Mixed-Tenure Developments.

Original Article
May 14th, 2024


A building block for lasting communities

Author: Johnnie Leather, Public Policy Researcher, MA Social and Public Policy

England is grappling with a severe housing crisis, a cause of high costs and low supply. The problem is particularly acute in London and cities in the Southeast of England where property prices are highest and land most scarce. Given the pressing need for more homes, the delivery of well-thought-out developments is of vital importance for executing a sustainable solution.

Mixed-tenure developments are, as the name suggests, residential developments where different tenure types are found on the same site. Often recognised for creating thriving communities of varied socioeconomic groups, mixed tenure has a key role in combating the housing crisis, especially in urban spaces. But why is this so?

Typically, tenure could be split into two broad categories in England; owner-occupied and social. Since the 1990s, the private rented sector has steadily increased, giving rise to a third category. According to 2021 Census data, in England 61.4% of properties are owner-occupied, 20.4% privately rented and 17.1% social.

To avoid confusion in this article; owner-occupied, social and private rented will be the three encompassing tenure types that make up mixed tenure. Furthermore, owner-occupied will include outright ownership and dwellings with a mortgage, while the social sector will cover both social and affordable properties.

Integrated, segmented and segregated communities
Tenures can be mixed to varying degrees, described as either ‘integrated’, ‘segmented’ or ‘segregated’.

  • ‘Integrated’ tenure is where properties of different tenure types are side-by-side, and the tenure type is not visually distinguishable from the style of building. This is what true mixed tenure is normally taken to mean.
  • ‘Segmented’ tenure is a less closely mixed classification, where different types are split, perhaps into separate blocks and/or hold different visual characteristics.
  • ‘Segregated’ tenure is where different tenures are kept geographically apart, such developments can also be referred to as mono tenure.

The history of building mixed-tenure
Mixed tenure is far from a new concept, having formed a prevalent part of the post-WWII New Towns movement. The movement, which Milton Keynes, Sava’s home, is a leading example of, sought to regenerate the country after the destruction of the World Wars.

However, it was not always the favoured method for planning new developments. Notably, during the 1950s and 60s – the period of the highest rates of property building in England – segregated developments were the norm, consisting of solely owner-occupied or social tenancies.

Since then, building mono-tenure has become entrenched with criticisms of creating ‘ghettos’ and concentrated areas of deprivation. Mono-social developments are thought to hinder social mobility and fuel stigmatisation towards social housing. House building from the period has become typified for failing to create desirable communities, serving as a warning of what happens when building targets are prioritised over thoughtful placemaking.

Moving to the present day precautions are in place to limit mono-tenure developments. The current National Planning Policy Framework in England requires at least 10% of the total number of homes at major residential developments to be affordable. This means that all new developments are, to some degree, mixed tenure.

Shared Ownership
Under the Coalition Government, there was a drive to increase shared ownership, leading to the sector experiencing growth since 2010. Shared ownership is an initiative that allows people to acquire a share of a property as opposed to the whole thing, thereby making it a more affordable route into owning property.

A buyer will normally purchase 25% of the property’s full market value but it can vary between 10% to 75%. Deposits are then typically 5% or 10% of the share and the remainder of the share is met through monthly rent payments. It is also possible to purchase a greater share of the property over time in chunks, a process known as staircasing.

At the time of writing, to qualify for shared ownership, the household income must be below £80,000 or £90,000 in London. Additionally, they tend to require the purchaser to have a connection to the area, such as living or working there.

Between 2015 and 2021, 76,500 new shared ownership properties were delivered. Although only 1% of properties in England were shared ownership in 2021, the Affordable Homes Programme plans to deliver 180,000 more by 2026, with £11.5 billion of grant funding available. Given these building targets and the current mortgage rates, shared ownership could well be a vital initiative to prop up affordable homeownership over the coming years.

The Private Rented Sector
In countries, notably Germany and the United States, financial institutions such as pension funds and insurance companies have been much more involved in residential investment where private rented residential property accounts for a much larger part of the overall residential stock (Germany 60% and US 32%).

In contrast, the private rented sector in the UK is much more fragmented. Although, since January 1990, the percentage of UK housing stock in the private rented sector has grown from 9% to 20%, this is mostly due to the growth in the residential buy-to-let sector.

According to the ‘Private Landlords Survey 2010’, 89% of landlords were private individual landlords responsible for 71% of all private rented dwellings, with a further 5% of landlords being company landlords responsible for 15% of dwellings. More than three-quarters (78%) of all landlords only owned a single dwelling for rent, with only 8% of landlords stating they were full-time landlords.

However, the Buy to Let market peaked in 2017 following the introduction of tax changes for private landlords. As long ago as 2018 this policy generated concerns about the reduction in the private rented sector, with ‘Buy Association’ warning that the policy could leave “the country with a major issue”. The RICS warned the government that as smaller landlords were “pushed out of the market due to the removal of mortgage interest tax relief, combined with stricter lending criteria and a higher stamp duty burden, the increasing demand for rental property could see rents pushed up by 15% over the next five years.”

Since 2010, financial institutions have taken a more serious interest in the private rented sector, in part encouraged by their positive experiences in the private student accommodation market. This is usually through ‘Build to Rent’ developments.

Build-to-rent refers to homes that are purpose-built for rent, rather than for sale. According to the Build to Rent Hub (https://buildtorent.info/data/ ) build-to-rent is fast becoming an established sector in the UK housing market to meet demand for high-quality, professionally-managed rental housing – both for urban living (typically as apartments) and suburban (as single-family homes).

