Like most real humans, Chat GPT doesn’t really know how the planning system works, although it thinks it does, is plausible to the uninitiated and is going to learn fast.
“Describe the scene at the opening of a planning inquiry in the style of Martin Amis”
“The overcast morning yawned drearily as the austere gates of justice swung open, reluctantly welcoming a procession of concerned citizens, bureaucrats, and legal enthusiasts into the cavernous embrace of the planning inquiry. The venue, a drab municipal hall adorned with faded civic emblems and stained carpeting, echoed with the collective sigh of resignation.
The attendees, a motley crew of disparate interests and insatiable curiosities, shuffled in, each sporting a distinct sartorial display of subdued professionalism. Men in ill-fitted suits, replete with the sullen faces of reluctant labor, mingled with bespectacled women clutching notepads with an air of anticipatory dread. The atmosphere was thick with the scent of worn leather, a pallid reminder of past struggles fought and victories scarce won.
The weary acoustics of the room trembled as the chairman’s gavel thundered, reluctantly arousing the assembled multitude from their communal stupor. A bespectacled figure emerged from the shadows, his furrowed brow betrayed by a sparse crown of graying hair, a testament to the inevitable encroachment of time upon the human visage. He cleared his throat with a noise resembling a desolate gust of wind sweeping through a forgotten corridor, demanding the attention that was reluctantly offered.
Chairman and gavels aside, it’s not going to be long folks (and of course it is already being used for various specific functions – see this piece), so we need to be on top of how it can be used to improve development outcomes and lead to genuine efficiencies, whilst being on guard against its misuse. Could you spot a Chat GPT generated objection letter? This was its response to the request for an objection letter to a proposed solar farm, free and it took about a second. Imagine how it might then be plausibly tweaked and sent, many times over. How are planning officers going to guard against this?
“Subject: Objection to Proposed Solar Farm near [Your Location]
Dear [Recipient’s Name],
I am writing to express my deep concern and objection to the proposed solar farm project in close proximity to my residence [or: the [specific location]] in [City, State]. While I appreciate the growing need for renewable energy sources and acknowledge the importance of solar power in combating climate change, I believe that the current proposed location poses significant issues and may have adverse effects on the surrounding environment and community.
First and foremost, the proximity of the proposed solar farm to residential areas raises concerns regarding potential impacts on the quality of life for residents. The visual impact of large-scale solar panels and associated infrastructure in close proximity to homes could significantly diminish property values and negatively affect the aesthetic appeal of the area. Moreover, the potential glare caused by the reflective surfaces of solar panels could be intrusive and disruptive to residents, impacting their ability to enjoy their homes and surroundings.
Additionally, I am concerned about the potential environmental impacts associated with the construction and operation of the solar farm. The proposed location may be ecologically sensitive, hosting diverse wildlife habitats or fragile ecosystems that could be disrupted or permanently damaged by the installation of the solar panels and related infrastructure. It is crucial to thoroughly evaluate and mitigate these potential ecological consequences before proceeding with the project.
Furthermore, the proposed solar farm could have implications for the local community’s overall well-being. Construction activities may result in noise pollution, increased traffic congestion, and potential disruptions to daily activities. These factors, combined with the potential decrease in property values, may negatively affect the livelihoods and economic stability of the community.
I strongly urge you to consider alternative locations for the solar farm that are more suitable in terms of minimizing the visual impact on residential areas, preserving environmentally sensitive areas, and minimizing disturbances to the local community. It is crucial to involve the affected residents and community members in the decision-making process through open dialogue, public consultations, and comprehensive environmental impact assessments.
I kindly request that you take my objections into serious consideration and review the proposed solar farm project in light of the concerns raised. I encourage you to explore alternative options that prioritize both renewable energy goals and the well-being of the community and environment.
Thank you for your attention to this matter. I trust that you will act in the best interests of the community and ensure that any future renewable energy projects are developed with careful consideration of the concerns raised.
Yours sincerely,
[Your Name]”
I know to us it’s nonsense, no policies no nothing, but if I had been more specific in my request I would have got a more refined draft. And as it stands it’s pretty much par for the course as objection letters go.
