“• changes to the standard method for assessing local housing need, which as well as being a proposal to change guidance in the short term has relevance to proposals for land supply reforms set out in Planning for the Future;
• securing of First Homes, sold at a discount to market price for first time buyers, including key workers, through developer contributions in the short term until the transition to a new system;
• temporarily lifting the small sites threshold below which developers do not need to contribute to affordable housing, to up to 40 or 50 units to support SME builders as the economy recovers from the impact of Covid-19;
• extending the current Permission in Principle to major development so landowners and developers now have a fast route to secure the principle of development for housing on sites without having to work up detailed plans first.”
Kings Chambers’ Constanze Bell hosted a good discussion on the proposals in a 28 August podcast with a panel comprising (Diana Richardson, Gladman), Paul Bedwell (Pegasus), Martin Carter (Kings Chambers) and Jonathan Easton (Kings Chambers).
Changes to the standard method
The Government “proposes a revised standard method for calculating local housing need which will be used as the basis for plans created prior to any changes outlined in Planning for the Future being introduced.”
There will be two steps:
Step 1 – the “baseline for the standard method should be whichever is the higher of 0.5% of existing housing stock in each local authority OR the latest projected average annual household growth over a 10-year period”
“The household projections element of the baseline will use the latest ONS national household growth projections for the local authority area (Principal projection, table 406). The projected average annual household growth over a 10-year period (10 consecutive years, with the current year being used as the starting point from which to calculate growth over that period) will be used.”
Step 2 – “We propose the standard method will include two adjustments to the baseline using the workplace-based median house price to median earnings ratio. Initially it is proposed that the ratio for the most recent year for which data is available in order to address current affordability of homes would be used. Then how affordability has changed over the last 10 years of published data would be incorporated, using that same statistic.”
The Government proposes the following transitional arrangements: “from the publication date of the revised guidance, authorities which are already at the second stage of the strategic plan consultation process (Regulation 19) are given 6 months to submit their plan to the Planning Inspectorate for examination. Authorities close to publishing their second stage consultation (Regulation 19), should be given 3 months from the publication date of the revised guidance to publish their Regulation 19 plan and a further 6 months to submit their plan to the Planning Inspectorate.”
In theory, the new formula could be with us very quickly: “Following the outcome of this consultation, the Government will update the planning practice guidance with the revised standard method for assessing local housing need.”
Basically they are intended to be a “for sale” product for first time buyers and other qualifying groups, sold at a 30% discount to market value, which must be maintained on re-sale. At that point the Government was consulting on the detail.
This is what it has concluded, subject to this further consultation:
⁃ “a minimum of 25 per cent of all affordable housing units secured through developer contributions should be First Homes. This will be a national threshold, set out in planning policy.”
⁃ “The Government proposes that, under the new system, a policy compliant planning application should seek to capture the same amount of value as would be captured under the local authority’s up-to-date published policy. For instance, a local policy may require 20% affordable housing on site, half of which is shared ownership, and half of which is social rent. The plan viability assessment will set out assumptions on the amount of value captured – for example, a social rent home may be discounted by 50% from market price, and a shared ownership home may be discounted by 20%. This allows the total value captured under the policy to be calculated. This value can then be reallocated to a different affordable housing mix under the new policy.”
⁃ “For the remaining 75% of affordable housing secured through developer contributions, there are two broad options:
• “Option 1: Where a local authority has a policy on affordable housing tenure mix, that policy should be followed, but with First Homes delivering a minimum of 25% of the affordable housing products…”
• “Option 2: A local authority and developer can negotiate the tenure mix for the remaining 75% of units.”
It will be open to authorities to require in their local plans that the discount be 40% or 50% rather than 30% but they will not be able to water down the requirement that 25% of the affordable homes to be provided on site must be First Homes.
Again, the proposal could be with us quickly, initially in the the form of “planning policy changes” (Planning Practice Guidance? NPPF changes? Written ministerial statement?):
“We intend to begin by making planning policy changes, to ensure that clear expectations are set. However, to ensure that First Homes are delivered, nationwide, on a consistent basis, we are keeping under consideration the option to strengthen the policy through primary legislation at a future date. We also intend to introduce an exemption from the Community Infrastructure Levy for First Homes, to enable delivery prior to wider developer contribution reform. This would require changes to regulations. Lastly, we are also considering significant reforms to the system of developer contributions. We will ensure that First Homes will continue to be delivered under a reformed approach”
However, it seems from the transactional arrangements set out below that the requirement will not immediately take full effect:
56. We recognise that local authorities may need to review the tenure mix for the remainder of the affordable housing that they are seeking to secure. Where local authorities choose to update their tenure mix to reflect this policy, they can do this through a local plan review, although we believe that prioritising the replacement of home-ownership tenures by First Homes will reduce the need for this.
57. We also recognise that there will be a number of local plans and neighbourhood plans that have been prepared based on the existing National Planning Policy Framework and that have reached more advanced stages of the plan-making process. Therefore, local plans and neighbourhood plans that are submitted for Examination within 6 months of this new policy being enacted will not need to reflect the First Homes policy requirements.
58. We also recognise that many developers will have been preparing planning applications under different assumptions. Where significant work has already been undertaken to progress a planning application, including where there has been significant pre-engagement with a local authority on the basis of a different tenure mix of affordable housing, the local authority should have flexibility to accept alternative tenure mixes, although they should consider whether First Homes could be easily substituted for another tenure, either at 25% or a lower proportion.”
Lifting the small sites threshold for SME builders
This could have a significant effect on development. In London, for instance, it will have big repercussions.
“We are proposing to raise the small sites threshold to up to either 40 or 50 new homes through changes to national planning policy and are seeking views on the most appropriate level. These thresholds balance the aim of supporting SMEs with the need to deliver new affordable homes. This will be for an initial period of 18 months in which we will monitor the impact of the raised threshold on the sector before reviewing the approach.”
“ In designated rural areas, we … propose to maintain the current threshold.”
The current threshold is 10 new homes, or site area of 0.5 hectares. The site area threshold will be increased “at the same proportion”, so presumably to 2 or 2.5 hectares (although should in fact the site area increase be less, to reflect likely density of development?).
Again the proposal could be in effect quickly:
“Following the consultation, a decision will be taken on whether to proceed with this approach. If it is taken forward, this could be through the introduction of a Written Ministerial Statement in the Autumn.”
If you are an SME developer with a scheme which may qualify, might it be worth your while seeing how this pans out? Of course it will not be straightforward – we are likely to see some local planning authorities seeking understandably to continue to rely on adopted local plan requirements for affordable housing, choosing to apply less weight to the written ministerial statement, and therefore the potential need to appeal.
Presumably the Government is hoping to see significant take-up, meaning inevitably less affordable housing. That would seem to be a politically-charged trade-off but may in reality simply leapfrog what would otherwise have been a viability process outcome in many instances.
Local planning authorities are currently required to maintain brownfield land registers, in two parts.
– Part 1: previously developed land with an area of at least 0.25 hectares that is suitable and available for residential development and where residential development is achievable (all defined terms).
– Part 2: land in Part 1 where the local planning authority has exercised its discretion to enter the land in Part 2 and has decided to allocate the land for residential development having followed defined publicity, notification and consultation procedures.
If your land is on Part 1 of the register you can currently apply for permission in principle for minor development (basically less than ten dwellings). If your land is on Part 2 of the register you already have permission in principle for the development set out in the register (which must not be large enough to require environmental impact assessment.
There is a further procedure in the Housing and Planning Act 2016, but not yet brought into effect, for automatic permission in principle to stem from allocation in defined categories of statutory development plans rather than just from designation on a brownfield land register.
The Government now proposes “to remove the restriction in the current Permission in Principle regulations on major development”. Although the paper is not specific, this must surely simply mean that permission in principle would now be able to be applied for in relation to major development (although still not development such as to require environmental impact assessment so, unless a negative screening opinion has been obtained, capped at 150 dwellings/5 hectares), as long as the site is on Part 1 of a local planning authority’s brownfield land register.
The paper proposes that there be no cap on the amount of commercial development proposed, although the scheme will need to be “residential-led”. The procedure is quicker than the outline planning application procedure (five weeks determination period, 14 days deadline for responses from statutory consultees).
There is not proposed to be any increase in the information requirements that currently apply to PiP applications for minor development. “However, we would be interested in whether, given the larger scale of development, there should be an additional maximum height threshold parameter, in terms of number of storeys, as part of the Permission in Principle. This would provide greater clarity to the applicant and local planning authority about the scale of housing development that is acceptable for the site, particularly in high density urban areas. Conversely, the inclusion of a maximum height parameter would add further complexity to the determination of Permission in Principle as it starts to bring in design considerations, and may in practice lead to greater confusion – for instance, a high height threshold may only be acceptable for part of the site given the impact on neighbouring dwellings.”
The Government is proposing to adjust the application fee regime to increase the cost saving in comparison with a traditional application for outline planning permission.
This all certainly gives additional focus to brownfield land registers (which I last looked at in my 5 January 2018 blog post Brownfield Land Registers: A Bit Of Progress). If you have land that is on Part 1 of a brownfield land register, it will certainly be a procedural route to consider.
Again, we could see the proposal come into effect relatively quickly. “Following this consultation, if we introduce Permission in Principle by application for major development, we aim to introduce amending regulations this Autumn, with the regulations expected to come into force by the end of the calendar year. Changes to the fee structure would require separate changes to the Planning Fees Regulations.”
Of course, this will also be a useful test as to how well permission in principle can be made to work in practice, ahead of the Government’s more ambitious proposals the subject of ChangesOne (and my 7 August 2020 blog post For The Future).
When I saw a limelon for the first time yesterday (some recently marketed lime/melon hybrid since you ask, and tangy and refreshing it is indeed), I naturally thought of the proposed combined infrastructure levy: what on earth is it?
Planning For The Future is of course work in progress and it may be churlish for us to expect it to have all the answers. After all, it is up to us to provide cogent responses to the current consultation process.
But the sections in the document on infrastructure contributions are very light indeed, given the central role that section 106 and the community infrastructure levy play in the current system and the obvious complexity of arriving at a system for a combined infrastructure levy that on the one hand does not choke off various forms of development in some areas by making it unviable and that on the other hand both (1) raises sufficient monies to secure the delivery of necessary social (e.g. affordable housing) and physical infrastructure and also (2) ensures for the benefit of both communities and developers that the infrastructure will actually be provided in the right place, at the right time.
•Update the evidence on the current value and incidence of planning obligations
• Investigate the relationship between CIL and S106
• Understand negotiation processes and delays to the planning process
• Explore the monitoring and transparency of developer contributions
• Understand the early effects and expectations for the changes to developer contributions brought in by the revisions to the NPPF
Chapter 3 (The value of Planning Obligations and the Community Infrastructure Levy) sets out some interesting findings:
“• The estimated value of planning obligations agreed and CIL levied in 2018/19 was £7.0 billion. This valuation is premised upon the assumptions identified in the appendix, corresponding to survey validity, respondent representation and the distribution of values.
• When adjusted to reflect inflation the total value of developer contributions in real terms is £500 million higher than in 2016/17, £300 million higher than in 2007/08.
• 67% of the value of agreed developer contributions was for the provision of affordable housing, at £4.7 billion; this is the same proportion as in 2016/17 and is the joint-highest to date.
• 44,000 affordable housing dwellings were agreed in planning obligations in 2018/19. This is a reduction since 2016/17, but the value of this housing has increased over the same period due to an increase in house prices in many areas with higher developer contributions.
• The value of CIL levied by LPAs was £830 million in 2018/19, with a further £200 million levied by the Mayor of London.
• The geographic distribution of planning obligations and CIL is weighted heavily towards the south of England. The South East, South West and London regions account for 61% of the total value. However, the value of developer contributions exacted in London has fallen since 2016/17 – down from 38% to 28% of the total aggregate value.”
There is nothing in the white paper that explicitly draws from the findings of that report in order to arrive at the wholly new mechanism that is proposed.
Some people seem to have picked up the message that the white paper means the end of the community infrastructure levy – a cause for celebration in some parts. But the white paper’s proposal for a combined infrastructure levy to my mind is CIL writ large, potentially just as complex, with a whole new set of rate setting, liability, payment and spending mechanisms and with the express objective of raising more monies than the current system. It warrants its own focus at this point, away from the noise of the other proposals in the white paper.
How to begin to unpick what is proposed in relation to CIL and section 106 planning obligations (and what the proposals in relation to section 106 mean for the delivery of affordable housing in particular)? I wrote down for myself five basic questions:
1. How will planning obligations work under the new system?
2. What will happen to CIL?
3. How will the new Combined Infrastructure Levy be set?
4. What requirements will there be on local authorities as to how they apply combined infrastructure levy receipts?
5. Under the new system, how can local planning authorities set requirements for affordable housing and seek to ensure that they are delivered?
In order to try to answer them (in a way which would have to work in relation to all of the proposed consenting routes: DCO, outline planning permission in plan, PiP (if different from outline permission in plan, not sure!), traditional planning permission, PD), then I cut and pasted the relevant passages from the white paper in their entirety (only leaving out the detail of some of the “alternative options” floated and leaving out the questions raised in the consultation). It is easy to read summaries and think “well there must be more detail in the document itself”. It is worth reading these passages to see the totality of the proposals.
After these passages I then see how far we can get in answering my questions.
“The process for negotiating developer contributions to affordable housing and infrastructure is complex, protracted and unclear: as a result, the outcomes can be uncertain, which further diminishes trust in the system and reduces the ability of local planning authorities to plan for and deliver necessary infrastructure. Over 80 per cent of planning authorities agree that planning obligations cause delay. It also further increases planning risk for developers and landowners, thus discouraging development and new entrants.”
“1.19. Fourth, we will improve infrastructure delivery in all parts of the country and ensure developers play their part, through reform of developer contributions. We propose:
• The Community Infrastructure Levy and the current system of planning obligations will be reformed as a nationally-set value-based flat rate charge (‘the Infrastructure Levy’). A single rate or varied rates could be set. We will aim for the new Levy to raise more revenue than under the current system of developer contributions, and deliver at least as much – if not more – on-site affordable housing as at present. This reform will enable us to sweep away months of negotiation of Section 106 agreements and the need to consider site viability. We will deliver more of the infrastructure existing and new communities require by capturing a greater share of the ulpift [sic] in land value that comes with development.
• We will be more ambitious for affordable housing provided through planning gain, and we will ensure that the new Infrastructure Levy allows local planning authorities to secure more on-site housing provision.
• We will give local authorities greater powers to determine how developer contributions are used, including by expanding the scope of the Levy to cover affordable housing provision to allow local planning authorities to drive up the provision of affordable homes. We will ensure that affordable housing provision supported through developer contributions is kept at least at current levels, and that it is still delivered on-site to ensure that new development continues to support mixed communities. Local authorities will have the flexibility to use this funding to support both existing communities as well as new communities.
• We will also look to extend the scope of the consolidated Infrastructure Levy and remove exemptions from it to capture changes of use through permitted development rights, so that additional homes delivered through this route bring with them support for new infrastructure.
“4.5. Securing necessary infrastructure and affordable housing alongside new development is central to our vision for the planning system. We want to bring forward reforms to make sure that developer contributions are:
• responsive to local needs, to ensure a fairer contribution from developers for local communities so that the right infrastructure and affordable housing is delivered;
• transparent, so it is clear to existing and new residents what new infrastructure will accompany development;
• consistent and simplified, to remove unnecessary delay and support competition in the housebuilding industry;
• buoyant, so that when prices go up the benefits are shared fairly between developers and the local community, and when prices go down there is no need to re-negotiate agreements.
