Category: Affordable housing

Permission Quashed Due To PSED Failure

This year has seen a few cases that will have made developers and decision makers somewhat nervous as to the sheer variety of matters which may give objectors a basis for judicial review, depending of course on the facts in each situation and the reasoning set out for the relevant decision. After, for instance Rainbird (my 12 May 2018 blog post) and People Over Wind (my 20 April 2018 blog post) we now have what I think is the second example of a planning permission being quashed as a result of a local planning authority failing to comply with the Public Sector Equality Duty (“PSED”) within section 149 of the Equality Act 2010.

Section 149 provides as follows:

“(1) A public authority must, in the exercise of its functions, have due regard to the need to—
(a) eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under this Act;

(b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it;

(c) foster good relations between persons who share a relevant protected characteristic and persons who do not share it.
…


(3) Having due regard to the need to advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it involves having due regard, in particular, to the need to—


(a) remove or minimise disadvantages suffered by persons who share a relevant protected characteristic that are connected to that characteristic;

(b) take steps to meet the needs of persons who share a relevant protected characteristic that are different from the needs of persons who do not share it;
…..


(4) The steps involved in meeting the needs of disabled persons that are different from the needs of persons who are not disabled include, in particular, steps to take account of disabled persons’ disabilities.
…..


(7) The relevant protected characteristics are—
age;

1. disability;

2. gender reassignment;

3. pregnancy and maternity;

4. race;

5. religion or belief;

6. sex.”

In R (Buckley) v Bath and North East Somerset Council (Lewis J, 20 June 2018) the High Court quashed, on the basis that the PSED in section 149 had not been complied with, an outline planning permission which the local authority had granted for the development of part of the Foxhill Estate by the demolition of up to 542 dwellings and the provision of up to 700 dwellings.

Most of the properties on the estate are owned by a social housing provider, Curo Places Limited, with some properties being leased from other registered social housing providers and others being privately owned. There are currently 414 affordable homes on the site and these would be replaced by 210 affordable homes as part of the redevelopment.

The estate sits alongside the Mulberry Park development, for which planning permission had already been granted for up to 700 homes, including 210 affordable homes. Defined categories of tenants on the Foxhill Estate would be given priority for homes within Mulberry Park.

Whilst the environmental statement and other documents supporting the planning application dealt with socio-economic matters, and the officer’s report to committee also addressed the relevant development plan policy (H8, “affordable housing regeneration schemes”), there was no specific consideration of the PSED in relation to the impact on the elderly and the disabled of losing of their homes. In the circumstances, the relevant questions for the court to grapple with were

⁃ does the PSED apply at outline planning permission stage?

⁃ were PSED issues dealt with in applying policy H8, which had itself been the subject of an equality impact assessment?

⁃ were the issues considered in sufficient detail in any event to comply with the PSED?

⁃ even if there had been a breach, was it highly likely that the outcome would have been the same even without the breach?

The judge held that the duty does apply at outline planning permission stage. The fact that detailed issues, also raising equality considerations, would arise at reserved matters stage did not prevent the duty from arising.

It was not enough that policy H8 was “designed to address issues of equality in the context of affordable housing regeneration schemes which, necessarily, would or might include demolition of properties as part of the process of regeneration“. H8 was too general as a policy automatically to ensure that an application complying with policy H8 met the PSED.

In order to comply with the PSED, it was not essential for the report to committee to refer to it expressly:

“In broad terms, the duty is a duty to have due regard to the specified matters not a duty to achieve a specific result. The duty is one of substance, not form, and the real issue is whether the relevant public authority has, in substance, had regard to the relevant matters having regard to the substance of the decision and the authority’s reasoning. The absence of a reference to the public sector equality duty will not, of itself, necessarily mean that the decision-maker failed to have regard to the relevant matters although it is good practice to make reference to the duty, and evidentially useful in demonstrating discharge of the duty.”

The judge found that on balance “the defendant did not in fact have due regard to the impact on the elderly and disabled persons of granting an application which might lead to the demolition of their existing homes…The defendant did not specifically address or have regard to the impact on groups with protected characteristics, in particular the elderly and the disabled, of the loss of their existing home. It may well be that not a great deal would have needed to be said on this matter. It may have been sufficient to draw that matter to the decision-maker’s attention and then the decision-maker could have decided whether the contemplated benefits of the proposed development did outweigh any negative impacts. Ultimately, however, I am persuaded there were matters relevant to the discharge of the public sector equality duty which the relevant decision-maker needed to have due regard to but which were not drawn to the decision-maker’s attention.”