Finally, as a bit of fun, what does Open AI’s Dall-E system think that the scene at a planning inquiry might look like?
The participants:
Not so bad really. But what about the solicitor?
He (an algorithmically assumed white male) is pictured faceless, doodling, writing nonsense:
Or the planning officer?
More white males, one strangely missing a finger on his left hand:
The overall lack of diversity of it all is troubling, as is the sheer lazy ease of generating splurge content – without safeguards (which are needed immediately, not at the speed that the planning system usually works) this could be as harmful for the planning system, in terms of submerging it under prolix and irrelevant content, as word processing technology has been. In fact, in Chat GPT I think I have found the real mutant algorithm.
Happy bank holiday all.
Simon Ricketts, 27 May 2023
Personal views, et cetera
A planning inquiry in the style of David Hockney, apparently.
Hey let’s get Joan Armatrading on the Walkman. We’re going back – way back…
The Levelling-up and Regeneration Bill had its first reading in the House of Commons over a year ago on 11 May 2022. It’s not just intervening political chaos which has caused this slow-moving caravan of disparate policy notions to lurch from side to side with occasional abrupt halts Along the way additional bright notions have been loaded onto it, impeding progress still further.
One of those notions is the old chestnut of community land auctions. Clauses 127 to 137 were added to the Bill in November 2022 without prior consultation, once Michael Gove became Secretary of State, so as to allow community land auctions to be piloted for ten years.
CLAs are of course catnip to many political types and economists, for instance supported by Policy Exchange (see eg Alex Morton’s 2013 paper A Right To Build) and the YIMBY Alliance, as part of the wider thinking on land value capture (see eg my 20 May 2017 blog post Money For Nothing? CPO Compensation Reform, Land Value Capture). My conclusion remains that the introduction of community land auctions would inevitably be harmful to the principled operation of the planning system – it’s just too darned complicated – and to the delivery of development in the right places – for instance it introduces a huge conflict of interest for the local planning authority as between whether to plan for the best places or the best returns. In my view primary legislation to allow for a pilot is premature. If there are excess unearned gains for the state (in addition to what is already extracted via the planning system), why not just openly tax them rather than embark on this three cup trick?
“A “community land auction arrangement” means an arrangement provided for in CLA regulations under which—
(a) a local planning authority is to invite anyone who has a freehold or leasehold interest in land in the authority’s area to offer to grant a CLA option over the land, with a view to the land being allocated for development in the next local plan for the authority’s area,
(b) any CLA option granted under the arrangement ceases to have effect if the land subject to the option is not so allocated when that plan is adopted or approved (unless the option has already been exercised or been withdrawn or otherwise ceased to have effect), and
(c) the local planning authority may—
(i) exercise the CLA option and dispose of the interest in the land to a person who proposes to develop the land,
(ii) exercise the CLA option with a view to developing the land itself, or
(iii) dispose of the CLA option to a person who proposes to exercise it and then develop the land.”
Clause 128: “Power to permit community land auction arrangements
(1) This section applies where—
(a) the Secretary of State directs that a local planning authority which is to prepare a local plan may put in place a community land auction arrangement in relation to that plan,
(b) the local planning authority resolves to do so (and that resolution has not been rescinded), and
(c) the community land auction arrangement has not come to an end.
(2) The local plan may only allocate land in the authority’s area for development—
(a) if the land is subject to a CLA option or a CLA option has already been exercised in relation to it, or
(b) in circumstances which are prescribed by CLA regulations.
(3) Any financial benefit that the local planning authority has derived, or will or could derive, from a CLA option may be taken into account—
(a) in deciding whether to allocate land which is subject to the option, or in relation to which the option has been exercised, for development in the local plan;
(b) in deciding whether the local plan is sound in an examination under Part 2 of PCPA 2004.
(4) CLA regulations may make provision about how, or to what extent, any financial benefit may be taken into account under subsection (3) (including provision about how any financial benefit is to be weighed against any other considerations which may be relevant to whether the land should be allocated for development in the local plan or to whether the plan is sound).”
