Housing Needs, Housing Shortfalls

We’ve got five years, my brain hurts a lot

We’ve got five years, that’s all we’ve got

(David Bowie)

The new NPPF introduces the requirement for local planning authorities to use a standard method to arrive at their local housing needs assessment, “unless exceptional circumstances justify an alternative approach which also reflects current and future demographic trends and market signals. In addition to the local housing need figure, any needs that cannot be met within neighbouring areas should also be taken into account in establishing the amount of housing to be planned for.”

However, the precise methodology and authority by authority figures are still a moving target. The Government said this in its “response to consultation” document, published alongside the new NPPF:

A number of responses to this question provided comment on the proposed local housing need method. The government is aware that lower than previously forecast population projections have an impact on the outputs associated with the method. Specifically it is noted that the revised projections are likely to result in the minimum need numbers generated by the method being subject to a significant reduction, once the relevant household projection figures are released in September 2018.

In the housing white paper the government was clear that reforms set out (which included the introduction of a standard method for assessing housing need) should lead to more homes being built. In order to ensure that the outputs associated with the method are consistent with this, we will consider adjusting the method after the household projections are released in September 2018. We will consult on the specific details of any change at that time.

It should be noted that the intention is to consider adjusting the method to ensure that the starting point in the plan-making process is consistent in aggregate with the proposals in Planning for the right homes in the right places consultation and continues to be consistent with ensuring that 300,000 homes are built per year by the mid 2020s.”

Inevitably, with change comes uncertainty as to how the new policies will be applied to applications and plans which are currently in the pipeline. There are three key transitional arrangements:

⁃ “The policies in the previous Framework will apply for the purpose of examining plans, where those plans are submitted [for examination] on or before 24 January 2019” (paragraph 214)

⁃ “The Housing Delivery Test will apply from the day following the publication of the Housing Delivery Test results in November 2018” (paragraph 215)

⁃ “The policies in this Framework are material considerations which should be taken into account in dealing with applications from the day of its publication” [ie 24 July 2018] (paragraph 212).

I want to look at a few specific issues of interest (to me at least):

The application of the new NPPF to the draft London Plan

The footnote to paragraph to paragraph 214 is more specific than the draft, in making it clear that the equivalent cut-off date for the London Plan is “the point at which the Mayor sends to the Panel copies of all representations made in accordance with regulation 8(1) of the Town and Country Planning (London Spatial Development Strategy) Regulations 2000“, meaning that the current Draft London Plan, for which a Panel of three inspectors has been appointed to hold an examination in public late this year, will be tested against the 2012 NPPF.

As underlined in his 27 July 2018 letter to the London Mayor, even when it is tested against the 2012 NPPF the Secretary of State is “not convinced” that the assessment of need in the current draft “reflects the full extent of housing need in London to tackle affordability problems.” He is looking to see modifications on a series of matters:

⁃ “A number of policy areas in the draft that are inconsistent with national policy, such as your policies allowing development on residential gardens and your policy on car parking. [NB whilst these might be areas of political difference they are not areas where the MHCLG’s approach would drive up numbers – far from it]

The detail and complexity of the policies within the draft London Plan have the potential to limit accessibility to the planning system and development.

⁃ The draft Plan strays considerably beyond providing a strategic framework.

⁃ The draft Plan does not provide enough information to explain the approach you will take to ensure your targets are delivered, including collaboration with boroughs and neighbouring areas.

⁃ There are a number of policies in the draft Plan which seek to deal with matters relating to building standards and safety. It is important that there is a consistent approach to setting building standards through the framework of Building Regulations

But, presumably as a quid pro quo for not sending the plan back to the drawing board to be tested against the methodology for assessing housing need in the new NPPF (which would arrive at significantly higher need figures than the basis for the draft plan), the Secretary of State is looking for the Mayor to review and revise the plan as soon as it is adopted:

It remains crucial however that you bring forward a revised London Plan that has regard to new national policies at the earliest opportunity. You will want to note paragraph 33 and annex 1 of the revised National Planning Policy Framework, which sets out that the Government expects plans to be reviewed early where all identified housing need is not being met and to ensure a plan is in place which reflects current national policy. I would therefore expect you to review the London Plan to reflect the revised National Planning Policy Framework immediately once the London Plan has been published. I remind you that if this is not forthcoming, I have powers to direct the review to ensure London delivers the plan and homes that communities need.”