As to whether it was highly likely that the decision would have been the same even if the duty had been complied with, the judge did not feel able to reach that conclusion. He noted that the proposal was controversial. “The ultimate vote was five in favour of the grant of outline planning permission and four against. There would be other options open for addressing the problems of the estate including re-furbishment rather than demolition. In all the circumstance, it cannot be said that it is highly likely that the outline planning permission would have been granted in this particular case if the breach of section 149 of the 2010 Act had not occurred.”

As it happens, once the judicial review had been brought, Curo abandoned its demolition plans in favour of refurbishment of the estate and so the purpose of the proceedings was only to seek to ensure, as far as residents were concerned, that that the permission did not remain on the record and capable of implementation at a later stage. However, it still seems to me that the decision to quash was by no means inevitable on the facts. The case is certainly a warning to developers and local planning authorities to be scrupulous in taking into account the implications of proposals for those with section 149 protected characteristics.

The duty of course also applies equally to Inspectors and the Secretary of State in their decision making, as is demonstrated by what I suspect is the only other example of a planning permission being quashed due to breach of the PSED, namely LDRA Limited and others v Secretary of State (Lang J, 6 May 2016). In that case, a planning permission granted on appeal by an inspector for development on the banks of the River Mersey which would restrict access to the river side.

The judge noted that the site was “the only place in the area where public parking next to the river is readily available. The large car park is immediately beside the River Mersey, thus enabling disabled people and their carers to enjoy the river and the fine views across it, and to watch the activities of ships and smaller boats. Disabled people can remain in the car park area (which is built on two levels) or if they are sufficiently mobile, they can proceed a short distance to the riverside promenade (which forms part of the Wirral Circular Trail) either in a wheelchair or on foot. There was clear evidence before the Inspector from several sources that this car park, and the access which it gave to the river, was an amenity which was both regularly used and valued by disabled people (both adults and children with special needs).” She found that “there was a strong argument, based on the written and photographic evidence, that disabled people with impaired mobility would find it very difficult or impossible to go down to the riverside if the development is built because (a) they would be parked too far away; and (b) the footpath down to the riverside, and back up, would be too steep for disabled people and their carers to manage.”

She concluded:

” Applying the legal principles set out above, I have concluded that the Inspector did not have due regard to the duty under section 149 in this case. In particular, because of the lack of any detailed consideration of the value of the existing amenity to disabled persons (including, for the immobile, being able to sit in the car and look at the river); the lack of any other comparable amenity in the Birkenhead area; the practical difficulties which would be experienced by persons with restricted mobility and their carers in descending and climbing the steep footpath to the riverside; and the apparent failure to consider whether the loss of the car park would not be merely “less convenient” for disabled persons but might well mean that they would be unable to access the riverside at all. If the Inspector was not fully appraised of the relevant information, he was under an obligation to seek the information required. The statutory equality duty was not mentioned in the planning officers’ report, nor in the Inspector’s decision. Of course, the Inspector could comply with the duty without specifically referring to it. But there is no indication in the decision that the Inspector considered the factors set out in section 149, and tellingly there is no reference, express or implied, to the statutory considerations of removing or minimising disadvantages suffered by disabled persons, and taking steps to meet the needs of disabled persons. I consider it is likely that the Inspector overlooked section 149 in reaching his decision, and thus made an error of law”.

The permission was quashed.

Of course the PSED does not just arise in the context of the determination of planning applications and appeals but generally in the exercise of functions by public authorities (as well as in the exercise of public functions by non-public bodies).

It will be recalled that at first instance (albeit overturned on appeal in Secretary of State v West Berkshire District Council (Court of Appeal, 11 May 2016), Holgate J had quashed the written ministerial statement on minimum affordable housing contribution thresholds and the vacant building credit, partly on the basis of breach of the PSED, given that a disproportionate number of those with protected characteristics were in need of affordable housing, which he did not find had been sufficiently taken into account in the Government’s decision. The Court of Appeal disagreed, holding that a “relatively broad brush approach” in the equality statement accompanying the WMS was sufficient.

Breach of PSED was also an unsuccessful ground of challenge in the recent judicial review of the Mayor of London’s affordable housing and viability SPG, brought by a group of retirement housing companies (McCarthy & Stone Limited and others v Mayor of London (Ouseley J, 23 May 2018). The judge gave the complaint short shrift:

“Mr Warren’s attack is only on one narrow aspect of s149, where he raises a very particular point about the effect of the SPG on the provision by the Claimants of specialist accommodation for the elderly to buy, and hence on those whose protected characteristics could be affected. That point is not actually grappled with in any of the equalities assessments. But the basis for that in Mr Burgess’ evidence ultimately concerns the financing arrangements of the Claimants. “Due regard” for s149 purposes, does not require all possible ways in which someone may be affected, including in this indirect way, to be considered. Still less does it do so when it has not been raised and explained to the degree necessary. It is a very indirect consequence, and not something which one would expect a planning authority to be aware of unless specifically told. “Due regard” does not require an encyclopaedic examination of all the ways, not by any means obvious, in which an equality effect might be argued to arise.