Receipts are to be used to support development in an area by funding infrastructure and paying for the administration of the community land auctions process.
The provisions were debated in House of Lords Committee on 18 May 2023 (the relevant part of the debate starts from amendment 364B) and it might put some flesh on the bones to see how a Government minister, Earl Howe, explains how it is all intended to work:
“Community land auctions are an innovative process of identifying land for allocation for development in a local planning authority’s area in a way that seeks to optimise land value capture. Their aim is to introduce transparency and certainty by allowing local planning authorities to know the exact price at which a landowner is willing to sell their land. The crux of our approach is to encourage landowners to compete against each other to secure allocation of their land for development in the local plan by granting a legally binding option over their land to the local planning authority.
The competitive nature of community land auction arrangements incentivises landowners to reveal the true price at which they would willingly part with their land. If the land is allocated in the local plan upon its adoption, the local planning authority can sell the CLA option, keeping the amount that the successful bidder has paid and capturing the value that has accrued to the land as a result of the allocation. The successful bidder must then pay the price set out by the original landowner in the option agreement to purchase the land. The detailed design of community land auction arrangements will be set out in regulations that will be subject to the affirmative procedure.”
“…sustainable development remains at the heart of our approach. Piloting authorities will decide which land to allocate in their emerging local plans by considering a range of factors, which the Government will set out in guidance. Unlike conventional local plans, when allocating sites, local planning authorities will be able to consider the financial benefits that they are likely to accrue from each site. How, and the extent to which, financial benefits may be taken into account will be determined in regulations. Importantly, the existing requirement to prepare local plans, with the objective of contributing to the achievement of sustainable development under Section 39 of the Planning and Compulsory Purchase Act 2004, will remain.
We are not altering the existing local plan consultation and examination process. Piloting authorities will still be required to consult on the proposed land allocations in their draft local plans, before they are submitted and independently examined in public in accordance with the local plan preparation procedures, as modified by Schedule 7 to the Bill.
… the Secretary of State is required to lay a report before each House of Parliament on the effectiveness of the pilot within the timeframe set out in Clause 134(2). There is a requirement to publish this report, which means that it will be publicly accessible and available to any combined authority that was involved in the pilot.
The noble Baroness, Lady Taylor, asked about whether there had been prior consultations. We will consult on community land auctions shortly, and taking part in the pilot will be voluntary for local authorities. We need the powers in the Bill to enable the pilot to happen.
I appreciate the thought behind my noble friend’s Amendment 366. However, as community land auctions are a new and innovative process for identifying land for allocation for development, our view is that it is right that the Bill makes provision for them to be piloted on a strictly time-limited basis.
If community land auction arrangements are deemed successful, and if there is ambition to extend the approach, further primary legislation would be required to implement them on a permanent basis. As we do not have the evidence about their effectiveness yet, we think it right that the Bill does not include provisions that could make CLAs a permanent fixture. Instead, the Government will take a decision at the relevant point in the future, based on the evidence.”
“The simplest way I can describe this is that community land auctions will be a process of price discovery. In the current system, local planning authorities have to make assumptions about the premium required by a reasonable landowner to release their land for development. For Section 106 agreements, this manifests itself through viability negotiations between the local planning authority and a developer. As these can be negotiated, there is a higher risk that, in effect, higher land prices lead to reduced developer contributions, rather than contributions being fully priced by developers into the amount that they pay for land.
For the community infrastructure levy and the proposed infrastructure levy, a levy rate is set for all development within certain parameters. When setting rates, the local planning authority has to calculate how much value uplift will occur on average, and has to make assumptions about landowner premiums and set a levy rate on that basis. The actual premium required by individual landowners will not be available to local planning authorities and will vary depending on individual circumstances. If the local planning authority makes an inaccurate assumption about landowner premiums, they may either make a lot of sites unviable by setting too high a levy rate, or else they will collect much less than they might have done otherwise by setting too low a levy rate.