4.6. The Government could also seek to use developer contributions to capture a greater proportion of the land value uplift that occurs through the grant of planning permission, and use this to enhance infrastructure delivery. There are a range of estimates for the amount of land value uplift currently captured, from 25 to 50 per cent. The value captured will depend on a range of factors including the development value, the existing use value of the land, and the relevant tax structure – for instance, whether capital gains tax applies to the land sale. Increasing value capture could be an important source of infrastructure funding but would need to be balanced against risks to development viability.”
“4.7. We propose that the existing parallel regimes for securing developer contributions are replaced with a new, consolidated ‘Infrastructure Levy’.
Proposal 19: The Community Infrastructure Levy should be reformed to be charged as a fixed proportion of the development value above a threshold, with a mandatory nationally-set rate or rates and the current system of planning obligations abolished.”
“4.8. We believe that the current system of planning obligations under Section 106 should be consolidated under a reformed, extended ‘Infrastructure Levy’.
4.9. This would be based upon a flat-rate, valued-based charge, set nationally, at either a single rate, or at area-specific rates. This would address issues in the current system as it would:
be charged on the final value of a development (or to an assessment of the sales value where the development is not sold, e.g. for homes built for the rental market), based on the applicable rate at the point planning permission is granted;
• be levied at point of occupation, with prevention of occupation being a potential sanction for non-payment;
• include a value-based minimum threshold below which the levy is not charged, to prevent low viability development becoming unviable, reflecting average build costs per square metre, with a small, fixed allowance for land costs. Where the value of development is below the threshold, no Levy would be charged. Where the value of development is above the threshold, the Levy would only be charged on the proportion of the value that exceeded the threshold ; and
• provide greater certainty for communities and developers about what the level of developer contributions are expected alongside new development.
4.10. The single rate, or area-specific rates, would be set nationally. It would aim to increase revenue levels nationally when compared to the current system. Revenues would continue to be collected and spent locally.
4.11. As a value-based charge across all use classes, we believe it would be both more effective at capturing increases in value and would be more sensitive to economic downturns. It would reduce risk for developers, and would reduce cashflow difficulties, particularly for SME developers.
4.12. In areas where land value uplift is insufficient to support significant levels of land value capture, some or all of the value generated by the development would be below the threshold, and so not subject to the levy. In higher value areas, a much greater proportion of the development value would be above the exempt amount, and subject to the levy.
4.13. To better support the timely delivery of infrastructure, we would also allow local authorities to borrow against Infrastructure Levy revenues so that they could forward fund infrastructure. Enabling borrowing combined with a shift to levying developer contributions on completion, would incentivise local authorities to deliver enabling infrastructure, in turn helping to ensure development can be completed faster. As with all volatile borrowing streams, local authorities should assure themselves that this borrowing is affordable and suitable.
4.14. Under this approach the London Mayoral Community Infrastructure Levy, and similar strategic Community Infrastructure Levies in combined authorities, could be retained as part of the Infrastructure Levy to support the funding of strategic infrastructure.
4.15. In bringing forward the reformed Infrastructure Levy, we will need to consider its scope. We will also consider the impact of this change on areas with lower land values.”
Alternative options proposed: “The Infrastructure Levy could remain optional and would be set by individual local authorities”. “Alternatively, the national rate approach could be taken, but with the aim of capturing more land value than currently, to better support the delivery of infrastructure”
“Proposal 21: The reformed Infrastructure Levy should deliver affordable housing provision
4.20. Developer contributions currently deliver around half of all affordable housing, most of which is delivered on-site. It is important that the reformed approach will continue to deliver on-site affordable housing at least at present levels.
4.21. Affordable housing provision is currently secured by local authorities via Section 106, but the Community Infrastructure Levy cannot be spent on it. With Section 106 planning obligations removed, we propose that under the Infrastructure Levy, authorities would be able to use funds raised through the levy to secure affordable housing.
4.22. This could be secured through in-kind delivery on-site, which could be made mandatory where an authority has a requirement, capability and wishes to do so. Local authorities would have a means to specify the forms and tenures of the onsite provision, working with a nominated affordable housing provider. Under this approach, a provider of affordable housing could purchase the dwelling at a discount from market rate, as now. However, rather than the discount being secured through Section 106 planning obligations, it would instead be considered as in-kind delivery of the Infrastructure Levy. In effect, the difference between the price at which the unit was sold to the provider and the market price would be offset from the final cash liability to the Levy. This would create an incentive for the developer to build on-site affordable housing where appropriate. [Footnote: As above, a Section 106 planning obligation could still be used to secure a covenant on the land, where necessary. However, the value would be captured through the Infrastructure Levy, rather than Section 106. ] First Homes, which are sold by the developer direct to the customer at a discount to market price, would offset the discount against the cash liability.
4.23. Under this approach we recognise that some risk is transferring to the local planning authority, and that we would need to mitigate that risk in order to maintain existing levels of on-site affordable housing delivery. We believe that this risk can be fully addressed through policy design. In particular, in the event of a market fall, we could allow local planning authorities to ‘flip’ a proportion of units back to market units which the developer can sell, if Levy liabilities are insufficient to cover the value secured through in-kind contributions. Alternatively, we could require that if the value secured through in-kind units is greater than the final levy liability, then the developer has no right to reclaim overpayments. Government could provide standardised agreements, to codify how risk sharing would work in this way.
4.24. We would also need to ensure the developer was incentivised to deliver high build and design quality for their in-kind affordable homes. Currently, if Section 106 homes are not of sufficient quality, developers may be unable to sell it to a provider, or have to reduce the price. To ensure developers are not rewarded for low standard homes under the Levy, local authorities could have an option to revert back to cash contributions if no provider was willing to buy the homes due to their poor quality. It is important that any approach taken maintains the quality of affordable housing provision as well as overarching volumes, and incentivises early engagement between providers of affordable housing and developers. Local authorities could also accept Infrastructure Levy payments in the form of land within or adjacent to a site. Through borrowing against further Infrastructure Levy receipts, other sources of funding, or in partnership with affordable housing providers, they could then build affordable homes, enabling delivery at pace.
4.25. Alternative option: We could seek to introduce further requirements around the delivery of affordable housing. To do this we would create a ‘first refusal’ right for local authorities or any affordable housing provider acting on their behalf to buy up to a set proportion of on-site units (on a square metre basis) at a discounted price, broadly equivalent to build costs. The proportion would be set nationally, and the developer would have discretion over which units were sold in this way. A threshold would be set for smaller sites, below which on-site delivery was not required, and cash payment could be made in lieu. Where on-site units were purchased, these could be used for affordable housing, or sold on (or back to the developer) to raise money to purchase affordable housing elsewhere. The local authority could use Infrastructure Levy funds, or other funds, in order to purchase units.”
“Proposal 22: More freedom could be given to local authorities over how they spend the Infrastructure Levy
4.26. It is important that there is a strong link between where development occurs and where funding is spent. Currently, the Neighbourhood Share of the Community Infrastructure Levy ensures that up to 25 per cent of the levy is spent on priorities in the area that development occurred, with funding transferred to parish councils in parished areas. There are fewer restrictions on how this funding is spent, and we believe it provides an important incentive to local communities to allow development in their area. We therefore propose that under this approach the Neighbourhood Share would be kept, and we would be interested in ways to enhance community engagement around how these funds are used, with scope for digital innovation to promote engagement.
4.27. There is scope for even more flexibility around spending. We could also increase local authority flexibility, allowing them to spend receipts on their policy priorities, once core infrastructure obligations have been met. In addition to the provision of local infrastructure, including parks, open spaces, street trees and delivery or enhancement of community facilities, this could include improving services or reducing council tax. The balance of affordable housing and infrastructure may vary depending on a local authority’s circumstances, but under this approach it may be necessary to consider ring-fencing a certain amount of Levy funding for affordable housing to ensure that affordable housing continues to be delivered on-site at current levels (or higher). There would also be opportunities to enhance digital engagement with communities as part of decision making around spending priorities. Alternatively, the permitted uses of the Levy could remain focused on infrastructure and affordable housing, as they are broadly are at present. Local authorities would continue to identify the right balance between these to meet local needs, as they do at present.”
“ 5.19. If a new approach to development contributions is implemented, a small proportion of the income should be earmarked to local planning authorities to cover their overall planning costs, including the preparation and review of Local Plans and design codes and enforcement activities.”
Back to my questions:
1. How will planning obligations work under the new system?
It is said in the paper that the “current system of planning obligations under Section 106 should be consolidated under a reformed, extended ‘Infrastructure Levy’.” There will no longer be “months of negotiation of Section 106 agreements”. “Section 106 planning obligations [will be] removed”.
The proposals seem to assume that section 106 is simply a mechanism for securing provision of affordable housing and other “developer contributions”. Whilst that is its main role at present, it is a mechanism for a wide range of commitments – see this table from the accompanying study:
The joy of section 106 is its flexibility to circumstances and policy, enabling the applicant commit to commit, in a way that binds successors in title, to all necessary mitigation measures that cannot be secured by way of planning condition and which are necessary to overcome what would otherwise be reasons not to allow the proposed development to proceed. On more complex developments it is the only tried and tested way in which appropriate mechanisms can be arrived at to make sure that, for instance, necessary infrastructure comes forward at the right time and by way of a sensible process, bespoke to the circumstances of the development, agreed between the parties. There is no proposal in the paper (although it has previously been floated by some) that the role of planning conditions could be expanded.
Where financial contributions are paid to a local planning authority under a section 106 agreement they can only be used for the specified purposes, whereas the proposals in relation to the consolidated infrastructure levy appear to be more loose: “We could also increase local authority flexibility, allowing them to spend receipts on their policy priorities, once core infrastructure obligations have been met.”What is meant by “core infrastructure obligations”? The core infrastructure obligations necessary to make a particular development acceptable? If so, then a document will need to be drawn up which surely will be as complex as a section 106 agreement – when will the school come forward, using the developer’s infrastructure levy contribution, how, where and when? Local employment and training measures, provision and maintenance of open space and play areas, carbon reduction commitments, commitments to specified transport improvements and the formulation and implementation of transport plans – are all these to be swept away? If so, the document needs to explain either why this is acceptable and desirable or how these matters will otherwise be addressed.
Additional confusion arises when these bold statements as to the removal of section 106 obligations are then contrasted with the footnote to paragraph 4.22: “As above, a Section 106 planning obligation could still be used to secure a covenant on the land, where necessary. However, the value would be captured through the Infrastructure Levy, rather than Section 106”. What does that mean? What would the “covenant on the land” and if the only point is to make sure that the infrastructure levy binds successors in title, why not leave that for the legislation itself?
Is anyone out there clearer at this stage ?
2. What will happen to CIL?
The community infrastructure levy will be replaced by the consolidated infrastructure levy, which will work in various significantly different ways to the current system. For instance:
• It will be a “nationally-set value-based flat rate charge”. I try to unpick this in my answer to question 3 below.
• It will be “levied at point of occupation”.
• “Revenues would continue to be collected and spent locally.”
• “we would also allow local authorities to borrow against Infrastructure Levy revenues so that they could forward fund infrastructure. Enabling borrowing combined with a shift to levying developer contributions on completion, would incentivise local authorities to deliver enabling infrastructure, in turn helping to ensure development can be completed faster.” [If a developer needs specific infrastructure to be delivered in order to enable development to proceed, how will this be documented? What if, as is usually the case, the developer would prefer to deliver the infrastructure, e.g. build the school?]
• The “London Mayoral Community Infrastructure Levy, and similar strategic Community Infrastructure Levies in combined authorities, could be retained as part of the Infrastructure Levy to support the funding of strategic infrastructure” [Is this retained as in retained under the current CIL system so that in London CIL would continue to operate alongside the new levy, or is this retained as in “rolled into”?]
• “We will also look to extend the scope of the consolidated Infrastructure Levy and remove exemptions from it to capture changes of use through permitted development rights” [This is odd – development pursuant to PD rights is not exempt from CIL at the moment. Is this flagging more widely that exemptions will be removed? That would have been a sensible, simplifying, approach were CIL levels to be reduced, but here we are faced with an increased Infrastructure Levy…]
3. How will the new Combined Infrastructure Levy be set?
• It will be a “nationally-set value-based flat rate charge, set nationally, at either a single rate, or at area-specific rates”. [Clearly this can’t in any circumstances mean a nationally-set flat rate charge of x per square metres but must mean a nationally-set proportion of (I assume) gross development value.]
• There will be “a value-based minimum threshold below which the levy is not charged, to prevent low viability development becoming unviable, reflecting average build costs per square metre, with a small, fixed allowance for land costs. Where the value of development is below the threshold, no Levy would be charged. Where the value of development is above the threshold, the Levy would only be charged on the proportion of the value that exceeded the threshold”. [When would the developer have certainty that the threshold was not exceeded, or indeed as to what the value (and therefore charge) is considered to be, through what procedure and with what rights to appeal against the valuation? Is the valuation a notional one, applying a formula, or an actual valuation?]
• “buoyant, so that when prices go up the benefits are shared fairly between developers and the local community, and when prices go down there is no need to re-negotiate agreements.” [the timing of the valuation date will be critical, as will how to deal with phased and revised schemes and so on].
• “It would aim to increase revenue levels nationally when compared to the current system” [so more than £7bn, on the basis of the findings in that study – in a way which will need not to disincentivise owners and developers from carrying out development].
That’s all I can glean from the document. It seems to me that local planning authorities will lose much flexibility, for instance in the setting of differential rates for different types of floorspace (the document does focus to a significant extent on residential development – what rate would be set for, say, offices, logistics or retail, particularly given the weaker relationship between non-residential uses and the delivery of affordable housing, and what about not for profit development – will we need to reintroduce a number of the current CIL exemptions?
4. What requirements will there be on local authorities as to how they apply combined infrastructure levy receipts?
• “With Section 106 planning obligations removed, we propose that under the Infrastructure Levy, authorities would be able to use funds raised through the levy to secure affordable housing”. I try to unpick this in my answer to question 5 below.
• “We could also increase local authority flexibility, allowing them to spend receipts on their policy priorities, once core infrastructure obligations have been met. In addition to the provision of local infrastructure, including parks, open spaces, street trees and delivery or enhancement of community facilities, this could include improving services or reducing council tax.” [So, infrastructure levy surplus receipts (after delivery of “core infrastructure”) become unhypothecated tax receipts – the less the authority spends on infrastructure, the lower it can keep its council tax, hmm…]?
• “If a new approach to development contributions is implemented, a small proportion of the income should be earmarked to local planning authorities to cover their overall planning costs, including the preparation and review of Local Plans and design codes and enforcement activities.”
5. Under the new system, how can local planning authorities set requirements for affordable housing and seek to ensure that they are delivered?
• “We will be more ambitious for affordable housing provided through planning gain, and we will ensure that the new Infrastructure Levy allows local planning authorities to secure more on-site housing provision”.
• “This could be secured through in-kind delivery on-site, which could be made mandatory where an authority has a requirement, capability and wishes to do so. Local authorities would have a means to specify the forms and tenures of the onsite provision, working with a nominated affordable housing provider. Under this approach, a provider of affordable housing could purchase the dwelling at a discount from market rate, as now. However, rather than the discount being secured through Section 106 planning obligations, it would instead be considered as in-kind delivery of the Infrastructure Levy. In effect, the difference between the price at which the unit was sold to the provider and the market price would be offset from the final cash liability to the Levy. This would create an incentive for the developer to build on-site affordable housing where appropriate. First Homes, which are sold by the developer direct to the customer at a discount to market price, would offset the discount against the cash liability.” [So presumably the developer could net-off the costs of on-site delivery from its infrastructure levy liability. How is this to be documented? Who adjudicates on the obvious valuation issues arising?]