Ms Peters has also explained that she did not accept that the sort of problems which Mr Burgess described were soundly based or significant for the sector. She was entitled to come to that view, and in so doing to conclude that there was no impact of significance to be considered or which had been omitted.

Even if criticism can be made of the form in which the fulfilment of the PSED duty is recorded, and even if there was a point which could have been considered in the course of having “due regard”, I find it impossible to consider that the outcome of its consideration could have been different in view of the rejection by the GLA of the factual basis upon which the Claimants’ rely. It is not for me to resolve that issue. The GLA view is not unreasonable.”

Whilst all cases of course turn on their facts, the Buckley judgment (which incidentally does not cite West Berkshire, McCarthy & Stone or indeed LRDA) does appear to take a tougher stance in relation to the need for proper compliance with the PSED (the facts in LRDA are certainly more stark). The lessons must surely be to ensure that developers and decision makers give specific, careful, consideration as to the potential implications of any project for those with section 149 protected characteristics, implications which may not be immediately obvious, and to ensure that the implications are expressly taken into account in decision making.

Simon Ricketts, 22 June 2018

Personal views, et cetera

Photo credit Bath Newseum

So Who Did Win The SPG JR?

Isn’t it heartwarming when the opposing parties in litigation all claim to have won? He said wryly.

Ouseley J’s judgment in McCarthy & Stone Retirement Lifestyles Limited, Churchill Retirement Living Limited, Pegasus Life Limited and Renaissance Retirement Limited v Mayor of London was handed down at 10.30 am on 23 May.

The Mayor rapidly issued a press release that morning, Judge rules in favour of Mayor’s threshold approach to housing.

However, the subsequent press releases by McCarthy & Stone Judge rules in favour of retirement consortium’s judicial review of the Mayor of London’s SPG and by Renaissance Retirement later that day seemed to tell a different story.

So that they can be checked for factual, typographical or grammatical errors or ambiguities, Planning Court judgments are usually issued in draft to the parties at least 24 hours ahead of being handed down, under conditions of strict confidentiality. Disclosure beyond the lawyers and parties themselves is a contempt of court and can bring criminal sanctions. However, what that advance sight does mean is that, by the time that the judgment is formally handed down (often with the parties not needing to be present and with submissions about remedies, costs orders and so on dealt with separately by email), the parties have got to grips with the often complex analysis within it and are ready to influence the way in which the narrative appears in traditional and social media, particularly the breaking online news items in the specialist press.

Planning law can be difficult in its abstractions and it can take time and strong coffee to arrive at a full understanding of the implications of a judgment (particularly without a familiarity with the evidence presented and submissions made to the court). This blog always includes links to the judgment transcripts because, however detailed the summary, there is no substitute for reading the document itself, but even then it can be hard. All credit to Holgate J in Parkhurst for appending parts of the inspector’s report to provide readers with the necessary context, but that was still a complex judgment (there have been some glib summaries!) and always of course watch for the political spin (Cheshire East Council’s “Cheshire East wins landmark legal judgement for residents in fear of housing sprawl” press release, following its loss in the Supreme Court in Suffolk Coastal , with ultimately an award of costs against it, being a classic of the genre!).

Back to the case in hand. So who really did win?

The claimants are all developers of specialist housing for the elderly. Their main concern with the Mayor’s 2017 affordable housing and viability SPG was that their schemes, usually on small sites, are caught by its requirement for a late stage viability review but were not caught under the adopted London Plan, which refers to the mechanism in the context of schemes which “in whole or in part…are likely to take many years to implement“.

[I summarised the SPG in my 20 August 2017 blog post 20 Changes In The Final Version Of The London Mayor’s Affordable Housing & Viability SPG. (Warning: the Mayor of London’s SPGs are not subject to the same legal regime that applies to local planning authorities in preparing SPDs, summarised in the first part of my 1 December 2017 blog post What’s For The Plan, What’s Supplementary?)]

The claimants’ evidence was that they developed smaller sites – “usually brownfield, higher build costs, significant communal facilities and spaces which were not for sale – making them more costly per square metre than most market housing, and particularly so in London. These schemes were constructed in a single phase, and could not meet affordable specialist housing accommodation requirements on-site, as had been accepted for years; they always provided viability appraisals to justify off-site contributions to affordable housing, and always had to be completed as a whole before any elderly occupiers moved in; they had a markedly slower selling rate. This made the Claimants less able to compete with general house builders in site acquisition.”