Under the CLA process, landowners bid to have their land selected for allocation in an emerging local plan, as I have described, by stating the price at which they would willingly sell their land to the LPA for development. The offer from the landowner, once an option agreement is in place with the LPA, becomes legally binding. The LPA can either exercise it themselves, thereby purchasing the land, or auction it to developers. The competitive nature of CLAs incentivises landowners to reveal the true price at which they would willingly part with their land. If they choose to offer a higher price, they risk another piece of land being allocated for development, in which case they will not secure any value uplift at all.”
But if you’re regularly involved in local plan making and/or the promotion of land for development, obvious points arise, none of which are addressed in the above – or anywhere as far as I can see:
the nature, terms and timing of these “options”. They would need to be investment-grade binding commitments on the owner (or owners – many potential allocations are a patchwork of interests knotted together by land promoters) and the owner’s successors in title, with all those with relevant interests (eg mortgagees, tenants) having consented, legally binding for a very long period of time, until drawdown which would be way past local plan adoption, with no get out if any owner changes its plans.
The above means heavy-duty conveyancing input on the part of the owner but also on the part of the local authority, all within the necessary local plan preparation window. Given the number of sites proposed in any local authority’s “call for sites” this is a truly massive amount of work to be resourced by the authority, even with terms as standardised as possible.
The proposed option price by the land owner is going to be influenced by whether best values are to be achieved (1) blind via this route, (2) by in some way bringing forward a scheme outside the process (if this is ruled out the system is utter nationalisation and state control of development – if that’s what you voted for, fine, but I suspect it’s not) or (3), as has happened with other forms of development land tax, by just waiting it out for a less restrictive regime.
Say two pieces of land are put forward as alternative locations for the expansion of a town, one less sustainable than the other (eg it may be greenfield rather than brownfield, remote from public transport connections). The owner of the less sustainable site may offer to make its land available for a lower price. To what extent can or should the authority take into account the additional monies to be extracted from on-sale of the less sustainable site in deciding which to allocate? My early years as a planning lawyer were in the out of town supermarket wars, where the common situation was the local authority seeking to promote a supermarket on its own, worse, site in opposition to better proposals by others, for obvious reasons that at the time of course had to remain unspoken because having regard to the authority’s potential financial returns was obviously verboten. Just think how this would play out under what is proposed – and with much of the decision making inevitably taking place behind closed doors due to inevitable commercial confidentiality.
How is commercial and mixed used development to be approached and dealt with in valuation terms? Is this how we are going to allocate land for major logistics or industry? It’s a cookie cutter approach as presented: housing, housing, housing.
The local authority is envisaged to be the ring master and banker of the whole processes. Whilst this may be welcome in some ways, capacity building would be required on a huge scale.
In any event, the current system already minimises land values, and will increasingly do that if relatively recent changes to the viability process are allowed to bed down. Every time development comes forward with less affordable housing than required by policy, that is because the authority, or inspector on appeal, has been satisfied, on the basis of valuation advice, that no more affordable housing could be extracted and the scheme still proceed, based on an appraisal that doesn’t feed in the price the developer may actually have paid for the land but, usually, just existing use value with a premium set at the minimum that the valuers agree would have been necessary to persuade the owner to sell. I would like to see an explanation of why the option price offered by a land owner would be likely to be lower than EUV+.
Oh and there’s nothing “community” about it.
That’s just the outcome 15 minutes’ thought at the kitchen table on a Saturday morning with Joan Armatrading on in the background.
Some people seem to think that the planning system can be used as a sandbox for trying out these over-complicated, theoretical constructs. I set out my brief thoughts on the infrastructure levy last week and see also the “no hope value” thinking. We’re barking up the wrong tree folks. Drop the pilot. We don’t have the time. Get the existing system to work, now, with more resources and less complexity, better guidance and – perish the thought – some political consistency. Use the local plans system for planning and the tax system for taxation rather than creating something which sounds more like a complicated board game. In my humble opinion.
Simon Ricketts, 19 May 2023
Personal views, et cetera
The phrase to “drop the pilot” means to abandon a trustworthy adviser. This 1890 Punch cartoon depicts the dismissal of Otto von Bismarck from the Chancellorship of the German Empire by Wilhelm II.