According to the Hub, in the last quarter of 2022 there were 242,548 build-to-rent homes in the UK, including both London and the regions, of which:

  • 78,717 are complete
  • 72,244 under construction
  • 113,379 in planning, 91,272 units in London and outside there are 151,276 units.

The social impact of mixed tenure
A driving factor in building mixed tenure is the associated social benefits. Mixing tenure is a key tool for creating socially and economically varied areas, which is favourable for establishing desirable communities and avoiding problems linked to exclusively low-income areas.

The social impact of mixed tenure is something that the Joseph Rowntree Foundation (JRF) has widely researched into. They found that a good mix of incomes results in better wealth distribution within the community. Further to this, different tenure and property types allow households to remain in neighbourhoods as their circumstances change, creating greater stability.

Impact on property value
Equally significant, a literature review, carried out by the National House Building Council (NHBC) Foundation and the Housing and Communities Agency, found that mixed tenure did not have a negative impact on property values.

The report stated that, in fact, the integrated approach was thought to be most popular with developers for maintaining property value, suggesting concerns that mixed-tenure developments could negatively impact private sector house prices are misplaced. While another study by the JRF verified that an impact on property value can be eliminated by ensuring that the quality of other aspects (such as the design and quality of the houses) can offset any anxieties that may arise.

That said, it should be noted that lenders are usually very cautious around new property developments (whether mixed tenure or not) simply because they have to manage their exposure to risk. Depending on the risk profile of the lender and a range of factors such as general location and untested areas etc. some lenders may only lend on up to 10% of a new development so as not to be overexposed on a site that is ‘untested’ in the market.

Comment from Anne Hinds, BSc (Hons) FRICS (Lead Practitioner Surveying & Verification, Sava)
From a valuation point of view surveyors/valuers need to make sure they understand the tenure mix and the relationship of the various types of tenure to the property they are valuing and the impact that may have on the value. They need to ensure that comparables are chosen carefully and that they reflect the same attributes as the property they are valuing.

What does good mixed tenure look like?
This being said, not all mixed-tenure developments are created equal, and it is simply not enough to combine tenure types to achieve the associated benefits. Instead, the extent to which the positives are actualised will depend on a development’s general design, including layout, building quality, local amenities, connection to surroundings, access, and care to the way people will live in the homes. The concept of placemaking is essential throughout the design phase.

Additionally, communities should be formed of a variety of dwelling types and sizes that are characteristically indistinguishable. A mix of dwelling types and size is important for driving mixed communities, while characteristic similarity blurs tenure types, reducing stigma towards social housing.

Another aspect to be considered is the continued estate management once built. With the recent growth of the private rental sector, landlords have increasingly been buying up properties to rent out. This changes the tenure dynamic in an area and can impact social and economic mixes too. Therefore, to achieve the benefits of mixed communities, it is important to ensure that there is an element of asset management in the years following delivery. Likewise, any services and facilities should receive long-term management to maintain a high quality.

Dockley Apartments
An example of a mixed-tenure development that strived to meet these demands is Dockley Apartments in Bermondsey, Southwark (pictured in this article). The 111-unit development is comprised of private, shared ownership and social housing tenures (38%), with one, two and three-bed options.

Figure 1: Dockley Apartments (Source: www.dockley-apartments.co.uk)

Influenced by collective housing in Europe, Dockley Apartments gives priority to communal spaces designed to encourage social connection. Roof terraces, wide galleries and a shared courtyard provide ample space for interaction. While the variety of property types help to establish a stable neighbourhood that caters for different household incomes, sizes and ages. It is plain to see how a development designed in this way, with inclusivity and social interaction at its core, achieves the benefits of mixed tenure.

The project will also create a new pedestrian street to connect Spa Road and Dockley Road. There are already traders in the existing railway arches in the area but the development includes new commercial units opposite the existing arches. The intention is to “contribute to the array of artisan producers on-site” and also create a lively street suitable for Saturday market trading which will become a key part of Southwark’s ‘Low Line’ walking routes.

Commercial property and mixed-use
As mentioned, local amenities are also an important factor in delivering sustainable mixed-tenure communities, which Dockley Apartments serves as an example of. Developments that seek to combine residential and commercial spaces are known as mixed-use, providing not only somewhere to live but also a place to work and for leisure.

Mixed-use developments have been linked to creating more liveable and sustainable communities. Through the provision of on-site commercial amenities, the need for driving is reduced and walking or public transport is encouraged. This, in turn, can lead to more social interaction and lower environmental impact. The residential properties also serve as a ready-made source of customers to support local businesses.

Mixed-use planning is popular in urban settings where space is scarcer and there is a greater need to get cars off the road and people on their feet. Equally, the provision of commercial space allows the development to adapt and change with the needs of the area, feeding into the need for lasting communities.

Some lenders will also be cautious about the type of mixed-use incorporated in the development. For example, a block of flats developed for shared ownership adjacent to a national DIY store where access to the car park was through the car park of the DIY store. The majority of lenders declined as suitable security.

Concluding thoughts
In an age where a sense of community is diminishing for many, it is important we are increasingly mindful of how we design developments – creating developments that are not just a place to live but also to interact, come together and belong. With land for new developments becoming increasingly scarce in urban areas, especially London, it is key we maximise the space we do have as we tackle the housing crisis.

Johnnie Leather, Public Policy Researcher, MA Social and Public Policy
Johnnie Leather is a Public Policy Researcher. He has an MA in Social and Public Policy and carries out research on energy policy and sustainability in the built environment.