• “Under this approach we recognise that some risk is transferring to the local planning authority, and that we would need to mitigate that risk in order to maintain existing levels of on-site affordable housing delivery. We believe that this risk can be fully addressed through policy design. In particular, in the event of a market fall, we could allow local planning authorities to ‘flip’ a proportion of units back to market units which the developer can sell, if Levy liabilities are insufficient to cover the value secured through in-kind contributions. Alternatively, we could require that if the value secured through in-kind units is greater than the final levy liability, then the developer has no right to reclaim overpayments. Government could provide standardised agreements, to codify how risk sharing would work in this way” [How to safeguard against misuse?]
• “To ensure developers are not rewarded for low standard homes under the Levy, local authorities could have an option to revert back to cash contributions if no provider was willing to buy the homes due to their poor quality.”
• “Local authorities could also accept Infrastructure Levy payments in the form of land within or adjacent to a site.” [Back to ensuring a robust valuation process].
Again, maybe it’s just me but I’m left scratching my head. This is a wholly different approach to extracting contributions for affordable housing and for ensuring that they are delivered. Basic questions:
• How will the requirements (quantum, tenure mix, size] be set at policy stage and determined at application stage (in advance of valuations) such that there can be confidence that development will not be stalled through lack of viability?
• Are we moving to a system where all affordable housing is delivered by a local authority nominated housing provider, with less ability for the developer to seek to improve viability?
• How can there be any confidence that this mechanism will result in more on-site affordable housing than at present?
Again, thoughts welcome – it’s not that the proposals can’t be made to work, it’s just that much more input is required and, in my view, a cautious approach needs to be taken so as to guard against the inevitable unintended consequences.
The deadline for consultation responses is 29 October. We are likely to be collating a Town response, if only on specific issues such as this. If you would be interested in feeding in your thoughts, then please let me know, although, health warning, we are not in the business of designing fruit by committee!
are probably the three words I most associate with the planning system in England, since you asked.
The main part of this post is a commentary by special guest and fellow Town partner Duncan Field on the Government’s Planning for the future white paper, published on 6 August 2020.
But before we get to that, some initial comments from me on timescales.
The consultation period on the white paper ends on 29 October 2020.
The aspiration in the document is that (subject to time extensions for recent plans) new local plans should be in place by the end of this Parliament, so by Spring 2024. Given that those local plans will take up to 30 months to be put in place under the new system proposed, the necessary primary legislation will need to have been passed and in force, with any necessary accompanying Regulations and guidance, by Autumn 2021.
By way of proxy for legislative timescales, the less ambitious Housing and Planning Act 2016 and Neighbourhood Planning Act 2017 each took around seven months to pass through the necessary Parliamentary stages, which would mean introducing a Bill by the beginning of 2021. One perhaps has to look back to the Localism Act 2011 for planning legislation of equivalent complexity. That took eleven months from soup to nuts.
Something is going to have to give – either there is going to be rushed consideration of these proposals, which still need significant refinement, or that “end of this Parliament” aspiration is going to have to be reconsidered before long.
But in any event, things can be expected to move quickly.
The timescales in that document for the four sets of proposals within it are as follows:
· changes to the standard method for assessing local housing need: “Following the outcome of this consultation, the Government will update the planning practice guidance with the revised standard method for assessing local housing need.”
· securing of First Homes through developer contributions in the short term until the transition to a new system: “We intend to begin by making planning policy changes, to ensure that clear expectations are set. However, to ensure that First Homes are delivered, nationwide, on a consistent basis, we are keeping under consideration the option to strengthen the policy through primary legislation at a future date. We also intend to introduce an exemption from the Community Infrastructure Levy for First Homes, to enable delivery prior to wider developer contribution reform. This would require changes to regulations. Lastly, we are also considering significant reforms to the system of developer contributions. We will ensure that First Homes willcontinue to be delivered under a reformed approach”
· supporting small and medium-sized builders by temporarily lifting the small sites threshold below which developers do not need to contribute to affordable housing: “Following the consultation, a decision will be taken on whether to proceed with this approach. If it is taken forward, this could be through the introduction of a Written Ministerial Statement in the Autumn.”
· extending the current Permission in Principle to major development: “Following this consultation, if we introduce Permission in Principle by application for major development, we aim to introduce amending regulations this Autumn, with the regulations expected to come into force by the end of the calendar year. Changes to the fee structure would require separate changes to the Planning Fees Regulations.”
The white paper is in my view a considered document and less radical than might have been expected, although certainly ambitious in its breadth. Proposals spin out of it, one after the other, often just in a sentence or two. There are of course areas where there needs to be further thought or explanation. For me, there are two big ones in particular:
⁃ the way in which housing numbers are to be set by the Government for individual authorities and how to resolve the inevitable tension between a swifter examination process and a process that allows proposals in a plan (and the basis for proposals not being in the plan) to be properly tested (particularly where the plan is going to be the equivalent of a series of outline planning permissions for its growth areas);
⁃ how this new infrastructure levy is really going to work and how obligations are going to be addressed that presently are dealt with by way of section 106 agreement, in particular the delivery of affordable housing.
There will also have to be a clear working through of the respective powers and responsibilities across the system, as between government, strategic authorities, local planning authorities and neighbourhoods.
I must say that I found Chris Katkowski QC’s explanations in the latest Have We Got Planning News For You episode really helpful in bringing the proposals, and the thinking behind them, to life. And, boring to say, there is no substitute for reading the actual document.
Planning for the Future begins with some fairly combative language, referring to “our outdated and ineffective planning system” and drawing comparisons with a patched up building which needs to be torn down.
In truth the Government’s proposals do not go quite as far as that and in practice, to continue with the same analogy, we might end up with a better and more sustainable outcome if we were to save the parts of the “patched up building” which have architectural merit. The biggest problem with the current system is not that it is all inherently bad but that it is not sufficiently resourced; it is a pity that planning reforms by successive Governments have never really grappled with that central issue. The good news on this occasion is that the new system will be accompanied by a comprehensive skills and resources strategy for local authorities and key participants in the system; let’s hope the Government delivers on that.
Further on in the document there are some powerful words from the Secretary of State which bring home just how important a time this is for the planning system and what it can deliver. It is hard to disagree with any of this:
The outbreak of COVID-19 has affected the economic and social lives of the entire nation. With so many people spending more time at home than ever before, we have come to know our homes, gardens and local parks more intimately. For some this has been a welcome opportunity to spend more time in the place they call home with the people they love. For others – those in small, substandard homes, those unable to walk to distant shops or parks, those struggling to pay their rent, or indeed for those who do not have a home of their own at all – this has been a moment where longstanding issues in our development and planning system have come to the fore.
Onto the objectives for reform, which can be summarised as follows:
• Reduce complexity and with it, uncertainty and delay.
• In doing so, deliver a more competitive market with a greater diversity of developers.
• Remove the discretionary nature of individual development management decisions and replace it with a rule-based system of development control.
• In doing so, reduce planning risk and the cost of capital for development.
• Reduce the time it takes to produce a local plan.
• Simplify assessments of housing need, viability and environmental impacts.
• Restore public trust and encourage more widespread public participation.
• Get better at unlocking growth and opportunity, encouraging beautiful new places, supporting town and city centres and revitalising existing buildings as well as new development.
• Harness digital technology.
Linked to this is a long list of desired outcomes including the user experience, home ownership, access to infrastructure, economic growth and innovation.
We then come to the main proposals which the Government intends to bring forward:
1. Local plans
a. These will be simplified so that they only identify land for development, the sites that should be protected and the development that can take place. There would be three categories of land:
i. Growth – sites suitable for comprehensive development which, once allocated, will have outline approval for development.
ii. Renewal – sites where smaller scale development is appropriate, which would benefit from a statutory presumption in favour of development once allocated.
iii. Protected – sites with environmental or cultural characteristics where development should be subject to more stringent controls.
An alternative approach might be a more binary system (growth and renewal with permission in principle versus protected areas) or more scope for the existing development management approach in areas other than those allocated for “growth”.
b. Plans should become digital, visual and map-based, interactive and data rich, using a standardised approach to support open access.
c. Local plans (and neighbourhood plans) will be more focused on giving clear area-specific requirements for land that is allocated for growth and renewal including design codes; generic development management policies and duplication of national policy and guidance needs to be avoided.
d. Plans should be subject to a single test of achieving sustainable development instead of the current tests for soundness and the duty to co-operate. There would be no Sustainability Appraisal and instead this would be replaced by a simplified process for assessing the environmental impact of plans.
e. Local plans would meet housing need by reference to a standard method for establishing housing requirements developed and set at a national level; this would mean distributing the national housebuilding target of 300,000 new homes annually, and one million homes by the end of the Parliament, taking into account local factors including constraints, opportunities and affordability. The Housing Delivery Test would stay.
f. Local plans would have to be brought forward by reference to a fixed 30 month statutory timescale with six stages and individual timings for each stage.
g. Local planning authorities would be under a duty to review their plans every 5 years; powers of intervention would remain such as the issuing of directions and preparation of a plan in consultation with local people.
h. Neighbourhood Plans to be retained but with more focus on form of development to reflect the proposals for Local Plans.
This is a refreshingly clear vision of what local plans might become and a digitalised system would be transformative for the user experience and public engagement. However, there are some big questions around how to encourage strategic planning across local authority boundaries for the bigger than local issues (the Government is open to suggestions), how in practice the “sustainable development” test would work and, linked to that, how robust the new environmental assessment process will be.
Equally as important, what will the effect of these promised changes be on current local plans? Without further incentives or assurances around their continuing effect in any transitional arrangements as we switch over to the new system, there must be a real concern they will be halted in their tracks.
2. Development Management
a. As indicated above, growth areas allocated in a local plan would have outline permission for the principle of development; details would be agreed and full planning permission achieved through a new reserved matters process, a local development order or possibly, on bigger sites, via a development consent order.
b. Renewal areas would benefit from a new statutory presumption in favour of development and would benefit from either a new automatic consenting route where specified forms of development meet design and other prior approval requirements, a faster planning application process or a local or neighbourhood development order.
c. Proposals which do not conform to the local plan in renewal and growth areas could still come forward, exceptionally, through a planning application process.
d. In protected areas, proposals will have to be brought forward via a planning application (subject to any permitted development rights or local development orders) and will be judged against the NPPF.
e. Generally, the development management process will be based on a more streamlined end-to-end process with firm deadlines for determination through a mix of:
ii. Data access;
iii. Shorter and standardised applications with reduced or limited supporting material;
iv. A standardised approach to technical information, conditions and developer contributions; and
v. Delegation of detailed planning decisions to planning officers where the principle of development has been established.
f. The Government will build in incentives for prompt determination of applications by local planning authorities such as deemed approval of some applications or refunds of application fees.
g. The process will still be subject to call-in powers and appeals but the Government expects the volume of call-ins and appeals to reduce over time.
h. There will be encouragement for faster build out by making provision in local plans/design codes for a variety of development types by different builders (picking up on the conclusions of the Letwin Review).
This vision for the new development management system feels less clear: permission in principle and outline planning permission are used interchangeably in places as a consequence of land being allocated for growth; however, over and above this, there appears to be provision for a “full” planning permission through a new reserved matters system or local development orders or even development consent orders. Would this not remove a lot of the benefit of allocating land for growth? There is also a myriad of possible ways in which land allocated for renewal might gain consent and, in the meantime, we retain the current planning application process as well. If the Government is not careful it might add to the complexity of development management.
Certainly, we can all get on board with the much-needed streamlining of the development management process from end to end, with more standardisation, reducing the quantity of application documents and increased use of digital technology. However, resourcing this change will be key to its success.
3. Building better, building beautiful and sustainable places
Design and place-making is still high up on the Government’s political agenda. Proposals in this space include the following:
a. A National Model Design Code to be published in the Autumn which will work alongside the National Design Guide and the Manual for Streets; together these are expected to have a bearing on design of new communities and to guide decisions on development. (This will be an early entrant into the current planning system.)
b. Local guides and codes are to be prepared wherever possible to reflect local character but need to have input from the local community before they are given any weight in the planning process.
c. A new expert body will be set up to help local authorities make use of design guidance and codes, as well as performing a wider monitoring and challenge role for the sector.
d. The much-heralded “fast-track” for beauty will be achieved through:
i. The NPPF – which will have provision for schemes that comply with local design guides and codes to be approved quickly;
ii. Legislation to require that sites in growth areas should have a masterplan and site-specific code as a condition of the permission in principle which is granted through allocation in the local plan; and
iii. Widening permitted development rights through the use of “pattern books” for different building types.
e. The NPPF will require targeted consideration of measures to support climate change mitigation and adaptation. (In our view, policy has been playing catch-up on climate change for some time – this is long overdue and should be welcomed.)
f. There will be a quicker and simpler framework for assessing environmental impacts, stepping away from the current frameworks such as Strategic Environmental Assessment, Sustainability Appraisal and Environmental Impact Assessment. The key requirements for the new framework will be:
i. early consideration;
ii. clear and easy to understand; and
iii. avoidance of duplication.
A further consultation on this is expected in the Autumn.
g. The Government intends to review and update the planning framework for listed buildings and conservation areas, to ensure their significance is conserved while allowing, where appropriate, sympathetic changes to support their continued use and address climate change.
h. Improvements to the energy efficiency standards for buildings will be brought forward to help meet the 2050 net zero commitment.
The intention here is clear and consistent with the recent focus of the Government on design and beauty in the planning system. The area with the most loaded questions is the promised framework for assessing environmental impact; in our view, there is clear scope to reduce the voluminous and highly technical nature of the current framework but now is not the time to water it down in terms of its ambit and its protective function. We will have to wait until the Autumn to find out more.
There are radical proposals for the funding of infrastructure:
a. Replace S106 obligations and the current version of Community Infrastructure Levy with a new Infrastructure Levy calculated as a fixed proportion of the development value above a threshold, with a mandatory, nationally-set rate or rates (potentially variable by area).
b. This new levy will be charged on the final value of a development (or an assessed sales value where the development is not sold, e.g. build to rent) by reference to the rate in force when planning permission is granted. This would have to be paid before occupation.
c. Local authorities would be able to borrow against Infrastructure Levy revenues so that they could forward fund infrastructure.
d. The London Mayoral Community Infrastructure Levy and similar strategic Community Infrastructure Levies in combined authorities could be retained.
e. The Infrastructure Levy Could be extended to capture changes of use without additional floor area and through permitted development.
f. The new levy would be extended to fund affordable housing. Allowance would be made for in-kind delivery on-site, which could be made mandatory where an authority has a requirement, a capability to deliver on site and wishes to do so. In those circumstances local authorities would be able to specify the form and tenure of the on-site provision. The Government anticipates that there would need to be a considered policy approach to the risk of imbalance between the value of the agreed in-kind delivery and the fluctuating nature of the levy liability, contingent as it will be on the development value.
g. Local authorities could be given more freedom on how they spend the levy.
There is a lot of detail to be worked through here. Setting the new levy at a level which does not deter development (and indeed land supply through the price paid by developers) will be key and a difficult issue to judge.
The Government will also need to be scrupulous in ensuring that affordable housing continues to come forward using levy funds and still comes forward as part of mixed and balanced communities.
The removal of the blunt and inflexible tool that we have come to love or hate in the form of CIL is welcome in our view and with it the removal of a considerable amount of confusing and time-consuming red tape. For practical reasons – not least delivering site-specific solutions for development – we are not sure we are witnessing the end of S106 obligations or an equivalent just yet but they will undoubtedly be slimmed down.