Thinkin’ ’bout the IL and how to build some homes”.
Many of us have had an intense few weeks of meetings and calls on the subject of the proposed infrastructure levy since publication in March 2023 of DLUHC’s technical consultation document and ahead of the 9 June deadline for responses to the 45 questions asked.
There is some bewilderment. We’re used to proposals for planning reform that introduce additional complexity, that as yet have no proof of concept or that are likely to have unintended, unwelcome, consequences, but the consensus seems to be that IL really takes the biscuit.
Sam Stafford and BECG have now done wonders in editing a recent Clubhouse discussion I hosted on the subject (featuring some people who know what they are talking about – my Town Legal partner Clare Fielding, Quod’s Sasha Gordon, BNP Real Estate’s Anthony Lee, the BPF’s Sam Bensted, Irwin Mitchell’s Nicola Gooch and, last but not least, Gilian MacInnes) into a 50 Shades of Planning podcast episode. Whatever your current level of knowledge of the proposals I think you will find it worth a listen – if only for Sam’s comments at the head and tail of the piece. It’s available to listen to here.
“Cheer up, it might never happen”, you could say. But it might.
The GLA has released consultation drafts of its new London Plan Guidance (LPG) on Affordable Housing and on Development Viability (4 May 2023). The consultation closes on 24th July 2023.
There is a huge amount of detail to take in.
I am very grateful indeed to my Town Legal colleague Susie Herbert for what follows:
Summary
The updated LPG documents will replace the GLA’s 2017 SPG on Affordable Housing and Viability. The new LPG comprises two documents with one covering Affordable Housing and the other covering Development Viability. The Affordable Housing document covers the threshold approach, tenure, grant funding and build to rent while the Development Viability document covers the viability assessment process, principles for undertaking viability assessments, viability assessment information, inputs and sense checking, the review mechanisms and the formulas.
While much of the draft is similar the 2017 SPG with updates to reflect the 2021 London Plan and and to incorporate other guidance that has been released in the interim (such as the 2018 Practice Note on Public Land), some of the proposed changes are of more substance.
These include much more detailed guidance on the process for and the inputs to viability reviews covering a wider range of inputs which suggests a more prescriptive and standardised approach, including more emphasis on optimising the viability of the development including exploring different testing alternative uses; a suggestion that financing costs should be treated differently for different types of developer, and an exclusion of risk items of development costs such as Rights of Light costs or asbestos removal. It is also made clear throughout the guidance that any public subsidy should be included in the development value but that the target return should not be applied to any public subsidy.
There is also more prescriptive guidance on section 106 agreements and to monitoring requirements for both applicants and LPAs with information to be reported to the Planning London Datahub.
There is a more prescriptive approach to mid-term reviews which are now expected for schemes over 500 dwellings as well as those expected to have a build programme of more than 5 years or for estate regeneration schemes. Any surplus return identified in a mid-stage review is expected to be used to deliver affordable housing.
In respect of early stage reviews, the draft guidance effectively rules out force majeure clauses so that the early stage review will apply whatever the reason for delay.
Turning to eligibility criteria, there is a greater emphasis on provision for key workers and the consultation also states that the GLA is considering raising the £60,000 threshold to £67,000 and comments are invited on this.
While the threshold approach remains in place, there is a change in respect of scheme changes which will allow schemes which were originally subject to viability review to follow the fast track route in respect of additional dwellings if there additional dwellings include enough affordable provision to meet the relevant threshold.
While co-living will generally be subject to viability review, there is the potential for it to be assessed under the fast track route if it provides affordable housing meeting the internal space standards and the requirements of policies H5 and H6.
The consultation questions generally ask for comments on and suggestions for improvement for the various sections although there are some specific questions in particular in respect of income caps for intermediate housing.
Affordable Housing Document
Threshold approach
The “threshold approach” first set out in the 2017 SPG remains. This means that the Fast Track Route (FTR) is available for schemes with the minimum of 35% or 50% for public-sector land and industrial sites where there would be a net loss of industrial capacity although the 35% no longer states that it has to be achieved without public subsidy.