Their evidence was that “the acute pressures, on the viability of specialist housing schemes, made it essential that the risk of the development’s returns falling significantly below expectations was reduced to a minimum. They relied on various forms of borrowing to fund site purchases. The standard but notional 20 percent development return used in such appraisals was the bare minimum “on the basis that the risk associated with the affordable housing cost is known…If there is a risk that [that] cost might rise significantly, the risk profile becomes unacceptable….” Mr Warren emphasised that it is the risk which matters when deciding on what price to pay for a site. And it is that extra risk which Mr Burgess said affected them more than those in the general market. The effect of the late stage review was felt by the Claimants at the stage of bidding for the sites in the first place; the uncertainty about the amount of money which might have to be paid over at the late stage review affected the calculation of risk for borrowing, in such a way as to make the funding impossible.”

The judge made no ruling as to whether these concerns were justified and they were not accepted by the Mayor but this was the claimants’ explanation as to why the issues mattered to them.

[I note at this point that the proceedings were brought in the knowledge that the emerging new London Plan would in any event be proposing an equivalent late stage review mechanism. The parameters of that mechanism will no doubt be considered as part of the examination into the draft Plan (rumoured as likely to take place from November 2018 to February 2019)].

So the claimants’ objective plainly was to challenge that requirement for a late stage review of viability in relation to schemes like theirs which could not be said to be “likely to take many years to implement” (although the claimants sought to argue that it was single phase schemes that should not be caught).

In order to demolish that requirement, they contended that the SPG was unlawful and in so doing relied on three grounds:

“(1) it constitutes policy which should only be in the London Plan, which is currently being revised; the SPG was also inconsistent with that Plan;

(2) the SPG is a “plan or programme” which required a Strategic Environmental Assessment, SEA, under the Environmental Assessment of Plans and Programmes Regulations, SI 2004 No.1633 but which had not been undertaken; and

(3) it was produced without due regard being had to the constituent parts of the public sector equality duty, PSED, in s149 Equality Act 2010.”

Ouseley J rejected grounds 2 and 3 as unarguable and I’ll say no more about them.

In relation to ground 1, Rupert Warren QC for the claimants first argued that the SPG contained policies which could only be within the London Plan itself, namely “the 35 percent threshold, the fast-track, and the viability tested route, with three viability appraisals, (initial, early stage and late stage), the deliberately slow-track.”, all of which are indeed now proposed as policy in the draft London Plan.

The judge largely sidestepped this issue: “I do not want this judgment to be misread as holding that the SPG, and at this level of detail, must as a matter of law be in the London Plan or alternatively that the SPG cannot lawfully be included in the Plan as policy“. He did not interfere with the Mayor’s decision to treat the matters as appropriate for an SPG.

He commented that whether the emerging policies that reflect those SPG requirements are appropriately strategic for the Plan will be a matter for the inspector to determine following his or her examination of it: “They may contain a level of detail for the control of negotiations in quite small forms of development, and larger non-PSI developments, which excludes them from s334, though I do not doubt that the levels of affordable housing developed on new housing sites, can be seen as a strategic matter. In particular, when the draft London Plan goes for public examination, the question of whether draft policy H6, which takes the SPG into the draft Plan, is “strategic” and “general” may be one on which the inspector after the examination in public expresses a view. I would not want what I say to resolve the content of the draft London Plan, in advance of any inspector’s consideration and report.”

Rupert Warren QC’s second argument under ground 1 was that the SPG was inconsistent with the adopted London Plan. The judge stated:

“I am not prepared to hold that conflict with development plan policy of itself makes a non-statutory document unlawful. If it states that it is in conflict with the development plan because that plan is now out of date, for example because of changes in Government policy as might be found in the NPPF, or because the review of the Plan was delayed for proper reasons, I see no basis for it to be unlawful. The weight to be given to it is quite another in the light of s38(6), but the NPPF contains advice which conflicts with development plans up and down the country, and is not on that account unlawful. If an authority seeks to put forward some policy to cover the period when it is out of date, which could happen very quickly with new government policy, I see no reason to hold its actions unlawful. The plan-led system is supported by the proper application of s38(6), which can readily accommodate expressions of policy in conflict with the development plan. It does so often when a new draft plan is issued.”

So, inconsistency of itself does not lead to an SPG being unlawful. However, as identified by the judge:

“Here the Mayor clearly did not intend to produce SPG in conflict with the London Plan, let alone to avoid the development plan process. The Executive Summary of the SPG at [4] states that it is “guidance to ensure that existing policy is as effective as possible…it does not and cannot introduce new policy.” Indeed, the consistency of the SPG with the London Plan was a theme of the Defendant’s response to Grounds 2 and 3, SEA and PSED. It is inherent in the concept of SPG that it purports to supplement and not to contradict development plan policy. In so far as he did produce SPG in conflict with the London Plan, he would have misdirected himself as to the meaning and effect of either the Plan or the SPG and so failed, in promulgating it, to have regard to a material consideration. ”

So, inconsistency may well lead to an SPG being unlawful, if the policy-maker did not intend there to be any inconsistency, as was the case with this SPG.