The consultation document ends with a few final proposals and thoughts from Government on the delivery of a new planning system:
a. As a first step there is a parallel consultation on changes to the current system including extension of Permission in Principle (by application to major development), the standard method for assessing local housing need, First Homes and supporting SME builders by temporarily lifting the small sites threshold below which developers do not need to contribute to affordable housing. More here: https://www.gov.uk/government/consultations/changes-to-the-current-planning-system
b. The Government sees a potential delivery role for development corporations.
c. The reforms are considered likely to reduce judicial review risk.
d. The need for resources and skills is recognised and will be addressed through a comprehensive strategy. In principle, the Government’s view is that the cost of operating the new planning system should be principally funded by the beneficiaries of planning gain – landowners and developers – rather than the national or local taxpayer. Funding may also be achieved through application fees and potentially the new infrastructure levy or- to a limited extent – general taxation.
e. The Government intends to strengthen the powers for local planning authorities to enforce against breach of planning control and provide incentives for enforcement action to be taken.
To end where this overview began, resources are key and a comprehensive strategy to ensure the sufficiency of funding and skills will be very welcome, as long as it does what it says on the tin. This will be vital to the success of the new system.
We know now what the Government wants to achieve. It is up to all of us in the sector to help them make it work and if parts of the system are worthy of retention for their “architectural” merit, to explain why that is, with reference to the Government’s objectives.
The Clap for Our Carers phenomenon reflects heartfelt gratitude for what is currently being done, for all of us, by NHS staff, carers and others carrying out essential services. But clapping is glib. Many of us no doubt feel uneasy. After all many or most of those to whom we owe so much:
⁃ are in jobs in the public sector, or are employed by companies contracted to the public sector, and have seen particular and significant pressure on their incomes for many years;
⁃ are doing those jobs in the absence of adequate facilities and equipment, due to longstanding restrictions on public spending, lack of investment at necessary levels and/or a lack of organisational foresight;
⁃ are not UK nationals and have had to suffer an increasingly hostile environment, catalysed by Brexit;
⁃ due to the loss over time of traditional indentured accommodation and massive house price inflation, particularly in London, have found themselves unable to live in decent accommodation convenient to their work, despite often needing to work at unsocial times or being “on call”.
Plainly there will be a reckoning on many fronts when this immediate crisis is over but will one consequence be a fresh focus on the role of key worker affordable housing?
The NPPF affordable housing definition includes housing for “essential local workers” but, whilst many individual local authorities and registered providers may still prioritise some applications from local key workers, variously defined, there has been no central Government encouragement, let alone funding, for key worker accommodation for many years.
In fact the background to the demise of any focus on accommodation for key workers is well described in a November 2019 presciently topical Policy Exchange paper, Revitalising Key Worker Housing by Jack Airey (now of course a No 10 policy advisor) and Sir Robin Wales (previously leader, and then mayor, of Newham Council).
Back in 2000, the Blair Government launched the Starter Home Initiative, which aimed to provide low cost home ownership for key workers, primarily nurses, teachers and police officers.
The then housing minister Tony McNulty, responded to a question in the Commons as to what progress had been made on providing key workers with affordable housing in central London:
“The Government recognise the importance of affordable housing for key workers in London in maintaining balanced and successful communities.
£146 million of the £250 million Starter Homes Initiative has been allocated to London schemes and will help around 4,600 key workers to realise their aspirations of home ownership. We hope that the initiative will act as a catalyst, and encourage other innovative approaches to housing key workers.
The NHS in London is providing 2,000 units of affordable rental accommodation for health staff in the three years up to June 2003.”
However, as summarised in this 2004 Guardian article:
“Uptake was slow and the help available often failed to keep pace with rapidly rising property prices. As it was confined to just nurses, teachers and police officers, it was also criticised as too narrowly focused.
In March 2004, the government devoted more resources to the problem and replaced the SHI with a £690m programme called Key Worker Living (KWL). Under the new scheme, eligibility for assistance was broadened to include social workers, fire-fighters, and prison and probation service staff.
The type of housing assistance offered under KWL was also expanded to include ‘intermediate’ rented housing – priced at levels above those of traditional social housing, but still below market rates.”
As described by Shelter, four products were available to key workers under KWL
⁃ equity (“Homebuy”) loans of up to £50,000 to buy a home;
⁃ higher-value equity loans up to £100,000 for a small group of London school teachers with the potential to become leaders in their field;
⁃ shared-ownership of newly built properties; and
⁃ intermediate renting at subsidised levels
Until April 2008, KWL leases contained a clawback provision where the beneficiary ceased to be a key worker.
In the affordable housing reforms, and grant cut backs, following the global financial crisis and the 2010 general election, there was no longer any specific key worker housing “pathway” promoted or funded by Government. The focus has instead been on “affordability” judged by reference to rental/income levels and without reference to the applicant’s occupation. Responsibility for affordable housing in London transferred to the Mayor in April 2012 and since his election in 2016 Sadiq Khan has pursued a specific approach, driven by the obvious concern that the Government’s definition of “affordable rent”, based on discount to market value, does not necessarily enable local housing needs in London properly to be met. On London’s Dave Hill has written a good explainer, What are London ‘affordable’ homes and who can afford them? (17th December 2018), subtitled “An attempt to explain the almost unexplainable”.
The specific challenges faced in London have been covered well in papers such as these:
Back in December 2019 the Mayor promised a consultation in intermediate housing during the course of 2020 “which will seek views on a range of issues, including how we can ensure that key workers benefit from intermediate housing in the capital”.
From a national perspective, we did see reference to key workers in the Government’s February 2020 consultation document on its proposed First Homes programme, “prioritised for first-time buyers, serving members and veterans of the Armed Forces, and key workers, such as nurses, police and teachers” (see my 29 February 2019) blog post (perhaps the Policy Exchange influence there, in the light of its December 2019 report?), but what is the Government’s stance more generally as to whether key workers should be given priority in relation to particular forms of affordable housing?
And indeed (the point at which the nice ideas start to stall), how do you even define “key workers”? The “essential workers” definition may be appropriate for the purposes of the current Covid-19 crisis but would not necessarily be appropriate in the longer term – it is in some instances potentially too narrow and in other respects too wide.
The difficulty is possibly rooted in an uncomfortable fundamental truth. In a functioning market-based economy, who isn’t a key worker? The problem is rather that there are many people, some skilled some unskilled, carrying out relatively poorly paid roles, without which society certainly couldn’t function, and who cannot secure adequate, suitable and convenient accommodation due to the disparity between what they earn and the cost of renting or owning property.
The “correct” longer term solution is plainly a twofold one of significantly raising those earning levels (which is not going to be easy as presumably we enter another economically challenging period) and of reducing, or at least stabilising, property costs (also not easy, given lack of supply). We will only ever paper over part of the problem of inadequate salary levels by requiring developers to subsidise the affordability gap.
But in an imperfect world of course we do need an “incorrect” shorter term solution, which surely must be to ensure that those in defined categories of occupation are now given proper priority when it comes to affordable housing tenures of all kinds, and that developers who are prepared to make a meaningful commitment in that respect (particularly if supported by employers of key workers) are not faced with an overly restrictive application of local affordable housing policies until such time as those policies catch up.
Our carers (widely defined) certainly deserve a lot more than a badge at the end of this.
Simon Ricketts, 18 April 2020
Personal views, et cetera
NB Thank you to my Town colleague Lida Nguyen for some background research.
I’ll pass for now on Thursday’s Planning For The Future and indeed Wednesday’s budget. It’s one week at a time at the moment isn’t it? Planning for the future, and the wider politics of planning, has seemed less relevant than planning for a future – the even wider, and deeper, politics of public health and the intersections between virus control, health service capacity, economics and public messaging. You will already have read some other really good summaries and critiques of that document.
But then yesterday in London some fairly momentous things happened along the currently active fault lines as between MHCLG, the Mayor and the boroughs that I have previously written about in various posts.
Directed modifications to London Plan
First, the Secretary of State issued his letter to the Mayor directing that a series of modifications be made to the draft London Plan pursuant to section 337 of the Greater London Authority Act 1999. The modifications are set out an annex to the letter, in the form of a table setting out each directed “Modification to Remedy National Policy Inconsistency” with a “Statement of Reasons” alongside each modification. The letter and directed modifications are plainly a material consideration to be taken into account where relevant in the determination of planning applications and appeals.
Momentous but perhaps not surprising in the light of the “shot across the bows” letter that Khan had been sent by Robert Jenrick’s predecessor James Brokenshire on 27 July 2018. When you look back at that letter, the position was set out pretty clearly, in allowing the draft plan to proceed under the 2012 NPPF on condition that post adoption the Mayor would then embark on a review of the plan to reflect the revised NPPF (How far away is that review now? Might it have been better if MHCLG had bitten the bullet and required the Mayor to start again on his plan at that stage, so as to be consistent with the new NPPF?).
Back in 2018:
“I am not convinced your assessment of need reflects the full extent of housing need in London to tackle affordability problems.
“The Government is […] clear that Plans should be effective, deliverable and consistent with national policy. You will recall that the Government highlighted a number of further issues with your draft Plan in response to your consultation, including that:
⁃ 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.
⁃ 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.”
20 months later, following a lengthy examination and inspectors’ report (see my 26 October 2019 blog post More Plans Grounded: West Of England; Sevenoaks; London) the 13 March 2020 direction letter surely in part has the hand of a certain former London Mayor behind it in that as soon as it is past the “Dear Sadiq”, the letter is unforgiving in its content and tone and is a broader attack on the Mayor’s approach to housing:
“Every part of the country must take responsibility to build the homes their communities need. We must build more, better and greener homes through encouraging well-planned development in urban areas; preventing unnecessary urban sprawl so that we can protect the countryside for future generations. This means densifying, taking advantage of opportunities around existing infrastructure and making best use of brownfield and underutilised land.”
“Housing delivery in London under your mayoralty has been deeply disappointing, over the last three years housing delivery has averaged just 37,000 a year; falling short of the existing Plan target and well below your assessment of housing need. Over the same period, other Mayors such as in the West Midlands have gripped their local need for housing and recognised the opportunities this brings, leading significant increases in the delivery of homes.”
(an echo there of the Chancellor’s budget speech on 11 March 2020, which referred to “a new £400m Fund for ambitious Mayors like Andy Street in the West Midlands, to build on Brownfield sites…”)
“Since you became Mayor, the price of an average new build home in London has increased by around £45,000, reaching £515,000 in 2018, 14 times average earnings. Clearly, the housing delivery shortfall you have overseen has led to worsening affordability for Londoners; and things are not improving, with housing starts falling a further 28 per cent last year compared to the previous.”
“Critical strategic sites have stalled, epitomised by your Development Corporation in Old Oak and Park Royal being forced to turn away £250 million of Government funding because of your inability to work successfully with the main landowner. You also turned away £1 billion of investment we offered to deliver Affordable Homes, because of the support and oversight that would accompany this. You have put a series of onerous conditions on estate regeneration schemes for them to be eligible for grant- funding, such as the requirement for residents’ ballots. In attaching such conditions, you are jeopardising housing delivery and this approach will make it significantly more difficult to deliver the Plan’s targets and homes needed.”
(I covered the Old Oak and Park Royal Local Plan saga in my 4 January 2020 blog post Elephant, Dove, Old Oak, RICS. The Mayor published guidelines in August 2018 on applying his requirement (as a pre-condition to grant funding) for residents’ ballots in connection with estate regeneration schemes).
“Following the Planning Inspectorate’s investigation of your Plan, they only deem your Plan credible to deliver 52,000 homes a year. This is significantly below your own identified need of around 66,000 homes and well below what most commentators think is the real need of London. As I have set out, the shortfall between housing need in London and the homes your Plan delivers has significant consequences for Londoners.”
“Everyone should have the chance to save for and buy their own home so they can have a stake in society. In the short run this requires a proactive stance in building homes for ownership, including Shared Ownership and First Homes, and in parallel delivering a consistently high level of housing supply of all tenures. You should also be looking to deliver homes which people of different ages, backgrounds and situations in life can live in. Your Plan tilts away from this, towards one-bed flats at the expense of all else, driving people out of our capital when they want to have a family.”
(Of course, this is one of the largest and deepest fault lines – as to the relative weight to be given to intermediate affordable housing tenures, including in particular shared ownership and now – covered in my 29 February 2020 blog post – first homes).
“Your Plan added layers of complexity that will make development more difficult unnecessarily; with policies on things as small as bed linen. Prescription to this degree makes the planning process more cumbersome and difficult to navigate; in turn meaning less developments come forward and those that do progress slowly. One may have sympathy with some of individual policies in your Plan, but in aggregate this approach is inconsistent with the pro-development stance we should be taking and ultimately only serves to make Londoners worse off.”
(Bed linen? Well, Policy H16, Large-scale purpose-built shared living, lists the necessary criteria in order for a development to fall within the policy, and, it is true, one of the criteria is that “communal facilities and services are provided that are sufficient to meet the requirements of the intended number of residents and offer at least:
a) convenient access to a communal kitchen
b) outside communal amenity space (roof terrace and/or garden)
c) internal communal amenity space (dining rooms, lounges)
d) laundry and drying facilities
e) a concierge
f) bedding and linen changing and/or room cleaning services.”
Interestingly the Secretary of State is not directing any changes to H16).
“This challenging environment is exacerbated by your empty threats of rent controls, which by law you cannot introduce without Government consent. As we all know, evidence from around the world shows that rent controls lead to landlords leaving the market, poorer quality housing and soaring rents for anyone not covered by the controls.”
“I had expected you to set the framework for a step change in housing delivery, paving the way for further increases given the next London Plan will need to assess housing need by using the Local Housing Need methodology. This has not materialised, as you have not taken the tough choices necessary to bring enough land into the system to build the homes needed.”
So what modifications are proposed? As set out in the annex to the letter:
⁃ insertion of “the need for additional family housing” into policy H10.
⁃ references to optimising site capacity into policy D3, including the potential for boroughs to consider positively expansion of existing clusters of high density buildings and expanding Opportunity Area boundaries where appropriate.
⁃ deleting from policy H2 references to in lieu affordable housing contributions from schemes of nine or fewer homes.
⁃ removing the “no net loss of industrial floorspace” requirement from policy E4 and allowing boroughs to “identify opportunities to strategically coordinate development plans to identify opportunities to substitute Strategic Industrial Land where evidence that alternative, more suitable, locations exist”.
⁃ amending green belt and metropolitan open land policies G2 and G3 respectively to make them consistent with national policy.
⁃ introductory passage to be amended encouraging boroughs to review their housing targets where “they have additional evidence that suggests they can achieve delivery of housing above these figures whilst remaining in line with the strategic policies established in this plan”
⁃ reintroducing the previous 2016 maximum residential car parking standards.
⁃ watering down the restrictions in policy T6 on retail parking: “G. Boroughs should consider alternative standards where there is clear that evidence that the standards in Table 10.5 would result in (a) A diversion of demand from town centres to out of town centres, undermining the town centres first approach (b) a significant reduction in the viability of mixed-use redevelopment proposals in town centre”
⁃ deletion of paragraph 4.1.11 which was critical of the Government’s housing delivery test.
In addition to the modifications, the letter indicates that the Secretary of State is “taking this opportunity to highlight some of the specific areas where I think your Plan has fallen short of best serving Londoners.”
⁃ He is “Directing” the Mayor to “work constructively with ambitious London Boroughs and my Department to encourage and support the delivery of boroughs which strive to deliver more housing.”
