New proposed on-site affordable housing requirement for central London hotels

Westminster City Council has launched its formal Regulation 19 consultation on its draft City Plan. This follows its informal Regulation 18 consultation at the end of last year which saw questions raised by the hotel industry and other property professionals over the viability and practicality of proposed on-site affordable housing as part of new hotels in Westminster.

This is in the context of already increasing financial pressure on the provision of visitor accommodation in the capital. For example, the new Mayoral CIL (MCIL2) was introduced in April 2019. At £140 per sq m on relevant new hotel floorspace in Central London, the hotel levy is the third highest, closely behind retail (£165 per sq m) and office (£185 per sq m). All of these are marked increases in the flat rate of £50 per sq m charged under the original Mayoral CIL thereby adding a significant new cost to development in London.

The Regulation 18 consultation version of the draft City Plan was, for the first time, proposing that hotels above 1000 sq m in the Central Activities Zone were to provide 35% on-site affordable housing. Smaller hotels (750–999 sq m) were to provide a financial contribution in lieu. Questions were raised as to the feasibility of such proposals and in particular the increased burden this would place on smaller boutique style hoteliers.

It appears Westminster has, to a certain extent, taken the hotel industry’s concerns on board. The proposed thresholds for on-site affordable housing provision/contributions in lieu in the Regulation 19 version of the draft City Plan have been raised considerably to 6,500 sq m and 2,500 sq m respectively. The level of on-site provision proposed has also been reduced from 35% to 15%. However, as with the Regulation 18 draft, it is stated that off-site provision will only be accepted in exceptional circumstances. The under provision of affordable housing in Central London remains a key concern. In Westminster’s view, on-site affordable housing is key to addressing this and ensuring mixed and balanced communities. Although query whether such accommodation is best located in hotels.

Whether the proposed threshold uplifts are sufficient to ensure that much needed hotel development in Central London is not hindered from coming forward remains to be seen, as does how stringently Westminster will enforce on-site provision if the policy survives independent examination.

Westminster’s Regulation 19 consultation closes on 31 July 2019 and you can have your say at: https://www.westminster.gov.uk/cityplan2040 The independent examination is timetabled for later this year.

Alice is an associate in our Planning team.