Of course, since the current draft is not likely to be adopted until late 2019 and Sadiq Khan’s current term ends in May 2020, this will presumably increase the potential for politicking as between candidates and parties. Not good for consensus building, or perhaps other kinds of building, although if a new plan does not come forward presumably we can expect to see more MHCLG intervention in relation to major applications in London.

Other plans submitted for examination before 24 January 2019

Nothing in planning is of course black and white. Paragraph 214 of the new NPPF says that plans submitted for examination before 24 January 2019 will still be tested against the 2012 NPPF, but of course the 2012 NPPF allowed significant room for argument as to what the appropriate methodology might be for any authority “to use their evidence base to ensure that their Local Plan meets the full, objectively assessed needs for market and affordable housing in the housing market area, as far as is consistent with the policies set out in this Framework“. To what extent might inspectors allow the new standard method to be used for plans submitted before 24 January 2019?

Already since the publication of the new NPPF we have seen the East Cambridgeshire local plan inspector, Louise Nurser, issue her preliminary findings in a letter dated 30 July 2018 in which she accepts that the use of the new standard methodology is appropriate “in the particular circumstances of East Cambridgeshire” even though the plan was plainly submitted well before the relevant date. I set out her reasoning below:

“I conclude that it is a sound approach for the standard method to be used to set the OAN for housing within East Cambridgeshire at a minimum of 11,960 dwellings between 2016 and 2036. Indeed, in the context of a Strategic Housing Market Assessment (PE05) of considerable vintage (2013), which had already been used as the primary evidence base for the development strategy which is to be superseded by the Plan before me, it would not have been appropriate to update the evidence base in isolation of the wider HMA, so that it could be used a second time. Ideally, for the purposes of this plan, the housing needs of the wider Housing Market Area would have been thoroughly considered through a new Housing Market Assessment.

However, it is clear from the different stages in which the constituent plan making bodies find themselves that such a scenario would be unrealistic, particularly in the context of the clear indication from the recently published Framework that the standard method should be used in plan making in the future, and as a consequence, it is highly improbable that a completely new HMA would ever be commissioned.

I draw particular comfort from the fact that the annual dwelling requirement using the revised OAN figure of October 2016, for the district, which is based on the SHMA, is 586 dwellings per annum (PE06). This is comparable with the figure of 598 dwellings per annum, using the standard method (PE07). As such, the use of the standard method to determine East Cambridge’s housing needs is an acceptable and a pragmatic approach to determining the district’s needs. In coming to this conclusion, I must stress that my conclusions relate to the particular circumstances of East Cambridgeshire, which has already adopted a plan on the basis of the 2013 SHMA evidence.

I can see that there does not seem to be a significant difference in the case of East Cambridgeshire as to the outcome under the two approaches, but is her reasoning essentially, as she says, pragmatic – it would have been impractical to expect the 2013 strategic housing market assessment to have been updated as a base for the new plan? Might this be a position that various other authorities find themselves in? Does the new standard method amount to an appropriate evidence base for these purposes?

What now of the tilted balance?

Paragraph 11 of the new NPPF of course contains an amended form of what was paragraphs 14 and 49 of the 2012 document, the presumption in favour of sustainable development (or the “tilted balance” in the jargon) which applies where there is a shortfall in housing supply.