⁃ “I hope that where your small sites policies are appropriate, you are doing all you can to ensure sites are brought forward.”
⁃ “The Inspectors considered your industrial land policies to be unrealistic; taking an over-restrictive stance to hinder Boroughs’ abilities to choose more optimal uses for industrial sites where housing is in high demand. I am directing you to take a more proportionate stance – removing the ‘no net loss’ requirement on existing industrial land sites whilst ensuring Boroughs bring new industrial land into the supply.”
⁃ “I am concerned that your Plan will be to the detriment of family sized dwellings which are and will continue to be needed across London. This is not just in relation to their provision but also their loss, particularly where family sized dwellings are subdivided into flats or redeveloped entirely. I am therefore Directing you to ensure this is a consideration of London Boroughs when preparing policies and taking decisions in relation to dwelling mix.”
⁃ “It is important that development is brought forward to maximise site capacity, in the spirit of and to compliment the surrounding area, not to its detriment. Sites cannot be looked at in isolation and Londoners need to be given the confidence that high density developments will be directed to the most appropriate sites; maximising density within this framework. Examples of this are gentle density around high streets and town centres, and higher density in clusters which have already taken this approach. I am therefore Directing you to ensure that such developments are consented in areas that are able to accommodate them.”
⁃ In relation to aviation, “the Court of Appeal recently handed down judgment in the judicial review claims relating to the Airports National Policy Statement. The government is carefully considering the complex judgment and so does not consider it appropriate to make any direction in relation to Policy T8 Aviation at the present time. This is without prejudice to my power to make a direction under section 337 at any time before publication of the spatial development strategy, including in relation to Policy T8 Aviation.”
Finally, the Secretary of State wishes to see a “new standard for transparency and accountability for delivery at a local level” and a commitment to work together (regular meetings!) to provide “the fullest account of how the housing market and planning system is performing in London, where there are blockages and what is needed to unblock these, and what tools or actions can be undertaken to further increase housing delivery”.
“Housing in our capital is simply too important for the underachievement and drift displayed under you [sic] Mayoralty, and now in your Plan, to continue.”
To receive such a letter would be a bad start to the day for any Mayor.
Kensington Forum Hotel JR
Shortly after the letter was published, I separately saw a consent order, sealed by the High Court yesterday, 13 March 2020, the effect of which was to record the fact that the Mayor has consented to judgment in the judicial review brought by the Royal Borough of Kensington and Chelsea of his decision, having recovered the application, to grant planning permission for the Kensington Forum Hotel development. I have previously referred to the saga in my 26 January 2019 blog post The Secretary Of State & London and my 15 November 2019 blog post Planning Or Politics? Significant London Planning Decisions 2019. You will recall that planning permission was issued by the Mayor the same day as he had held his representation hearing. RBKC had judicially reviewed that permission and on 27 November 2019 secured an order for disclosure. The consent order records that following “a review of the documents disclosed pursuant to that order”, and in the light of RBKC’s case put in its grounds of claim and evidence, the Mayor “concedes that the Decision should be quashed on the basis of Ground 4, in particular that the decision to grant planning permission was made for an improper purpose and having regard to irrelevant considerations; namely that the Secretary of State should not be given the opportunity to call in the application for his own determination”. The Mayor has agreed as part of the order to pay RBKC’s costs in the sum of £90,000.
So the Mayor will now need to reconsider whether to grant planning permission (a further representation hearing) and the Secretary of State will no doubt consider whether to call in the application.
The coup de grace yesterday for the Mayor must surely have been the Government’s announcement that legislation will be introduced to postpone until May 2021 the local, Mayoral and Police & Crime Commissioner elections that were due to take place on 7 May 2020. After all, he would have been a re-election shoe-in this May if the polls are to be believed (eg see Sadiq Khan Has A Massive Lead In The London Mayoral Election According To A New PollLondonist, 10 March 2020). Next year? Well that’s a long time away.
One last word on Planning For The Future. The Secretary of State promises “an ambitious Planning White Paper in the Spring”. Obviously government has a stretched and blurred definition of the seasons but technically “Spring” starts on 20 March. It’s one week at a time at the moment isn’t it?
Simon Ricketts, 14 March 2020
Personal views, et cetera
A retweet by the Secretary of State. Probably wisely, the Mayor has not yet risen to the bait.
Government is consulting on the “design and delivery” of First Homes. The deadline for responses is 3 April 2020. First Homes was of course a manifesto pledge and so there are no questions as to whether the concept itself is supportable or indeed practical.
That is a shame, given the failure of the Starter Homes initiative after so much work and public expenditure. As explained in my 4 March 2017 blog post Definitely Maybe: Defining Affordable Housing, an elaborate structure was arrived at by way of chapter 1 of the Housing and Planning Act 2016 and a technical consultation by the Government in March 2016:
– a legal requirement that 20% of new homes in developments should be starter homes, ie
⁃ to be sold at a discount of at least 20% to open market value to first time buyers aged under 40.
⁃ Price cap of £250,000 (£450,000 in London)
– The restriction should last for a defined number of years, the first suggestion being five years, replaced with the concept of a tapered restriction to potentially eight years
– Commuted sums in lieu of on site provision for specified categories of development, eg build to rent.
The Government’s response to the technical consultation then significantly watered down the starter home concept, to the extent that the legislation was surplus to requirements (it is still on the statute book, just left hanging):
– There would be no statutory requirement on local planning authorities to secure starter homes, just a policy requirement in the NPPF, which was to be amended accordingly.
– Rather than requiring that 20% of new homes be starter homes, the requirement would be that 10% of new homes will be “affordable housing home ownership products” so could include shared equity or indeed low cost home ownership.
– maximum eligible household income of £80,000 a year or less (or £90,000 a year or less in Greater London
– 15 year restriction
– No cash buyers, evidence of mortgage of at least 25% loan to value
– Only be applicable to schemes of ten units or more (or on sites of more than 0.5h).
The only reference to starter homes in the February 2019 version of the NPPF is in the glossary’s definition of affordable homes:
“b) Starter homes: is as specified in Sections 2 and 3 of the Housing and Planning Act 2016 and any secondary legislation made under these sections. The definition of a starter home should reflect the meaning set out in statute and any such secondary legislation at the time of plan-preparation or decision-making. Where secondary legislation has the effect of limiting a household’s eligibility to purchase a starter home to those with a particular maximum level of household income, those restrictions should be used.”
Paragraph 64 of the NPPF of course requires:
“Where major development involving the provision of housing is proposed, planning policies and decisions should expect at least 10% of the homes to be available for affordable home ownership, unless this would exceed the level of affordable housing required in the area, or significantly prejudice the ability to meet the identified affordable housing needs of specific groups. Exemptions to this 10% requirement should also be made where the site or proposed development:
a) provides solely for Build to Rent homes;
b) provides specialist accommodation for a group of people with specific needs (such as purpose-built accommodation for the elderly or students);
c) is proposed to be developed by people who wish to build or commission their own homes; or
d) is exclusively for affordable housing, an entry-level exception site or a rural exception site.”
Going back to the NPPF affordable housing definition, aside from starter homes the other two listed categories of affordable home ownership are:
“c) Discounted market sales housing: is that sold at a discount of at least 20% below local market value. Eligibility is determined with regard to local incomes and local house prices. Provisions should be in place to ensure housing remains at a discount for future eligible households.
d) Other affordable routes to home ownership: is housing provided for sale that provides a route to ownership for those who could not achieve home ownership through the market. It includes shared ownership, relevant equity loans, other low cost homes for sale (at a price equivalent to at least 20% below local market value) and rent to buy (which includes a period of intermediate rent). Where public grant funding is provided, there should be provisions for the homes to remain at an affordable price for future eligible households, or for any receipts to be recycled for alternative affordable housing provision, or refunded to Government or the relevant authority specified in the funding agreement.”
Of these different affordable home ownership options (using the Government jargon, I appreciate that what is “affordable” is an open question), starter homes were abandoned by the Government as a concept after a huge amount of money and time had been spent. The National Audit Office’s Investigation into Starter Homes (4 November 2019) found as follows:
“In April 2015, the Conservative Party manifesto committed to “200,000 Starter Homes, which will be sold at a 20% discount and will be built exclusively for first-time buyers under the age of 40”. The November 2015 Spending Review subsequently provided £2.3 billion to support the delivery of 60,000 Starter Homes (of the 200,000 previously announced). The Housing and Planning Act (2016) set out the legislative framework for Starter Homes and the Department ran a consultation on Starter Homes Regulations (the regulations) between March and June 2016.
Between 2015 and 2018, government’s policy towards Starter Homes shifted.
In May 2018, the Minister of State for Housing and Planning stated that the government had spent an estimated £250 million of the Starter Homes Land Fund. In July 2018, the Department clarified that it had spent £250 million buying land to build affordable properties from two funds, the Starter Homes Land Fund and the Land Assembly Fund, with work under way to get the land ready for development, but that building had not yet started.”
“No Starter Homes have been built to date.”
“The Starter Homes legislative provisions are not yet in force.”
“The Department no longer has a budget dedicated to the delivery of Starter Homes.”
“Between 2015-16 and 2017-18, the Department spent almost £174 million preparing sites originally intended for building Starter Homes.”
“In 2015-16, Homes England spent £15.4 million of the Starter Homes 2015 funding preparing brownfield land.”
“Since August 2015 the Department has spent £6.45 million supporting local authorities through the Programme.”
“In 2016-17 and 2017-18, the Department spent £151 million under the
[Starter Homes Land Fund], but the spending has not supported the building of Starter Homes.”
“In 2017-18, the Department spent £97 million from the SHLF, but under [Land Assembly Fund] criteria, on acquiring land needing work and preparing it for the market”
No doubt some of the monies earmarked for starter homes may have ended up going towards other housing and affordable housing initiatives (I am not clear on that) but surely what an embarrassment this is for whoever first came up with the bright idea that was starter homes.
However, moving on from that failure, of course the thing to do is to learn from past mistakes? Why didn’t it work? What could have been done better? This is the essence of “black box thinking”. I was certainly not the only one pointing out the potential complexities that might prove its downfall (See my 21 June 2016 blog post Valuing Starter Homes).
But of course there is a insatiable political hunger for new ideas for manifestos, and in the December 2019 Conservative manifesto a concept of First Homes was trumpeted as the new solution to “making the dream of home ownership a reality for everyone” (to quote from the latest consultation document).
There has been widespread concern as to whether this new product (however it may be delivered – and there is going to be a statutory or policy requirement for it to be provided as part of the housing tenure mix on major schemes) will be at the expense of other more needed or more efficient affordable housing products (see for instance the piece by Ruth Davison, chief executive of Islington and Shoreditch Housing Association, First Homes won’t extend homeownership and will decimate supply of homes for those most in need) and of course not “affordable” for many (see for instance Shelter’s comments in the 16 February 2020 Guardian piece Discounted housing scheme out of reach of most first-time buyers) and I personally see as many potential valuation pitfalls as identified with starter homes – and surely there is a greater difficulty “selling” a discount product to purchasers where, unlike with starter homes, that discount will remain in perpetuity.
If you are not now going to MIPIM, why not consider the questions in the consultation paper instead? They neatly encapsulate many of the current uncertainties as to how this is all going to work:
a) Do you agree with a minimum discount of 30% (but with local flexibility to set a higher one)?
b) If not, what should the minimum discount be? i. 20%
iii. Other (please specify)
a) Should we set a single, nationally defined price cap rather than centrally dictate local/regional price caps?
b) If yes, what is the appropriate level to set this price cap? i. £600,000
ii. £550,000 iii. £500,000 iv. £450,000
v. Other (please specify)
a) If you disagree with a national price cap, should central Government set price caps which vary by region instead?
b) If price caps should be set by the Government, what is the best approach to these regional caps?
i. London and nationwide
ii. London, London surrounding local authorities, and nationwide
iii. Separate caps for each of the regions in England iv. Separate caps for each county or metropolitan area
v. Other (please specify)
Do you agree that, within any central price caps, Local Authorities should be able to impose their own caps to reflect their local housing market?
Do you agree that Local Authorities are best placed to decide upon the detail of local connection restrictions on First Homes?
When should local connection restrictions fall away if a buyer for a First Home cannot be found?
i. Less than 3 months
ii. 3 – 6 months
iii. Longer than 6 months
iv. Left to Local Authority discretion
In which circumstances should the first-time buyer prioritisation be waived?
a) Should there be a national income cap for purchasers of First Homes?
b) If yes, at what level should the cap be set?
c) Do you agree that Local Authorities should have the ability to consider people’s income and assets when needed to target First Homes?
Are there any other eligibility restrictions which should apply to the First Homes scheme?
a) Are Local Authorities best placed to oversee that discounts on First Homes are offered in perpetuity?
b) If no, why?
How can First Homes and oversight of restrictive covenants be managed as part of Local Authorities’ existing affordable homes administration service?
How could costs to Local Authorities be minimised?
Do you agree that we should develop a standardised First Home model with local discretion in appropriate areas to support mortgage lending?
Do you agree that it is appropriate to include a mortgage protection clause to provide additional assurance to lenders?
For how long should people be able to move out of their First Home and let it out (so it is not their main or only residence) without seeking permission from the Local Authority?
ii. Up to 6 months
iii. 6- 12 months
iv. Up to 2 years
v. Longer than 2 years vi. Other (please specify)
Under what circumstances should households be able to move out of their First Home and let it for a longer time period? (Tick all that apply)
i. Short job posting elsewhere
ii. Deployment elsewhere (Armed Forces)
iii. Relationship breakdown
v. Caring for relative/friend
vi. Long-term travelling
vii. Other (please specify)
Do you agree that serving members and recent veterans of the Armed Forces should be able to purchase a First Home in the location of their choice without having to meet local connections criteria?
What is the appropriate length of time after leaving the Armed Forces for which veterans should be eligible for this exemption?
i. 1 year
ii. 2 years
iii. 3-5 years
iv. Longer than 5 years
Are there any other ways we can support members of the Armed Forces and recent veterans in their ability to benefit from the First Homes scheme?
Which mechanism is most appropriate to deliver First Homes?
i. Planning policy through changes to the National Planning Policy Framework and guidance
ii. Primary legislation supported by planning policy changes
Which do you think is the most appropriate way to deliver First Homes?
i. As a percentage of section 106 affordable housing through developer contributions
ii. As a percentage of all units delivered on suitable sites
What is the appropriate level of ambition for First Home delivery?
i. 40% of section 106
ii. 60% of section 106
iii. 80% of section 106
iv. Other (please specify
Do you agree with these proposals to amend the entry-level exception site policy to a more focused and ambitious First Homes exception site policy?
a) Do you think there are rare circumstances where Local Authorities should have the flexibility to pursue other forms of affordable housing on entry-level exception sites, because otherwise the site would be unviable?
b) If yes, what would be an appropriate approach for Local Authorities to demonstrate the need for flexibility to allow other forms of affordable housing on a specific entry- level exception site?
What more could the Government do to encourage the use of the existing rural exception site policy?
What further steps could the Government take to boost First Home delivery?
Do you agree that the proposal to exempt First Homes from the Community Infrastructure Levy would increase the delivery of these homes?
Do you think the Government should take steps to prevent Community Infrastructure Levy rates being set at a level which would reduce the level of affordable housing delivered through section 106 obligations?
a) What equality impacts do you think the First Homes scheme will have on protected groups?
b) What steps can the Government take through other programmes to minimise the impact on protected groups?
Do you have any other comments on the First Homes scheme?