There is a change compared to the 2017 SPG in respect of scheme changes for developments that did not qualify for the FTR. Previously any changes would also be subject to viability review but the draft LPG now suggests that if the proposed change is to increase the number of dwellings and that increase would include enough affordable housing meet the relevant threshold, then the FTR is available for the application to make the change to the scheme (paragraph 2.8.3).
The list of applications for which the FTR is specifically expressed not to be available and which must be subject to the Viability Tested Route (VTR) has also been expanded compared to the 2017 version to include co-living (large-scale, purpose-built, shared-living accommodation (LSPBSL) (in accordance with Policy H16) and also applications “where other relevant policy requirements are not met to the satisfaction of the LPA or the Mayor” which reflects Policy H5 C 3). There is further guidance on this at Appendix 2 of the draft LPG which does allow for the possibility of the FTR for co-living if it provides sufficient affordable housing.
Tenure
The draft LPG states that the Mayor’s preferred affordable housing tenure for low-cost rented homes is Social Rent and not London Affordable Rent as only Social Rent homes are eligible for grant funding under the London Affordable Homes Programme (AHP) 2921-26. This is slightly different from the London Plan 2021 which lists both Social Rent and London Affordable Rent as preferred affordable housing tenures (para 4.6.3).
Eligibility for intermediate housing
In terms of eligibility for intermediate housing which is currently subject to a maximum income cap of £60,000, the consultation survey states that the GLA is considering raising the income cap to £67,000 in line with changes to median incomes in London since 2017. Consultees are asked whether they agree with this and to provide comments.
The London Plan requires that intermediate housing is provided for a range of household incomes below the maximum caps for the first three months of marketing. The survey states that the GLA is considering setting out income levels below the maximum level which would apply where the relevant local planning authority has not published local income levels and the survey asks for views on whether this would be a helpful addition to the guidance.
LLR
The section on London Living Rent (LLR) states that rents should not be increased above the rate of the CPI including housing costs within tenancies and that on re-let the rent should revert to the LLR (or lower). It also states that if no tenant has purchased their current home within 10 years, the RP may sell the home to another eligible purchaser on a shared ownership basis.
Key workers
The draft LPG also “strongly encourages” local authorities and housing providers to prioritise key workers when setting eligibility and prioritisation criteria.
Affordability
The guidance covers the new model for shared ownership (SO) homes introduced by the Government in 2021 (which allows for the initial share to be a minimum of 10% rather than 25%) and confirms that only the new SO model homes will be funded by the AHP 2021-26 so the Mayor will expect SO homes to be provided on that basis.
Service Charges
The draft LPG contains a section on service charges which states that Applicants, LPAs and affordable housing providers should ensure that service charges are affordable for residents, and that they do not exceed the cost of the services provided. It also states that applicants should consult with affordable housing providers at an early stage to minimise service charges as part of design and management strategies.
The LPG also states that residents of affordable housing should be given the same rights of access to amenities and facilities within the scheme as occupiers of market housing at no additional charge other than service charges. If an LPA agrees that access to a facility would make service charges unaffordable for residents of affordable housing, this should be excluded from standard service charges and they should be given full optional rights of access at a fair and reasonable charge.
Key features document
A key features document should be provided to potential tenants and purchasers at the start of the marketing period. This should include detailed information on the tenure of a property and the length of any lease, as well as the full range of potential costs, including any expected service charges, permission fees and any other charges (including those relating to resales).
Grant
The draft LPG describes how the Mayor’s grant funding powers work alongside the threshold approach and describes the AHP 2016-23 and 2021-26. In terms of maximising delivery, the FTR is available where an applicant commits unconditionally to provide at least 40 per cent affordable housing with grant (or 50% on public or industrial land). However, if the s106 will allow for a lower level of affordable housing than the relevant threshold if grant is not available, the scheme must follow the VTR.
If grant is not available at the application stage but grant funding subsequently becomes available, the S106 should require that the level of affordable housing proposed in the grant application is provided.
Build to Rent
The BtR section has been updated and reflects the London Plan 2021 Policy H11.