Mr Warren is reported as pointing to two inconsistencies: “(1) the most important, is the introduction by the SPG of a late stage review to single phase sites where the London Plan only envisaged those for phased developments; (2) the adoption of a 35 per cent affordable housing on-site threshold at which no viability information was required, whereas the London Plan required each site to provide the maximum reasonable amount of affordable housing, which could be greater than 35 percent.”

The judge did not find that the 35% threshold was inconsistent with the adopted Plan (hence the focus of the Mayor’s press release!) but he did find there was inconsistency in relation to the requirement for a late stage review:

“By contrast, the language of the London Plan does not permit the imposition of a requirement for all sites over 10 homes, of a specific requirement to produce at least three viability appraisals, and more if the phases so turn out. Nor does it permit it exceptionally. It permits it only where, in general, the timescale or scale of development means that it is likely to take many years to complete a phase or the whole.”

So, he found for the claimants on the issue which had led them to bring the claim in the first place.

The judgment indicates that he will now “hear submissions on the appropriate remedy, if any, for the inconsistency I have found to exist“. But it seems to me that whether the relevant parts of the SPG are formally quashed or not is neither here nor there – the effect of the ruling is that the Mayor cannot lawfully rely on the SPG in requiring a late stage viability review in relation to the sorts of schemes that they promote.

Of course, that may be a Pyrrhic victory. As the judge goes on to comment:

“The status of SPG matters little now that the draft London Plan has been published and consulted upon, containing H6. Draft plans often are inconsistent with their predecessors and are given increasing weight as they progress, as outlined in the NPPF. Once the Mayor has considered the consultation responses to the draft Plan, the period for delivering which has expired, and has amended the Plan as he sees fit, it will have no lesser weight than the SPG. Giving some weight to draft policy which is inconsistent with the development plan is not uncommon. The NPPF contains material which is not consistent with developmental plans. The issue about the status and consistency of the SPG is not one of continuing importance.”

That may be so, but presumably the claimants went into the litigation with their eyes open, given the emerging draft London Plan. This will indeed be a temporary win if they do not persuade the inspector that late stage reviews are not appropriate in relation to smaller, usually single phased, schemes. But that will be an issue to be debated without pre-existing support in the form of the SPG.

Who won? The claimants on the point that I suspect they cared most about. The Mayor on the point that I suspect he cared most about: avoiding collateral damage from the proceedings, in the form of any wider adverse ruling on other matters such as the 35% threshold or the validity of the document as a whole.

Simon Ricketts, 26 May 2018

Personal views, et cetera

Pointers From Parkhurst?

Parkhurst Road Limited v Secretary of State (Holgate J, 27 April 2018) is a complex analysis by the High Court of issues relating to viability appraisal. Indeed Holgate J concludes an unusual postscript (paragraph 142 onwards) to his judgment by expressing the hope that “the court is not asked in future to look at detailed valuation material as happened in these proceedings“.

The Parkhurst Road dispute has indeed been protracted, to say the least.

Parkhurst Road Limited had purchased the site in May 2013 for £13.25m from the Ministry of Defence, the site having been allocated by Islington Council as a “site for intensification for residential accommodation to help meet housing need in the Borough“.

An initial development proposal for 150 homes, reduced to 116 homes, was refused by Islington in October 2014 and an appeal was dismissed on design grounds in September 2015 following a six day inquiry. There had been dispute about viability issues at that inquiry but the inspector had been satisfied with the appellant’s benchmark land value position of £13.26m, which would have led to a 14% affordable housing commitment (16 homes). He considered that market comparables relied on by PRL showed that the price paid by PRL for the site “was not of a level significantly above a market norm“. Islington had not accepted the inspector’s approach to viability (pointing to a circularity inherent in relying on market evidence of comparable transactions to the extent it may not have been adjusted to reflect the requirements of relevant planning policies) but had not challenged it, given that the appeal had been dismissed in any event.

A revised scheme was then brought forward in January 2016, for 96 homes, with the design issues resolved, but with no affordable homes, on the basis that the viability of the scheme could no justify it. Again the application was refused, effectively solely on viability grounds, due to an asserted failure to maximise provision of affordable housing as against the council’s borough wide strategic target of 50%. PRL again appealed and by the time the inquiry closed in March 2017 after nine sitting days, the position was that PRL were arguing for a reduced benchmark land value of £11.9m and proposing that 10% of the homes should be affordable housing. Islington was arguing for a benchmark land value of £6.75m, leaving headroom for 34% affordable housing. The council’s case was based on an approach of relying on a low existing use value with a premium added (EUV+). PRL’s case was based on using market signals from other transactions, disregarding transactions “which are significantly above the market norm“.