Obviously there is a place for discount to market “for sale” products, as part of the affordable housing mix on a major project, and obviously local connection/key worker restrictions need to play an important role, but let’s
⁃ be really careful that the First Homes concept does not squeeze out other affordable housing options for which there may be greater need, or through inefficiency place a greater strain on project viability and consequently the overall monies available for affordable housing
⁃ ensure that the regime is loophole-proof, straight-forward and fair, however mutually inconsistent those aspirations may be (cf CIL)
⁃ (above all else) learn from that Starter Homes failure.
Exactly a week after the Westferry Printworks decision letter (see my previous blog post) on 22 January 2020 the Secretary of State allowed two further appeals in relation to significant London residential development projects, this time both decisions following his inspectors’ recommendations, and with costs awards in favour of the appellants, again as recommended by his inspectors.
Given that an award of costs can basically only be made on the basis of unreasonable behaviour by a party to the appeal (see the detailed advice in the Government’s Planning Practice Guidance), lessons plainly need to be learned – in fact what happened in both cases was pretty shocking.
North London Business Park site, Barnet
This was an appeal by Comer Homes Group against Barnet Council’s refusal of a hybrid application for planning permission for the phased comprehensive redevelopment of the North London Business Park to deliver a residential led mixed-use development:
• detailed element comprising 376 residential units in five blocks reaching eight storeys, the provision of a 5 Form Entry Secondary School, a gymnasium, a multi- use sports pitch and associated changing facilities, and improvements to open space and transport infrastructure, including improvements to the access from Brunswick Park Road, and
• outline element comprising up to 824 additional residential units in buildings ranging from two to eleven storeys, up to 5,177m2 of non-residential floorspace (Use Classes A1-A4, B1 and D1) and 2.9 hectares of public open space, associated site preparation/enabling works, transport infrastructure and junction works, landscaping and car parking.
Members had refused the application against officers’s recommendations.
The council’s failing is set out starkly in the inspector’s costs report: no proper evidence was adduced to support its decision:
“Mr Griffiths, Principal Planning Officer at the Council of the London Borough of Barnet, was the Council’s only witness at the Inquiry. He stated, in his proof of evidence, that “It is not the intention for this document to represent my professional opinion and the evidence presented represents the views of elected members of the London Borough of Barnet Planning Committee”.
The proof of evidence focusses on a particular view contained within a TVIA submitted by the Applicant and states that “Within View 11, the 8-storey height of Blocks 1E and 1F stands in harmful juxtaposition with the two-storey height of the properties on Howard Close”. But the proof acknowledges “…that buildings of up to 7 storeys in height could be acceptable in this location therefore it is pertinent to outline the additional harm that would arise from the 8 and 9 storey buildings proposed within the development and why these heights are unacceptable”.
The written evidence fails to substantiate why the extra storey on Blocks 1E and 1F would cause harm and fails to consider the effect of buildings over seven storeys in height elsewhere in the development. The proof simply repeats the assertion made in the sole reason for refusal of the application that “The proposed development, by virtue of its excessive height, scale and massing would represent an over development of the site resulting in a discordant and visually obtrusive form of development that would fail to respect its local context…to such an extent that it would be detrimental to the character and appearance of the area”.
Under cross examination Mr Griffiths refused to answer some questions put to him and to give his professional view on the effect of the proposed development on the character and appearance of the area. The Appellant was not thus afforded the opportunity, at the Inquiry, to explore the unsubstantiated assertions made in the proof of evidence and did not learn anything more about members concerns. Crucially, no member of the Planning Committee appeared at the Inquiry to substantiate their views that was unsubstantiated in the proof of evidence.
The Council has failed to produce either written or verbal evidence to substantiate the reason for refusal of the application, and has provided only vague and generalised assertions, unsupported by an objective analysis, about the proposed development’s impact. The Council has behaved unreasonably and the Appellant has incurred unnecessary expense in the appeal process. A full of award of costs against the Council is justified.”
It was hardly surprising that the Secretary of State decided to allow the appeal:
“32. The development plan restricts tall buildings to identified locations, and the proposal would include them on a site not identified as suitable for them. This conflict carries significant weight against the proposal.
33. The proposal has been designed to respect the existing character of the local area, while maximising the potential for delivering homes. It would deliver a replacement secondary school alongside new open space, sports facilities and community space. The local authority is unable to demonstrate a five-year supply of housing land without taking account of this site, and the proposal would provide 1350 new homes. The provision of the housing and the ancillary facilities both carry significant weight in favour of the proposal.
34. The Secretary of State considers that there are material considerations which indicate that the proposal should be determined other than in accordance with the development plan, and therefore concludes that the appeal should be allowed and planning permission granted.”
The inquiry sat for four days in October and November 2018 (why the inordinate delay since then?), with the appellant team comprising Christopher Katkowski QC and Robert Walton (now QC), calling four expert witnesses. The costs award will amount to a sum that would be ruinous for many private sector bodies, well into six figures – because council members took a decision without evidence and without considering whether proper evidence, or a different approach, might be required in the face of an appeal. And a scheme for well over a thousand homes and a school (first applied for in December 2015!) has been delayed for absolutely no reason.
Conington Road, Lewisham
This was an appeal by MB Lewisham Limited against Lewisham Council’s decision to refuse its application for planning permission for the construction of three buildings, measuring 8, 14 and 34 storeys in height, to provide 365 residential dwellings (use class C3) and 554 square metres (sqm) gross of commercial/ community/ office/ leisure space (Use Class A1/A2/A3/B1/D1/D2) with associated access, servicing, energy centre, car and cycle parking, landscaping and public realm works.
The procedural position here was a little more complicated. After Lewisham had refused this application, the applicant had submitted a further application for planning permission which sought to address the reasons for refusal. The scheme would secure 20.19% affordable housing by habitable room, which the council accepted, on the basis of viability appraisal, was more than the maximum reasonable provision. The Council resolved to approve the application but the Mayor directed refusal, not satisfied that the viability work justified that level of affordable housing.
By that time the first application had been refused and the appellant revised the scheme to reflect the changes introduced into the second application. Accordingly, whilst the appeal was technically against Lewisham’s initial decision on the first application, in reality the only live issues were those raised by the Mayor on affordable housing and viability, including whether a late stage review mechanism was necessary in line with its policy requirement.
I suspect that you needed to be at the inquiry to appreciate the full horror as events unfolded (I wasn’t) but it appears that the viability case against the appellant’s position completely collapsed at the inquiry following exchange of evidence and cross-examination by Russell Harris QC. But that wasn’t the only problem. Presumably to save costs, the council and the Mayor both engaged the same advocate at the inquiry and, once it understood the real position on viability, the council wished to concede various issues but the Mayor was not willing so to do, meaning that the advocate immediately had a conflict of interest and, mid-inquiry, had to recuse herself from acting for the Mayor! The Mayor’s team continued to participate in the inquiry but without challenging the evidence provided by the appellant.
This is from the inspector’s report on the appellant’s costs application:
“On day 2 of the Inquiry, following cross-examination of the Council’s construction costs witness Mr Powling, the advocate representing the Council and the Greater London Authority (GLA) advised that due to a conflict of interest, the GLA would no longer be represented. The GLA however wished to continue with their objections as an unrepresented principal party. Later in the afternoon, following cross-examination by the appellant of Ms Seymour for the GLA, the Council formally withdrew its objections to the proposal on viability grounds. The Council took no further part in the Inquiry.”
“Where the operation of a direction to refuse is issued, the GLA is to be treated as a principal party. Without the GLA direction, the London Borough of Lewisham (LBL) would have granted a planning permission for a now identical scheme. This appeal only arises thus as a result of the change of the resolution to grant to reflect the terms of the GLA’s direction.
6. In its letter to the Inspectorate indicating its intention to attend, the GLA made it clear that was prosecuting its direction in terms and was expecting LBL to do the same. Therefore for all practical legal and policy purposes, the GLA must be treated as a main party prosecuting the terms of its direction at this appeal. Without that direction LBL would not have opposed this scheme and this inquiry would not have been necessary.
7. Their conduct therefore falls to be considered in accordance with the provisions for principal parties.
8. Its conduct was unreasonable in substantive terms in relation to its directed main reason for refusal. Its conduct during the inquiry was also unreasonable. Both levels of unreasonableness resulted in the inquiry and the appellant having to incur significant unnecessary expense in relation to the affordable housing issue.
9. In substantive terms, the GLA produced no evidence which met or came close to the requirements of the PPG on the issue of construction costs to support its reason for refusal.
10. Its ‘evidence” failed to meet the threshold properly to be called “evidence” It failed to engage with the agreed evidence of others that the construction costs were fair and reasonable and during the proceedings failed to read understand or engage with evidence which clearly established that its evidence was incorrect and unreasonable.
11. In terms of the double count issue, the GLA persisted with its case irrespective of evidence suggesting that it was wrong and in an unreasonable fashion after the only other relevant party advised by Leading Counsel had accepted that the point was simply not properly arguable. It chose not to read and understand the clear evidence, notwithstanding it had insisted on the reason for refusal and that it be a party at the inquiry.”
“The Greater London Authority shall pay to MB Homes Lewisham Ltd its partial costs of the inquiry proceedings, limited solely to the unnecessary or wasted expense incurred in respect of the costs of the appeal proceedings related to dealing with the issue of affordable housing after the Council decided not to represent the Greater London Authority, such costs to be taxed in default of agreement as to the amount thereof.”
The Secretary’s conclusions on viability were as follows:
“17. The Secretary of State agrees with the Inspector that the essential differences on viability between the parties lies in a variation of around £11m in construction costs (including fees and profit); and private residential values (IR127).
18. The Secretary of State notes that CDM (for the GLA) consider build costs to be overstated (IR129). However, the Secretary of State also notes that independent costs estimates produced by 3 firms of costs consultants were within 2 percentage points of each other. He agrees with the Inspector that no evidence has been produced in any later analyses to show that those build costs, or any element of them considered for viability purposes, are unreasonable (IR128-131).
19. The Secretary of State notes that the level of fees remained a point of difference at the beginning of the Inquiry. The Secretary of State also notes that while detailed analysis of this issue did identify an overstatement of fees of less than £1m, this is far below the overstatement claimed by the Council and GLA. He further notes that, at the Inquiry no evidence was forthcoming from the GLA’s costs witness, CDM, to support their contention that preliminaries are set too high or that the level of professional fees of around 10% would be excessive for a project of this nature. In addition, the Council’s costs witness accepted that if a reasonable preliminaries figure of 17% or so was adopted then the whole argument in support of the £5.5m fees deduction from the overall level of costs fell away (IR132-133).
20. For the reasons given in IR134-135, the Secretary of State agrees with the Inspector that the proposed profit levels are reasonable for this scheme.
21. For the reasons given in IR136 the Secretary of State agrees with the Inspector that no evidence was offered by the Council or the GLA to counter the appellant’s build costs analysis or the level of fees or profit.
Private residential values
22. The Secretary of State has carefully considered the Inspector’s analysis in IR137-146 and agrees that the GLA’s suggested values would be unlikely to be achievable in the market (IR144).
23. The Secretary of State also notes that the GLA accepted at the Inquiry that if the £11m alleged surplus on fees and construction costs did not exist, then the claimed remaining £900,000 (IR132) would not have led to a direction to refuse from the Mayor’s office (IR146). For the reasons in IR147, the Secretary of State agrees with the Inspector that the 20.2% affordable housing proposed by the appellant is the maximum, if not somewhat more, than what can be reasonably provided, and he accordingly attaches very considerable weight to this benefit of the proposal. He finds no conflict with the requirements of LonP policy 3.12; the Mayor’s Affordable Housing and Viability SPG, Lewisham CS policy 1 and DMLP policy DM7.
Late stage review
24. For the reasons given in IR148-149, the Secretary of State agrees with the Inspector that there is no pressing case for a late stage review for a scheme such as this, where development is proposed to be completed in a single phase. He finds no conflict with the requirements of LP policy 3.12, the Mayor’s Affordable Housing and Viability SPG, Lewisham CS policy 1 and DMLP policy DM7.”
“In favour, the Secretary of State affords very considerable weight to the provision of market and affordable housing. He also affords moderate weight to the positive contribution to the character and appearance of the emerging Lewisham Town centre.”
And no late stage review!
In amongst the horror show for both the council and the Mayor seems to have been some simple lack of communication as between their witnesses. Quoting from the inspector’s summary of Lewisham’s case:
“When the appellant’s viability proof was received and reviewed it did not appear that the short reference in paragraph 7.2 to the Gardiner & Theobald review report raised any pertinent issue. This was particularly so as the proof suggested that the appellant’s basis for assessment of costs was unaltered.
As a consequence the Council’s viability witness did not send its costs witness the appellant’s viability proof (which dealt with numerous other issues not relevant to costs estimates). On review at the Inquiry, the Council’s build cost estimate was revised from £107,179,737 to £111,809,368 representing a difference of £4,629,631. The consequence of this was that it changed appraisal A – 2018 Residential Pricing to negative £1,155,982 and Appraisal B – 2017 residential pricing (less HPI) reduced to £ 3,111,251. This still represents a £20m disparity approximately with the appellant’s viability conclusions. It nonetheless reduced the margin of surplus on the Council’s assessment to fall within an acceptable margin of error“.
Where would we be without the ability properly to test evidence at inquiry?
Simon Ricketts, 25 January 2020
Personal views, et cetera
PS not to be too London-centric, I should add that on the same day the Secretary of State also allowed an appeal for 850 homes near Tewkesbury.
Tower Hamlets Council’s revised CIL charging schedule came into effect on 17 January 2020, imposing borough CIL for the first time on its large allocated sites, so you will appreciate its double disappointment at the Secretary of State allowing the Westferry Printworks site appeal, against the inquiry inspector’s recommendations, in a decision letter dated 14 January 2020. The CIL figure could have been up to £50m, according to evidence given at the inquiry on behalf of the appellant.
The scheme is for a “comprehensive mixed-use redevelopment comprising 1,524 residential units (Class C3), shops, offices, flexible workspaces, financial and professional services, restaurants and cafes, drinking establishments (Classes B1/A1/A2/A3/A4), community uses (Class D1), car and cycle basement parking, associated landscaping, new public realm and all other necessary enabling works” at Westferry Road on the Isle of Dogs.
There has been a furious response from the council. At a full council meeting the following day, 15 January 2020, a resolution was passed to examine “all available options, including a judicial review“. The East London Advertiser reports Mayor John Biggs as saying:
“It is a massively tall and dense development. Something of 40 floors on the island is an outrage. By making the decision on Tuesday we also lose a massive sum of money. This development will place a huge impact on the island. It is a scandal and outrageous. We will be doing everything in our power [including] seeking a judicial review.”
The potential impact of borough CIL on the viability of the proposals obviously had been raised by the appellant as a potentially relevant matter, given that it would go to viability. Unsurprisingly, the appellant had sought to include a mechanism within its section 106 agreement for a potential reduction in affordable housing should the Secretary of State’s decision letter be issued after the revised CIL charging schedule had been adopted, a proposal which both the inspector and Secretary of State rejected.
The timing of the decision letter meant that this issue went away – it would have been an interesting one to test, given that the situation often arises where an applicant or appellant is in the hands of the decision maker as to whether permission will be issued before a revised CIL charging schedule comes into effect and why shouldn’t a section 106 agreement mechanism to neutralise the effect be appropriate where the viability appraisal has not taken the potential additional CIL liability into account?
The decision letter was plainly ready to be issued, why should it have been held back?