Securing delivery
There is a new section on securing delivery which sets out what a section 106 agreement should include such as restrictions on occupation and ensuring that affordable housing is not concentrated in final phases. It states that the affordable housing should be sold to an RP on a freehold or long (990 years) leasehold basis. The section 106 agreement should secure obligation in line with the LPG and the Mayor’s standard section 106 clauses such as eligibility, affordability and review mechanisms. The section 106 should also provide for the recycling of subsidy in the event that a home is no longer provided as affordable housing.
Monitoring and implementation
There is also a section setting out the applicant’s and the LPA’s responsibilities in respect of monitoring and implementation. The applicant should submit information on the affordable housing to be provided and the outcome of any viability review in a standardised format specified by the GLA.
The section also expands on the requirement under London Plan Policy H7 for boroughs to have clear monitoring processes with annual publication of monitoring information. It is strongly recommended that this monitoring is undertaken by specialist officers or teams wherever possible and the costs of this should be met by applicants.
Development viability
Principles for undertaking viability assessments
The guidance in Section 3 on the principles for undertaking viability assessments is significantly more detailed than the equivalent sections in the 2017 SPG.
There are also additional sections on:
(a) how viability assessments should be objective and realistic with requirements for assessors;
(b) modelling sensitivity testing of assumptions and inputs and value growth and cost inflation;
(c) optimising the viability of development with detail of how applicants should demonstrate that the proposed scheme optimises site capacity through a design-led approach which may include testing different residential typologies such as BtR and build for sale; and
(d) sense-checking.
The consultation survey asks whether the approaches set out in these sections are practical and will help to ensure that viability assessments are robust.
Viability assessment information, inputs and sense-checking
Again there is further additional detail on the inputs for the viability review compared with the 2017 SPG including on affordable housing values. This section also includes new detailed guidance on sales values, investment values, commercial property, grant and public subsidy, development programme, finance costs and other development costs. There is also a further section on sense checking.
Review mechanisms
Early Stage Reviews
In respect of Early Stage Reviews, there is a new paragraph on substantial implementation which makes it clear that provisions that seek to delay the trigger date for an Early Stage Review should not be included in the section 106 agreement. The reasoning is that the review is intended to secure additional affordable housing where viability allows, regardless of the reason development may have been delayed. This means that force majeure clauses which had sometimes been agreed to in light of the disruption caused by the pandemic will no longer be accepted.
There may be more flexibility on the definition of substantial implementation as the paragraph now makes clear that the description of works is an example of substantial implementation rather than a definition of it.
Where a payment in lieu of on-site affordable housing is made following an ESR, the guidance states that this can be included as a cost in subsequent reviews.
Mid-Term Reviews
The 2017 SPG stated that LPAs should consider mid-term reviews for larger developments that will be built out over a number of phases. This is expanded in the draft LPG. The draft guidance states that Mid-Term Reviews should be provided for larger phased schemes including those that propose 500 or more residential units (or for mixed-use schemes, the equivalent amount of development in floorspace) and that there may be other circumstances where Mid-Term Reviews are required for example where the construction programme is five years or longer or for estate regeneration schemes.
The timing for Mid-Term Reviews is to be agreed with the LPA or the Mayor as applicable. For outline or hybrid schemes it may be appropriate for reviews to take place as part of reserved matters applications to enable affordable housing to be included within the design of the relevant phase or future phases.
Mid-Term Reviews should assess the scheme as a whole, taking into account actual values and costs for earlier phases, and estimated figures for subsequent phases. They will not be conditional on reaching a specific level of progress by a trigger date.
Terms of viability review mechanisms
This section sets out more detail on the terms of VRMs to be included in s106 agreements. This includes that any public subsidy is included in the development value figures but that the target return should not be applied to any public subsidy.
For Mid-Term Reviews, the guidance states that it is most appropriate that they follow Early Stage Reviews in that any surplus return should be applied to the delivery of affordable housing. For Late Stage Reviews it may be acceptable for an element of surplus return to be retained by the applicant but not exceeding 40%.