There is a shortfall where:

⁃ the “local planning authority cannot demonstrate a five year supply of deliverable housing sites” (with a 5 to 20% buffer – see paragraph 73); or where

⁃ (for decisions after the publication of the Housing Delivery Test results in November 2018) the Housing Delivery Test indicates that the delivery of housing was substantially below the housing requirement over the previous three years (with “substantially below” defined in paragraph 215 – starting at 25% of what is required and ratcheting up first to 45% and then to 75%).

Where there is a shortfall, the “policies which are most important for determining the application” are deemed to be out of date, meaning that planning permission should be granted unless (i) the application of policies in the NPPF that protect a defined list of categories of areas or assets of particular importance provides a clear reason for refusing the development proposed or (ii) “any adverse impacts of doing so would significantly and demonstrably outweigh the benefits, when assessed the policies in this Framework taken as a whole“.

In my view this wording is clearer than the 2012 NPPF and should be easier to apply.

However, the effects of a shortfall are much reduced where there is a neighbourhood plan (which, after 11 December 2018, must be less than two years old) which contains policies and allocations to meet its identified housing requirement, the local planning authority has at least a three year supply of deliverable housing sites and the authority’s housing delivery was at least 45% of that required over the previous three years (25% until December 2019). (See paragraphs 14 and 216). In these circumstances, “the adverse impact of allowing development that conflicts with the neighbourhood plan is likely to significantly and demonstrably outweigh the benefits“.

Relevance of degree of shortfall

In deciding an appeal against the refusal of planning permission for housing development, how far does the decision-maker have to go in calculating the extent of any shortfall in the five-year supply of housing land? That was precisely the question considered last week by the Court of Appeal in Hallam Land Management Limited v Secretary of State (Court of Appeal, 31 July 2018). The case concerns the policies within the 2012 NPPF but the principles are just as applicable to the new NPPF.

In his decision letter dated 9 November 2016 the Secretary of State had dismissed an appeal by Hallam Land against refusal of planning permission by Eastleigh Borough Council for a development of up to 225 dwellings, a 60-bed care home and 40 care units together with associated development in Hamble.

His conclusions as to the degree of shortfall in housing supply simply stated this:

The Secretary of State notes the Inspector’s comment (IR108) that at the time of inquiry the Council were not able to demonstrate more than a four and a half years supply of deliverable housing land, and that there is evidence of an existing need for affordable housing. Whilst the Secretary of State notes that the Council are now of the view that they are able to demonstrate a 4.86 year supply...”

Weighing this shortfall into the balance he dismissed the appeal on the basis that the adverse impacts of the proposal would significantly and demonstrably outweigh its benefits.

Had he reached a properly reasoned decision on the housing supply question or had he just ducked it? At the inquiry there had been much argument as to the extent of housing supply. Hallam asserted that it was between 1.78 and 2.92 years. In post inquiry representations, the council asserted that the figure was now 4.86 years. However two inspectors’ appeal decisions in the borough had concluded otherwise. In the 24 May 2016 Bubb Lane decision letter the inspector had found that the council had a “considerable way to go to demonstrate a five year supply of deliverable sites”. In the 7 October 2016 Botley Road decision letter the inspector had concluded that there were 4.25 years of supply.

It is not necessary for the decision maker to arrive at a precise conclusion as to the level of shortfall. As Lindblom LJ states:

Relevant authority in this court, and at first instance, does not support the proposition that, for the purposes of the appropriate balancing exercise under the policy in paragraph 14 of the NPPF, the decision-maker’s weighting of restrictive local plan policies, or of the proposal’s conflict with such policies, will always require an exact quantification of the shortfall in the supply of housing land.

Accordingly, Lindblom LJ did not “think that in this case the Secretary of State could fairly be criticized, in principle, for not having expressed a conclusion on the shortfall in the supply of housing land with great arithmetical precision. He was entitled to confine himself to an approximate figure or range – if that is what he did. Government policy in the NPPF did not require him to do more than that. There was nothing in the circumstances of this case that made it unreasonable for him in the “Wednesbury” sense, or otherwise unlawful, not to establish a mathematically exact figure for the shortfall. It would not have been an error of law or inappropriate for him to do so, but if, as a matter of planning judgment, he chose not to do it there was nothing legally wrong with that.”