The appeal had been lodged in relation to an application submitted by Westferry Developments Limited (the owner of the site is Northern & Shell, the development manager is Mace) on 24 July 2018. The appeal was recovered for the Secretary of State’s own determination on 10 April 2019. Tower Hamlets asked for more time to formulate their position in relation to the proposals but this was refused by the Secretary of State, as recorded in a report to a meeting of Tower Hamlets’ strategic development committee on 14 May 2019:
“This report is seeking the authority of the committee for officers to defend an appeal which has been submitted to the Secretary of State by the developer. The Secretary of State has imposed a timetable which requires that this report is considered by the Committee on 14th May 2019 in time for the council to submit a Statement of Case by 22nd May 2019 in order to avoid breaching the imposed timetable and making the authority liable for costs for unreasonable behaviour. As the report had not been written when the timetable was imposed, the Council asked Secretary of State to review the timetable and he has declined. These are the special circumstances justifying the urgency.”
The previous Mayor of London (whatever happened to him?) had intervened and granted planning permission for an earlier scheme for the site in 2016 for “comprehensive mixed use redevelopment of 118,738 m2 including buildings ranging from 2-30 storeys (tallest 110 m AOD) comprising: a secondary school, 722 residential units, retail use, restaurant and cafe and drinking establishment uses, office and financial and professional services uses, community uses, car and cycle basement parking, associated landscaping and new public realm“. That planning permission has been implemented by the demolition of the printworks and works to construct a new basement.
The latest application had been on the basis of an offer of 35% affordable housing, although not policy compliant due to the proposed tenure mix, justified by reference to viability appraisal. When the appeal was submitted, unsurprisingly, given that on appeal the decision maker would expect an updated viability appraisal, that offer was withdrawn and at the time of the 14 May 2019 committee meeting there was just an indication that a revised viability assessment would be submitted and that the revised offer would be less than 35%.
The committee resolved that the proposals would have been refused on the following grounds:
⁃ Townscape and visual impact
⁃ Wind Impact on the Docklands Sailing Centre
⁃ Affordable housing – amount
⁃ Housing mix and choice
The inquiry started on 7 August 2019. This was an important appeal for the council, as can be seen from this July 2019 Facebook post from a councillor, encouraging opposition to the proposals:
In the evidence for the inquiry, the affordable housing offer had been reduced to 21% on the basis of an updated viability assessment.
In this summary that follows I am plagiarising some of an internal note prepared by my Town partner Louise Samuel (into which I may now introduce errors, all mine):
• The inspector accepted that the existing permission should be treated as a fallback, which formed an appropriate basis for assessing an alternative use value for the purposes of arriving at a benchmark land value.
• However, the inspector did not agree with how the appellant had calculated the benchmark land value (see IR 507 on for BLV discussion) and considered that the 21% offer was unlikely to be the maximum reasonable provision for the site. He did not, however, set what the maximum reasonable provision would be.
• Whilst Tower Hamlets criticised the appellant for resiling from its previous 35% offer, the Inspector notes that it was clear that the appellant was responding to the Mayor’s fast-track approach (which requires at least 35%) and so took a commercial view despite the fact that it was not supported by the viability assessment at the time. He concluded that this was not, in itself, a reason to reduce the weight to be attached to the Assessment before him (see para 530 of the IR).
• The Inspector’s view was that the consented scheme provided many of the same benefits but without causing the same harm to heritage assets. Because of the consented fallback, the only benefits that carried weight were those in addition to the consented position.
• The Secretary of State agreed that it is likely that the scheme could provide more affordable housing (“21% does not…represent the maximum reasonable amount of affordable housing”) but still considered that the additional benefits (compared to the consented fallback scheme) of: (a) housing (802 more units of which 142 would be affordable, with a policy compliant tenure split of 70% affordable rent 30% intermediate); and (b) employment during construction, were enough to grant permission. The Secretary of State gave these benefits significant weight whereas the Inspector had attached moderate weight to these benefits. The Secretary of State took into account that “there is no evidence before him of any other scheme which might come forward or what level of affordable housing might be delivered by any such scheme”.
• The Secretary of State considered these benefits to be enough to outweigh harm to important heritage assets (Grade I Old Royal Naval College; Grade I Tower Bridge; and the Greenwich World Heritage Site).
• The section 106 agreement included both an early and late stage viability review, which means that the percentage of affordable housing may increase, albeit the Inspector criticised the limited effectiveness of these.
An interesting decision in that we would need to go back almost two years to find another recovered appeal for housing development which the Secretary of State has allowed in London. Contrast for instance with the 19 July 2019 Chiswick Curve decision letter, appeal dismissed by the Secretary of State against his inspector’s recommendations, where he gave only moderate weight to the provision of 327 dwellings, whereas the Inspector had given significant weight to the housing offer (the decision has been challenged by the appellant – Louise and colleagues acting), and contrast with for instance the 1 Cambridge Heath Road 10 June 2019 decision letter, again an appeal dismissed against his inspector’s recommendations.
Much to chew over for those promoting, or otherwise engaged with, major projects in London.
I thought I would start 2020 by trying to establish some common ground, before then mentioning what happened shortly before Christmas in relation to the Elephant & Castle and Old Oak projects, both controversial in different ways. The questions are long but I hope that the answers are short.
Do we all agree that…
1. more housing is needed for those who cannot afford homes that are being built by the private sector in their local area, even when these are required to be sold or let at significant discounts to market rates – and that what we call that housing (eg social housing/socially rented) and the nature of the body that delivers and manages it (housing associations or other registered providers, local authorities) are secondary issues?
2. the current system of seeking to require developers to deliver that housing (whoever then manages it) is not working and is hugely inefficient, in that: (1) local policy expectations set out in local plans are often not met, due to those expectations being determined not to be viable – leading to prolonged negotiations and local objection (2) the complexities and multitude of inputs to any negotiated section 106 affordable housing package, often including intricate mechanisms to provide for later reviews of the viability position, are at best a costly distraction for all parties (needing to be tooled up with valuation and QS professionals) and at worst are prone to lead to huge delays and, over time, the prospect of renegotiation where the negotiated outcome is not sufficiently attractive to funders, or where (almost inevitably) circumstances have changed during the long course of the process?
3. it is in the public interest for communities within developments to be socially and economically diverse?
4. the system worked more easily when much more Government money was available to support affordable housing by way of grant (without grant obviously a requirement to deliver social housing has a huge impact on the viability of a scheme) and that we need to get back to a system that (1) is simple (2) delivers housing that is truly affordable for those who need it (3) is efficient and (4) does not delay development more generally?
5. government (ie our) money needs to be spent where it can have most beneficial impact and is most needed?
There has been a lot of government tinkering but don’t we have to get back to those fundamentals? I’m not sure that the Government’s promised Social Housing White Paper is going to get us there, given the absence of relevant detail about affordable housing in the Conservatives’ manifesto – talk about owning first homes is a world away from the very different challenges faced by so many.
I’m sorry to be a cracked record – see my 28 May 2017 blog post Affordable Housing Tax or 4 November 2017 blog post Viability Assessment Is Not A Loophole, It’s A Noose. We could look at the idea of expanding CIL to include a social housing contribution, so that local authorities can deliver or procure it, with the option of provision on site counting as works in kind? But I’ve previously been against further rolling out another complex and inefficient regime, ie CIL, and most authorities, hollowed out and stretched as they are, are not currently in any position to deliver or procure social housing at scale. Instead, personally I would simply prefer that we go back to the old way – grants to providers so as to reduce the impact on viability for the developer of providing social housing.
In the meantime, we have to make the current system work. My 8 June 2019 blog post The Bottom Line: Updates On CIL And Viability reported on the RICS professional statement on financial viability in planning, which came into effect on 1 September 2019, and mentioned the revisions made to viability passages of the PPG by the Government on 9 May 2019, reflecting changes to the NPPF that seek to ensure, amongst other things, that detailed viability examination takes place at plan-making stage rather than when applications come forward.
“We are not seeking comments contrasting the government framework with a market-based appraisal. Comments should focus on whether our draft guidance gives effect to government policy and practice guidance, in an administratively efficient way, in order to deliver the objectives of the NPPF.”
Make your views known.
In the meantime…
Elephant & Castle
Delancey’s proposed redevelopment of the Elephant & Castle shopping centre and London College of Communication has long been controversial. It proposes a large mixed-use development comprising a range of buildings of up to 35 storeys, with a mix of uses including 979 dwellings (proposed to be for rent rather than sale) and accommodation for retail, office, education, assembly and leisure along with a remodelling of the London Underground station. One of the lines of attack for objectors, including the 35% Campaign, has been the perceived lack of “genuinely affordable” housing.
Planning permission was granted by the London Borough of Southwark on 10 January 2019. Just before Christmas, in Flynn v London Borough of Southwark (Dove J, 20 December 2019), the High Court rejected a crowdfunded challenge to the permission brought on behalf of the 35% Campaign. The grounds of challenge all turned on the affordable housing deal that Southwark struck in the section 106 agreement with the developer.
The case doesn’t turn on any particularly interesting legal principles or make any new law. But the facts, set out in careful detail by Dove J, illustrate precisely the concerns that lay behind my attempt just now to establish some common ground:
The policy background is not straightforward, with a changing position both at borough level and at London Plan level.
The Mayor has set out criteria in his 2017 affordable housing and viability SPG for different tenures of affordable housing, including social rent (target rents determined through the national rent regime), affordable rent (rent controls requiring a rent of no more than 80% of the local market rent), intermediate (available for rent or sale at a cost above social rent but below market levels – and eligible only to households whose annual income is within a defined range) and intermediate London Living Rent (only available to households renting with a maximum income of £60,000 without sufficient current savings to purchase a home within the local area).
The adopted London Plan requires boroughs to seek the “maximum reasonable amount of affordable housing…when negotiating on individual private residential and mixed use schemes, having regard to” a number of factors, including “development viability” and the “availability of public subsidy”.
Within the Elephant & Castle area, Southwark’s adopted plan seeks a minimum requirement of 35%, on the basis of a split of 50% social rented and 50% intermediate housing. Its emerging plan seeks, in relation to build to rent developments, a different tenure split for the 35%: social rent equivalent (ie social rent level but not managed by registered provider) 34% minimum, affordable rent (aka discount market rent) capped at London Living Rent equivalent 52% minimum, affordable rent (aka discount market rent) for household incomes between £60,000 and £90,000 per year 14% minimum. The lack of social rent reflects the specific nature of build to rent developments, where it is more efficient for all of the housing to remain under single management rather than for a separate registered provider to be introduced.
At the time Delancey’s application first went to committee on 16 January 2018, its proposal was 36% affordable housing based upon habitable rooms, with the 36% made up as follows: 10% social rent equivalent, 46% London Living Rent, 43% discount market rent. The non policy compliant offer (in terms of tenure split) was based on an agreed viability assessment. Despite a recommendation for approval, members deferred a decision until a meeting scheduled for 30 January 2018 at which they intended to formulate reasons for refusal. The day before the follow-up meeting the developer made further proposals in relation to the affordable housing offer and the application was deferred to a subsequent meeting.
The revised proposal was to replace 33 social rent equivalent units with 74 socially rented units, all to be located on the western part of the development and to be owned and operated either by the borough or by a registered provider. This changed the tenure split (of the 35% affordable housing dwellings) to: social rent 24.9%, London Living Rent 27.9%, discount market rent 47.2%.
In June 2018 the offer was increased again. The developer’s consultants indicated that following “in-principle agreement from the GLA to provide grant funding towards the proposed scheme” the number of social rent units could be increased to 116 homes, or 38.1% of the 35% of the units that were to be affordable.
The application was approved at a committee meeting on 3 July 2018. It was acknowledged in the report that the proposed tenure split was still not policy compliant but was justified by way of the agreed viability appraisal. The report also noted that there would need to be a fallback arrangement in the section 106 agreement to cater for the possibility that the developer might choose after all to develop the western part of the development on a for sale rather than for rent basis (in which case the affordable housing requirement for that part of the site would return to 50% social rented, 50% intermediate).
If all of this does not start to give an idea of the inevitable complexity of negotiations on a scheme such as this, then consider the viability appraisal. As is common with a significant longterm development, where application of the more straightforward benchmark land value plus developer’s profit approach does not reflect accurately the financial modelling of a project over time, viability was judged against a minimum internal rate of return for the developer.
The latest RICS draft guidance defines internal rate of return (or “IRR”) as follows:
“The rate of interest (expressed as a percentage) at which all future project cash flows (positive and negative) will be discounted in order that the net present value (NPV) of those cash flows, including the initial investment, be equal to zero. IRR can be assessed on both gross and net of finance.”
However, unless I have missed it, there is no guidance anywhere as to when an IRR approach is appropriate and how to arrive at and test the inputs and modelling.
The agreed benchmark was 7.15% IRR, with annual growth to 11% over the construction period. Review mechanisms in the section 106 agreement provide that 50% of any excess are to be applied to increasing the affordable housing provision up to a policy compliant level/tenure split.
The claimant had three grounds of challenge. The first turned on an alleged inaccuracy in the way that the GLA’s offer of funding had been reported – it had not been formally confirmed and discussions were at an “in principle stage”. The second alleged that one of the detailed mechanisms in the section 106 agreement departed from the relevant head of term in the committee resolution. The third related to the mechanism in the section 106 agreement for determining the affordable housing to be provided if the western part of the site turned into a “for sale” development, but a deed of variation had been entered into after the challenge was brought, largely correcting the error that had been identified.
Dove J rejected each of the grounds, whilst accepting that each was arguable. (1) The report did not materially mislead members. (2) The section 106 mechanism was not outside the scope of the committee resolution (“True it is that the solutions arrived at are not a literal interpretation of paragraph 364 [of the report to committee], in that they do not include for the provision of land and a substantial cash dowry to construct the social rented units but, in my judgment, that was not required in order to remain within the scope of the delegation granted by the members”). (3) The approach to the fallback (“for sale”) scenario was “entirely rational and appropriate”. Part of the claimant’s criticism of the arrangements turned on whether the additional affordable housing in these circumstances should be social rented units rather than the social rented equivalent units provided for. The judge saw nothing relevant in the distinction:
“In terms of the matters raised by the Claimant the quality of tenure enjoyed by tenants in social rented equivalent properties are, as the nomenclature suggests, equivalent to those in social rented properties. Of course, there may well be nuanced differences between them as a consequence of them being separately defined. Furthermore, they will be managed in different ways as the definition implies. Be all of this as it may, in my view the important point is that the requirement of the officers’ report was a review in terms of affordable housing, and whether the additional habitable rooms were to be provided as social rented or social rented equivalent accommodation was not identified as being in any way a critical point upon which the delegation to the officers of authority to enter into the section 106 obligation turned. Put another way, whatever may be the nuanced differences between social rented equivalent property and social rented units that was not identified as a key requirement in relation to the review mechanism contemplated were the developer to take up the fall-back scenario.”
Will the new guidance make any of this more straight forward? I doubt it. Would proper funding for social rent and social rent equivalent housing? Of course it would.
Old Oak and Park Royal Local Plan
The recent NPPF and PPG changes of course seek to move the viability spotlight to the point at which sites are allocated for development. The Old Oak plan was examined last year under the previous NPPF but viability matters were still centre stage and the inspector’s findings may be an indicator of the detailed scrutiny that is likely to be given to the viability in particular of strategic sites (taken together with proposed policy requirements in terms of infrastructure delivery and affordable housing).
One of the key issues for the inspector was whether the proposed allocation of the 54 acre Cargiant site for residential and associated development was viable. Cargiant had itself attempted development of its site in the past. It had concluded that it would be unviable to contemplate relocating or extinguishing its business and carrying out the development – and took the position that there was no reasonable prospect within the plan period of the Old Oak and Park Royal Development Corporation (“OPDC”) being in a position to carry out such proposals, even by resorting to compulsory purchase and even with the benefit of £250m Housing and Infrastructure Fund monies which had been agreed in principle to be allocated by MHCLG.