Holgate J was told “that the two decision letters on the Parkhurst Road site have generated a good deal of interest amongst planning professionals, as if either decision could be taken as laying down guidance of more general application on the approach to be followed where development viability and affordable housing contributions are in issue.”

He throws cold water on that suggestion:

“It is important to emphasise that that is not normally the function of a decision letter. The Inspector’s task is to resolve the issues which have been raised on the evidence produced in that appeal. The Inspector is not giving guidance on what course should generally be followed, even in cases raising the same type of issue. First, the application of policy often involves a good deal of judgment and second, the circumstances of an appeal (and the evidence produced) may differ quite considerably from one case to another (see eg. St Albans DC v Secretary of State for Communities and Local Government [2015] EWHC 655 (Admin)). There is a risk of attaching too much importance to the decisions of individual Inspectors, particularly where their conclusions were heavily dependent upon the circumstances of the cases before them and the nature of the evidence and submissions they received, with all their attendant strengths and weaknesses specific to that appeal. Reliance upon such decisions may take up a disproportionate amount of time and may distract parties from preparing suitable and sufficient information to deal with the circumstances and issues which arise in their own case.”

I summarised the inspector’s decision letter dismissing the appeal in my 24 June 2017 blog post Viability & Affordable Housing: Update.

The appellant challenged the decision on three grounds:

Ground 1 – the inspector erred in concluding that the council’s case was based on the EUV plus approach.

Ground 2 – the inspector did not address flaws which had been shown in the council’s valuer’s approach, applied the consultant’s method in a manner which was inconsistent with his understanding of it and failed to recognise substantial changes in the council’s case by the time the end of the inquiry was reached.

Ground 3 – criticisms of the way in which the inspector treated certain comparable transactions when arriving at his decision to accept the council’s benchmark land value figure.

Holgate J is not a judge to be cowed by disputes involving matters of valuation. He is after all President of the Lands Chamber in the Upper Tribunal and Planning Liaison Judge (ie basically the lead Planning Court judge).

He summarises Government policy on viability, quoting from paragraph 173 of the NPPF (with an interesting reference to compulsory purchase compensation principles when referring to the concept of a “willing seller”) and paragraphs 1, 19, 23 and 24 of the viability section of the Government’s planning practice guidance, asserts that the guidance places the onus on the developer to demonstrate non-viability, before summarising relevant local policies.

He addresses the RICS professional guidance, “Financial Viability In Planning“, in paragraphs 50 to 58, without criticism – noting for instance the fact that the guidance note discourages reliance upon EUV+ “as the sole basis for arriving at site value, because the uplift is an arbitrary number and the method does not reflect the workings of the market. Furthermore, the EUV Plus method is not based upon the value of the land if the redevelopment involves a different land use (eg. an office building redeveloped for a residential scheme)”.

The Secretary of State and Islington resisted the grounds but submitted that, in any event, PRL’s criticisms “do not vitiate the essential conclusion of the inspector that, contrary to local policy, the appeal proposal failed to provide “the maximum reasonable amount of affordable housing“”.

After a lengthy analysis of the decision letter as well as the arguments that had been put forward by the parties, the judge rejected grounds 1 and 3. He accepted in part PRL’s arguments in relation to ground 2, there had indeed been flaws in the council’s valuer’s approach which were not addressed properly by the inspector. However that error, in the judge’s view, did not vitiate the basis upon which the inspector rejected PRL’s case that a 10% affordable housing provision represented the maximum reasonable level and was not therefore a basis for quashing the decision.

The claim was accordingly dismissed.

Which takes us to that postscript in paragraphs 141 to 147. It is an intriguing read for what is says about, for instance the following:

⁃ The importance of overcoming uncertainty as to how viability assessment should properly be carried out, which is “making it difficult for practitioners and participants in the planning process to predict the likely outcome and to plan accordingly. It also leads to a proliferation of litigation“.

⁃ The tension that has arisen in the application of paragraph 23 of the viability passages in the PPG, which should mean reflecting and not bucking relevant planning policies when arriving at a benchmark land value, but on the other hand ensuring that the application of those policies should be informed by and not bucking an analysis of market evidence.

⁃ Data on comparables should be adjusted properly but on the other hand there are drawbacks in a simple requirement to conform to EUV+, by way of formulaic application, especially via local authority documents which have not been subjected to independent statutory examination prior to adoption.