There is also an additional requirement to ensure reporting of information to the Planning London Datahub on the number and tenure of affordable housing by unit and habitable room secured in the application and the outcome of reviews including additional affordable housing, changes in tenure and any financial contributions.
The Formulas
Formula 1a – this is unchanged except for a note which states that the review GDV and build-costs figures should include the commercial component where relevant.
Formula 1b – the note now clarifies that the application and review stage GDV figures should include any public subsidy that is available at the time of the assessment but this should be excluded when calculating developer return.
Formula 3 on late stage reviews contains additional guidance on how the assessment should be adjusted for BtR if they were originally assessed as build for sale.
There is a new Formula 5 for Mid-Term Reviews based on Formula 2 but using actual values and costs for completed parts of the development at the time of the review and estimated figures for the rest of the scheme.
There is also a new Formula 6 for converting affordable housing to a more affordable tenure.
The specific BtR formulas from the 2017 SPG (Formulas 5 and 6) are not included.
In terms of viability deficits, the draft guidance states that deficits should not normally be accounted for in review mechanisms and should only be allowed exceptionally where agreed by the LPA (and the GLA). Deficits should not be included in reviews for schemes that have followed the FTR. The extent of any deficit should be determined by the LPA and the Mayor. A breakeven appraisal can be undertaken at application stage to assess the level of GDV and build costs at which the RLV equates to the BLV. The breakeven GDV and Build Costs should replace the application-stage GDV and build cost figures in the formulas.
Thank goodness we have a long weekend to take all this in! I’ll be testing you on Tuesday.
Simon Ricketts (with thanks again to honorary guest blogger Susie Herbert), 6 May 2023
Brave timing, with local elections this week, but it is helpful finally to see some detail today as to Labour’s proposed approach to planning reform in today’s Times piece, Starmer’s growth plan is built on houses (The Times, 1 May 2023 – behind paywall):
“Labour will pledge to restore housebuilding targets and hand more power to local authorities; promise 70 per cent home ownership and hundreds of thousands of new council homes. Given the resistance of so many local authorities to development, that may sound like a contradiction in terms. But I’m told a Starmer government would wield both carrot and stick: councils would be made to work together to come up with plans for development at a regional level, spreading a burden few want to shoulder individually, with cash and infrastructure as the prize for new housing. (Bafflingly, they are under no obligation to work together now.) If proposed developments meet the standards set out in those local plans, they will be approved. So no longer would each town hall have to agree to what one senior Labour source calls “shitty speculative developments” to meet targets arbitrarily imposed upon them. But nor will they be allowed to opt out of building either.
Starmer’s government would also look anew at the green belt, swathes of which — including a petrol station in Tottenham Hale, north London — are neither green nor pleasant. Those sites would be liberated. Not all politics is local, however. We can also expect to hear more about national projects, driven from the centre too: intensive development on the 50-mile Oxford-Cambridge Arc and a generation of new towns are all under discussion as Starmer’s aides work up plans to be announced at Labour conference in September.”
Obviously, more detail is needed and some policy nuances are lost in this summary – for instance:
We still do have targets, it’s just that they will become even more of an advisory starting point than at present.
We still have the duty to cooperate, indeed it seems from a Planning Resource story this week it seems that there may even be a re-think as to its replacement, in relation to housing numbers as opposed to infrastructure and nature strategies, by some vague alignment approach.
But, really, contrast even this thumbnail sketch of Labour thinking with new housing and planning minister’s Rachel Mcclean’s rather defensive and dare I say it unimpressive appearance before Select Committee this week. Much unsubstantiated assertion, much “we’ll come back to you on that”. NB Advice to any politician, never question Lichfields’ research – you won’t win!
Turn away if you feel uncomfortable about use of the B word, but…
I was as unconvinced by her explaining away the current wave of local planning authorities which have paused local plan production as I was later in the week during her appearance on BBC’s Question Time when she became animated in response to someone who asserted that Brexit was one of the causes for this country’s current poor economic performance.
Recognise the issues, own them!
On reflection, perhaps Labour’s unveiling of its approach to housing and planning has come at precisely the right time (although I won’t let that party off the hook on Brexit either…)
SIMONICITY 