requirements to an entirely different type of use on which the local authority is not resourced with expertise. Will the local authority appreciate that hotel developments can be intricate and how common areas are used and accessed, hotel lay-outs, design and the type of brand or operator a site may attract are all important considerations in a hotel development?

Further, whilst the Plan does recognise the need to maintain Westminster’s draw as a visitor destination, and protect all the benefits that brings, including by protecting existing hotel facilities, there are also other key points that hotel developers and operators should be aware of:

• There will be a bar on new hotels over 2,500m2 in the Soho Special Protection Area;

• New hotels will be directed to the CAZ, meaning those looking to develop hotels elsewhere to avoid the affordable housing requirements are likely to have little joy; and

• Extensions to existing hotels will be linked to upgrade of that hotel, and will not generally be able to include new or additional facilities to be used by non-residents. This comes at a time when it is important for the industry to be innovative and explore sources of income and models other than room lettings or traditional F&B services.

The consultation on the draft Plan closes on 22 December, and those with hotel interests in not only Westminster, but the wider London area should consider making representations, as where one borough leads, others often follow.  And whilst it may be optimistic to think that the affordable housing policy will be abandoned all together, the industry should take this opportunity to voice its concerns and explain how its sector needs to operate to thrive.

More details on how to respond can be found at: https://www.westminster.gov.uk/cityplan2040