Finally, in the context of the Government’s consultation proposals in relation to standardised inputs to viability assessments (see my 10 March 2018 blog post Developer Contributions, CIL, Viability: Are We Nearly There Yet the judge offers a suggestion:

“It might be thought that an opportune moment has arrived for the RICS to consider revisiting the 2012 Guidance Note, perhaps in conjunction with MHCLG and the RTPI, in order to address any misunderstandings about market valuation concepts and techniques, the “circularity” issue and any other problems encountered in practice over the last 6 years, so as to help avoid protracted disputes of the kind we have seen in the present case and achieve more efficient decision-making.”

That would indeed be welcome.

Simon Ricketts, 28 April 2018

Personal views, et cetera

[Colleagues at Town acted for PRL but these are, as always, my personal views].

Developer Contributions, CIL, Viability: Are We Nearly There Yet?

Bookends to this last week:
On Monday 5 March 2018 the draft revised NPPF , accompanying consultation proposals document and the Government’s response to the housing white paper consultation were all published, as well as the two documents I’ll focus on in this blog post:
– Supporting housing delivery through developer contributions: Reforming developer contributions to affordable housing and infrastructure (which also addresses proposed reform to CIL); and 

– Draft Planning Practice Guidance for Viability 
On Friday 9 March 2018 Draft Planning Practice Guidance: Draft updates to planning guidance which will form part of the Government’s online Planning Practice Guidance was published. 

The draft revised NPPF itself says very little on developer contributions, CIL and viability. 
On contributions, paragraph 34 of the draft (headed, in contrast to the “developer contributions” document, “development contributions” – consistency of terminology would be good!) states:
“Plans should set out the contributions expected in association with particular sites and types of development. This should include setting out the levels and types of affordable housing provision required, along with other infrastructure (such as that needed for education, health, transport, green and digital infrastructure). Such policies should not make development unviable, and should be supported by evidence to demonstrate this. Plans should also set out any circumstances in which further viability assessment may be required in determining individual applications.”

On viability:

“58. Where proposals for development accord with all the relevant policies in an up-to- date development plan, no viability assessment should be required to accompany the application. Where a viability assessment is needed, it should reflect the recommended approach in national planning guidance, including standardised inputs, and should be made publicly available.”
The Developer Contributions consultation document (responses sought by 10 May) addresses both contributions by way of section 106 planning obligations and by way of CIL. The document is accompanied by a research report commissioned from the University of Liverpool, The Incidence, Value and Delivery of Planning Obligations and Community Infrastructure Levy in England in 2016-17 which has some interesting statistics, underlining for me the scale of monies already being secured from development, over £6bn in 2016/2017:

It is clear from the consultation document that we are still on a journey to an unknown destination:
“The reforms set out in this document could provide a springboard for going further, and the Government will continue to explore options to create a clearer and more robust developer contribution system that really delivers for prospective homeowners and communities accommodating new development. 

One option could be for developer contributions [towards affordable housing as well as infrastructure] to be set nationally and made non negotiable. We recognise that we will need to engage and consult more widely on any new developer contribution system and provide appropriate transitions. This would allow developers to take account of reforms and reflect the contributions as they secure sites for development. 

The proposals in this consultation are an important first step in this conversation and towards ensuring that developers are clear about their commitments, local authorities are empowered to hold them to account and communities feel confident that their needs will be met.”
First step in a conversation??
Contributions via section 106 planning obligations
The document sets out perceived disadvantages of relying on section 106 planning obligations, including:
– delays (but there is no mention of how these could easily be reduced by prescriptive use of template drafts and more robust guidance and the Government’s previous proposal for an adjudication process to resolve logjams in negotiations has been dropped)
– the frequency of renegotiations, most frequently changing the type or amount of affordable housing (but with no analysis of why this is so – often in my experience for wholly necessary reasons, often linked to scheme changes or reflection of changed government affordable housing priorities or funding arrangements)

– a concern that they may “only have captured a small proportion of the increase in value” that has occurred over the time period covered by the University of Liverpool research report (but, aside from where the scale of contributions has been depressed from a policy compliant position due to lack of viability, why is this relevant? Planning obligations should be about necessary mitigation of the impacts from development, not about capture of uplifts in land value ). 

– lack of transparency. 

– lack of support for cross boundary planning. 