It was not clear “whether the Secretary of State reached any concluded view on the scale of the “acknowledged shortfall”. His reference in paragraph 17 to “the limited shortfall in housing land supply” suggests he had not found it possible to accept Hallam Land’s case at the inquiry, as recorded by the inspector in paragraph 62 of his report, that the supply of housing land was as low as “2.92 years, or 1.78 years if the need for affordable housing is included”, or even the “material shortfall” to which the inspector had referred in paragraph 108, in the light of the council’s concession that it was “not able to demonstrate more than a four and a half years supply of deliverable housing land”. A “limited shortfall” could hardly be equated to a “material shortfall”. It would have been a more apt description of the shortfall the council had now acknowledged in conceding, or contending, that it was able to demonstrate a supply of 4.86 years – the figure to which the Secretary of State referred in paragraphs 19 and 30 of his decision letter.”

If he did adopt, or at least assume, a figure of 4.86 years’ supply of housing land, or even a range of between four and half and 4.86 years, his approach could not, I think, be stigmatized as unlawful in either of those two respects. It could not be said, at least in the circumstances of this case, that he erred in law in failing to calculate exactly what the shortfall was. In principle, he was entitled to conclude that no greater precision was required than that the level of housing land supply fell within a clearly identified range below the requisite five years, and that, in the balancing exercise provided for in paragraph 14 of the NPPF, realistic conclusions could therefore be reached on the weight to be given to the benefits of the development and its conflict with relevant policies of the local plan. Such conclusions would not, I think, exceed a reasonable and lawful planning judgment.”

However, “even if that assumption is made in favour of the Secretary of State, there is in my view a fatal defect in his decision in his failure to engage with the conclusions on housing land supply in the recent decisions in the Bubb Lane and Botley Road appeals.”

In both decision letters the shortfall was characterized as “significant”, which plainly it was. This was more akin to saying that it was a “material shortfall”, as the inspector in Hallam Land’s appeal had himself described it in paragraph 108 of his decision letter. Neither description – a “significant” shortfall or a “material” one – can be squared with the Secretary of State’s use of the adjective “limited”. They are, on any view, quite different concepts.”

“Quite apart from the language they used to describe it, the inspectors’ findings and conclusions as to the extent of the shortfall – only “something in the order of four year supply” in the Bubb Lane appeal and only “4.25 years’ supply” in the Botley Road appeal – were also substantially different from the extent of the shortfall apparently accepted or assumed by the Secretary of State in his decision in this case, which was as high as 4.86 years’ supply on the basis of evidence from the council that had been before the inspector in the Botley Road appeal and rejected by him.”

“One is left with genuine – not merely forensic – confusion on this important point, and the uncomfortable impression that the Secretary of State did not come to grips with the inspectors’ conclusions on housing land supply in those two very recent appeal decisions.”

In a short judgment, agreeing with the lead judgment of Lindblom LJ, Davis LJ makes the position plain:

I have the greatest difficulty in seeing how an overall planning judgment thereafter could properly be made without having at least some appreciation of the extent of the shortfall. That is not to say that the extent of the shortfall will itself be a key consideration. It may or not be: that is itself a planning judgment, to be assessed in the light of the various policies and other relevant considerations. But it ordinarily will be a relevant and material consideration, requiring to be evaluated.

The reason is obvious and involves no excessive legalism at all. The extent (be it relatively large or relatively small) of any such shortfall will bear directly on the weight to be given to the benefits or disbenefits of the proposed development.”

The decision was quashed.

Was David Bowie writing for the Secretary of State, or for all of us?

My brain hurt like a warehouse, it had no room to spare

I had to cram so many things to store everything in there

Simon Ricketts, 5 August 2018

Personal views, et cetera

Author: simonicity

Partner at boutique planning firm, Town Legal LLP, but this blog represents my personal views only.

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