My firm acted for Cargiant and so I will restrict myself to pointing out the level of detail to which the inspector went in his interim findings on viability of Cargiant site proposal (10 September 2019) before concluding that the allocation would be unviable and therefore unsound.
The day after the general election, on 13 December 2019, the OPDC announced that it would change its proposals, which will now leave Cargiant in place:
“The Old Oak and Park Royal Development Corporation (OPDC) has today set out a revised approach to deliver tens of thousands of new homes and jobs through collaboration with major public sector landowners.
The regeneration of Old Oak, Park Royal and surrounding areas in west London, has the potential to deliver 25,500 new homes and 65,000 jobs over the next 30 years. OPDC has already approved plans for over 5,000 homes including 1,500 already completed or being built.
The shift in approach has been triggered by recent, rapid increases in industrial land values in west London which mean that it is currently not financially viable to deliver OPDC’s early regeneration plans at Old Oak North. This area, close to the planned new HS2 interchange station, includes the 54-acre site that is owned and operated by Cargiant, which had originally been earmarked for development.
Earlier this year, the Planning Inspector, in his interim report on the OPDC’s draft Local Plan, de-designated the Cargiant site from Strategic Industrial Land, but also concluded that Old Oak North had become commercially unviable for residential-led development at this time.”
Whilst this situation might be taken to be an example of how viability matters can indeed in practice be taken into account at the plan-making stage, I do have concerns:
⁃ There is now a bigger onus on authorities to carry out proper viability work, including work to a sensible level of detail on strategic sites (albeit often with assistance from those promoting those sites for development), and is it actually going to be done?
⁃ Where it is not done, delays will occur in the examination process. At Old Oak, the necessary work had not been done and there was a significant hiatus whilst it was commissioned.
⁃ Development proposals are often not sufficiently worked up, at the stage that the plan is being prepared, so as to enable a sensible viability appraisal to be undertaken. And will developers be prepared always to come clean at the allocation stage as to the challenges they are facing in making the numbers stack up?
⁃ Will there always be participants in the local plan examination process with the motivation and resources to put authorities to proof on the work that has been carried out? If Cargiant hadn’t taken its stance (entailing lawyers and a team of consultants to challenge much of the inputs) I suspect the allocation would have been confirmed without challenge – and then proved over time to be undevelopable.
Duncan Field, Victoria McKeegan and I were speculating in our 16 December 2019 planorama vlog as to what the new Government’s legislative programme and policy priorities are likely to be in relation to planning, infrastructure and the environment
We now have the blueprint, in the form of the Queen’s Speech on 19 December 2019 and particularly the 151 pages of background notes published the same day.
There is going to be an “ambitious” planning white paper in due course, but what is promised in the meantime in this very blue paper that these notes represent? The government has little excuse not to deliver on what it has set out, given the size of its majority. The most relevant references are as follows:
Housing (pages 48 to 50):
“My government will take steps to support home ownership, including by making homes available at a discount for local first-time buyers.”
● The Government will support people to realise the dream of homeownership. One of the biggest divides in our country is between those who can afford their own home and those who cannot.
● The Government will shortly launch a consultation on First Homes. This will provide homes for local people and key workers at a discount of at least 30 per cent – saving them tens of thousands of pounds.
● The discount on First Homes will be secured through a covenant. This means these homes will remain discounted in perpetuity, supporting people now and in the future who aspire to own a home of their own.
● The Government will also renew the Affordable Homes Programme, building hundreds of thousands of new homes for a range of people in different places. This will help us prevent people from falling into homelessness while also supporting further people into homeownership.
● We will introduce a new, reformed Shared Ownership model, making buying a share of a home fairer and more transparent. This new model will be simpler to understand and better able shared owners to buy more of their property and eventually reach full ownership.
● To deliver on the homes this country needs, the Government is committed to building at least a million more homes over this Parliament. In the coming months we will set out further steps to achieve this, including an ambitious Planning White Paper and funding for critical infrastructure.
● The Planning White Paper will make the planning process clearer, more accessible and more certain for all users, including homeowners and small businesses. It will also address resourcing and performance in Planning Departments.
● The new £10bn Single Housing Infrastructure fund will provide the roads, schools and GP surgeries needed to support new homes. Alongside First Homes, this will ensure local people truly benefit from house building in their area and build support for new developments
● To help those who rent, the Government will build a rental system that is fit for the modern day – supporting landlords to provide high quality homes while protecting tenants. The Government’s Better Deal for Renters will fulfil our manifesto commitments to abolish ‘no fault’ evictions and to introduce lifetime deposits, alongside further reforms to strengthen the sector for years to come.
● The Government is taking forward a comprehensive programme of reform to end unfair practices in the leasehold market. This includes working with the Law Commission to make buying a freehold or extending a lease easier, quicker and more cost effective – and to reinvigorate commonhold and Right to Manage.
● The Government will ensure that if a new home can be sold as freehold, then it will be. We will get rid of unnecessary ground rents on new leases and give new rights to homeowners to challenge unfair charges. The Government will also close legal loopholes to prevent unfair evictions and make it faster and cheaper to sell a leasehold home.
● For those in the social rented sector, we will bring forward a Social Housing White Paper which will set out further measures to empower tenants and support the continued supply of social homes. This will include measures to provide greater redress, better regulation and improve the quality of social housing.
● This Government has committed to end rough sleeping by the end of this Parliament. The Government will continue to invest in key rough sleeping interventions, building on the progress that we made last year in reducing rough sleeping numbers. The Government will also continue to support those at risk of homelessness and rough sleeping through the continued enforcement of the Homelessness Reduction Act.
Building Safety Bill (pages 51 to 53):
“New measures will be brought forward…to improve building safety.”
● An enhanced safety framework for high-rise residential buildings, taking forward the recommendations from Dame Judith Hackitt’s independent review of building safety, and in some areas going further by:
○ Providing clearer accountability and stronger duties for those responsible for the safety of high-rise buildings throughout the building’s design, construction and occupation, with clear competence requirements to maintain high standards.
○ Giving residents a stronger voice in the system, ensuring their concerns are never ignored and they fully understand how they can contribute to maintaining safety in their buildings.
○ Strengthening enforcement and sanctions to deter non-compliance with the new regime, hold the right people to account when mistakes are made and ensure they are not repeated.
○ Developing a new stronger and clearer framework to provide national oversight of construction products, to ensure all products meet high performance standards.
○ Developing a new system to oversee the whole built environment, with local enforcement agencies and national regulators working together to ensure that the safety of all buildings is improved.
● We will also legislate to require that developers of new build homes must belong to a New Homes Ombudsman.
Fire Safety Bill (pages 54 to 55):
“New measures will be brought forward…to improve building safety.”
● Clarifying that the scope of the Fire Safety Order includes the external walls of the building, including cladding, and fire doors for domestic premises of multiple occupancy.
● Strengthening the relevant enforcement powers to hold building owners and managers to account.
● Providing a transitional period for building owners and managers (the “responsible person”) and Fire and Rescue Services to put in place the infrastructure for these changes.”
National Infrastructure Strategy (pages 90 to 91):
“My government will prioritise investment in infrastructure…”
● The National Infrastructure Strategy will be published alongside the first Budget, and will set out further details of the Government’s plan to invest £100 billion to transform the UK’s infrastructure.
● The Strategy will set out the Government’s long-term ambitions across all areas of economic infrastructure including transport, local growth, decarbonisation, digital infrastructure, infrastructure finance and delivery.
● The Strategy will have two key aims:
○ To unleash Britain’s potential by levelling up and connecting every part of the country. Prosperity will be shared across all of the UK, and long- standing economic challenges addressed, through responsible and prudent investment in the infrastructure.
○ To address the critical challenges posed by climate change and build on the UK’s world-leading commitment to achieve net zero emissions by 2050.
● The Strategy will also provide the Government’s formal response to the National Infrastructure Commission’s 2018 National Infrastructure Assessment, which made a series of independent recommendations to government across all sectors of economic infrastructure (transport, energy, digital, waste, water and flood management).”
Rail reform and High Speed Rail 2 (West Midlands – Crewe) Bill (pages 101 to 103)
● Last year the Government launched a ‘root and branch’ review of the railways led by Keith Williams. The Review is the first comprehensive assessment of the rail system in a generation and is tasked with making ambitious proposals to reform the rail industry.
● The Review is focused on reforms that will put passengers at the heart of the railway, provide value for taxpayers and deliver economic, social and environmental benefits across Britain.
● The Government will publish a White Paper informed by the recommendations next year. Among other things, this will end the complicated franchising model to create a simpler, more effective system.
● The Government has also committed to a number of major investments in the railway, including:
o Midlands Rail Hub, to improve services around Birmingham and throughout the West and East Midlands;
o Northern Powerhouse Rail;
o Reopening a number of the lines and stations closed under the
Beeching cuts in the 1960s; and,
o Significant upgrades to urban commuter and regional services outside London.
● Separate to the wider review of the railway system, the Government awaits the review, of the High Speed Two (HS2) network led by Doug Oakervee which is looking at whether and how to proceed with HS2, including the benefits and impacts; affordability and efficiency; deliverability; and scope and phasing, including its relationship with Northern Powerhouse Rail.
● Without prejudice to the Oakervee Review’s findings and any Government decisions that follow, it is expected that the High Speed Rail (West Midlands – Crewe) Bill will be revived in this Parliament. The Bill was first introduced in Parliament in July 2017 and will enable Phase 2a of HS2. The Bill passed through the House of Commons and had completed Second Reading in the House of Lords before the dissolution of the previous Parliament. Following revival it would begin its next stages in the House of Lords.
English Devolution (pages 109 to 110):
“My government…will give communities more control over how investment is spent so that they can decide what is best for them.”
● We are committed to levelling up powers and investment in the regions across England and allowing each part of the country to decide its own destiny.
● This means proposals to transform this country with better infrastructure, better education, and better technology.
● We will publish a White Paper setting out our strategy to unleash the potential of our regions, which will include plans for spending and local growth funding.
● It will provide further information on our plans for full devolution across England, levelling up powers between Mayoral Combined Authorities, increasing the number of mayors and doing more devolution deals.
● These increased powers and funding will mean more local democratic responsibility and accountability.
● We remain committed to the Northern Powerhouse, Midlands Engine, and Western Gateway strategies.
Business rates (page 111):
“To support business, my government will…bring forward changes to business rates.”
● The Government is committed to conducting a fundamental review of business rates.
● The Government recognises the role of business rates as a source of local authority income and will consider input from the sector as part of the review of business rates. Further details on the review will be announced.
● We are committed to increasing the retail discount from one-third to 50 per cent, extending that discount to cinemas and music venues, extending the duration of the local newspapers discount, and introducing an additional discount for pubs.
● We will also progress legislation to bring forward the next business rates revaluation by one year from 2022 to 2021 and move business rates revaluations from a five-yearly cycle to a three-yearly cycle. This will allow the Government to press ahead with delivering an important reform that has been strongly welcomed by business.
● More frequent revaluations will ensure that business rates bills are more up- to-date reflecting properties’ current rental values. Moving to three-yearly revaluation will make the system more responsive to changing economic conditions.
Environment Bill (pages 112 to 114):
“To protect and improve the environment for future generations, a bill will enshrine in law environmental principles and legally-binding targets, including for air quality. It will also ban the export of polluting plastic waste to countries outside the Organisation for Economic Co-operation and Development and establish a new, world-leading independent regulator in statute.”
● Establishing new long term domestic environmental governance based on: environmental principles; a comprehensive framework for legally-binding targets, a long term plan to deliver environmental improvements; and the new Office for Environmental Protection.
● Improving air quality by setting an ambitious legally-binding target to reduce fine particulate matter (PM2.5), the most damaging pollutant to human health. The Bill also increases local powers to address sources of air pollution and brings forward powers for the Government to mandate recalls of vehicles when they do not meet legal emission standards.
● Protecting nature by mandating ‘biodiversity net gain’ into the planning system, ensuring new houses aren’t built at the expense of nature and delivering thriving natural spaces for communities. We will improve protection for our natural habitats through Local Nature Recovery Strategies and give communities a greater say in the protection of local trees.
● Preserving our resources by minimising waste, promoting resource efficiency and moving towards a circular economy. These measures include extended producer responsibility, a consistent approach to recycling, tackling waste crime, introducing deposit return schemes, and more effective litter enforcement. We will also ban the export of polluting plastic waste to non- OECD countries, consulting with industry, NGOs, and local councils on the date by which this should be achieved.
● Introducing charges for specified single use plastic items. This will build on the success of the carrier bag charge and incentivise consumers to choose more sustainable alternatives.
● Managing water sustainably through more effective legislation to secure long- term, resilient water and wastewater services. This will include powers to direct water companies to work together to meet current and future demand for water, making planning more robust, and ensuring we are better able to maintain water supplies.
Climate change (pages 115 to 118):
“My government will continue to take steps to meet the world-leading target of net zero greenhouse gas emissions by 2050. It will continue to lead the way in tackling global climate change, hosting the COP26 Summit in 2020.”
● We will build on our progress with an ambitious programme of policy and investment, with our first Budget prioritising the environment. This will help deliver the green infrastructure needed to improve lives and achieve Net Zero, including by investing in carbon capture, offshore wind, nuclear energy, and electric vehicle infrastructure so that individuals are always within 30 miles of a chargepoint. We will make sure we help lower energy bills investing in the energy efficiency of homes, schools and hospitals. And away from home, we will use our £1 billion Ayrton Fund to develop affordable clean energy for developing countries.
● The government will continue to use our position as a global leader in this area by hosting the UN Climate Change Summit in Glasgow in 2020 (COP26). We will ask our partners to match the UK’s ambition.
● With a focus on nature based solutions at our upcoming COP summit, at home we will be substantially increasing our tree-planting commitment and creating a £640 million new Nature for Climate fund.
● Our natural environment is one of our greatest assets, and can play a crucial role in the fight against climate change. This government will:
○ introduce a landmark Environment Bill – the first one in twenty years – that will create an ambitious environmental governance framework for post Brexit, as well as banning the export of plastic waste to non-OECD countries;
○ establish a new £500 million Blue Planet Fund to help protect our oceans from plastic pollution, warming sea temperatures and overfishing;
○ lead diplomatic efforts to protect 30 per cent of the world’s oceans by 2030; and,
○ in our trade negotiations, never compromise on our high environmental protection
● We will also ensure that we are protecting our citizens by investing £4 billion in flood defences and lowering energy bills by investing £9.2 billion in the energy efficiency of homes, schools and hospitals.
● We will increase our ambition on offshore wind to 40GW by 2030, and enable new floating turbines.
● We will support decarbonisation of industry and power by investing £800 million to build the first fully deployed carbon capture storage cluster by the mid-2020s; and £500 million to help energy-intensive industries move to low-carbon techniques.
Constitution and democracy (pages 126 to 127):
“A Constitution, Democracy and Rights Commission will be established. Work will be taken forward to repeal the Fixed-term Parliaments Act.”
Setting up a Constitution, Democracy & Rights Commission that will:
● Examine the broader aspects of the constitution in depth and develop proposals to restore trust in our institutions and in how our democracy operates. Careful consideration is needed on the composition and focus of the Commission. Further announcements shall be made in due course.
It’s a blue, blue, blue, blue Christmas.
The usual askew perspectives and commentary will continue here in 2020.