Despite these criticisms, the document does not propose significant changes to the section 106 process (or provide any timescale for the further review it alludes to) save for proposing to remove the pooling restriction (Regulation 123 of the CIL Regulations 2010) in areas:

* “that have adopted CIL; 


* where authorities fall under a threshold based on the tenth percentile of 
average new build house prices, meaning CIL cannot feasibly charged; 


* or where development is planned on several strategic sites”

The Government is consulting on what approach should be taken to strategic sites for this purpose, the two options being stated as:
“a) remove the pooling restriction in a limited number of authorities, and across the whole authority area, when a set percentage of homes, set out in a plan, are being delivered through a limited number of large strategic sites. For example, where a plan is reliant on ten sites or fewer to deliver 50% or more of their homes; 

b) amend the restriction across England but only for large strategic sites (identified in plans) so that all planning obligations from a strategic site count as one planning obligation. It may be necessary to define large strategic sites in legislation.”
I would prefer to see the pooling restriction dropped across the board. If authorities choose not to adopt a CIL charging schedule but to rely on section 106 planning obligations to make contributions towards infrastructure then why not let them, subject to the usual Regulation 122 test? I thought we wanted a simpler system?
There are sensible proposals for summaries of section 106 agreements to be provided in standard form (although we do not yet have the template), so that information as to planning obligations can be more easily made available to the public, collated and monitored. 
Contributions via CIL
The Government’s thinking on CIL continues along the lines set out alongside the Autumn 2017 budget and summarised in my 24 November 2017 blog post CIL: Haven’t Found What I’m Looking For ie wandering dangerously away from the CIL review panel’s ideas of a simpler, more uniform but lower charge regime. The proposed ability for authorities to set different CIL rates based on the existing use of land is inevitably going to make an overly complex system even worse, introducing another uncertainty, namely how the existing use of the land is to be categorised. The Government recognises that risk:

“Some complex sites for development may have multiple existing uses. This could create significant additional complexity in assessing how different CIL rates should be apportioned within a site, if a charging authority has chosen to set rates based on the existing use of land. 

In these circumstances, the Government proposes to simplify the charging of CIL on complex sites, by: 

* encouraging the use of specific rates for large strategic sites (i.e. with a single rate set for the entire site) 


* charging on the basis of the majority use where 80% of the site is in a single existing use, or where the site is particularly small; and 


* other complex sites could be charged at a generic rate, set without reference to the existing use of the land, or have charges apportioned between the different existing uses.”

One wonders how this would play out in practice. 

It seems that the requirement for regulation 123 lists (of the infrastructure projects or types of infrastructure which the authority intends to fund via CIL – and which therefore cannot be secured via section 106) is to be removed, which is of concern since regulation 123 lists (the use of which should be tightened rather than loosened) serve at least some degree of protection for developers from being double-charged. 
 The Government is proposing to address one of the most draconian aspects of the CIL process – the current absolute requirement for a commencement notice to be served ahead of commencement of development, if exemptions and the right to make phased payments (where allowed by the authority) are not to be lost, is to be replaced by a two months’ grace period. However, this does not avoid all current problems as any exemptions would still need to be secured prior to commencement.

A specific problem as to the application of abatement provisions to pre-CIL phased planning permissions is to be fixed. These flaws in the legislation continue to emerge, a function of the complexity and artificiality of the whole edifice, which the panel’s proposals would significantly have reduced. In the meantime, we are some way away from actual improvements to the system we are all grappling with day by day, with no firm timescale for the next set of amending Regulations. 
Viability
The thrust of the draft planning practice guidance for viability is understood and reflects what had been heralded in the September 2017 Planning for the right homes in the right places consultation document – focus viability consideration at allocation stage, standardise, make more transparent – but there are some surprising/interesting passages:
– Is the Government contemplating review mechanisms that don’t just ratchet upwards? Good if so:
“It is important that local authorities are sufficiently flexible to prevent planned development being stalled in the context of significant changes in costs and values that occur after a plan is adopted. Including policies in plans that set out when and how review mechanisms may be included in section 106 agreements will help to provide more certainty through economic cycles. 

For all development where review mechanisms are appropriate they can be used to amend developer contributions to help to account for significant changes in costs and values over the lifetime of a development. Review mechanisms can be used to re- apportion or change the timing of contributions towards different items of infrastructure and affordable housing. This can help to deliver sites that would otherwise stall as a result of significant changes in costs and values of the lifetime of a development.”
– Review mechanisms are appropriate for “large or multi phased development” in contrast to the ten homes threshold in draft London Plan policy H6 (which threshold is surely too low). 
– The document advises that in arriving at a benchmark land value, the EUV+ approach (ie existing use value plus premium) should be used. The London Mayor will have been pleased to see that but will then have choked on his cornflakes when the Government’s definition of EUV+ is set out. According to the Government, EUV is not only “the value of the land in its existing use” (reflecting the GLA approach) but also “the right to implement any development for which there are extant planning consents, including realistic deemed consents, but without regard to other possible uses that require planning consent, technical consent or unrealistic permitted development” (which is more like the GLA’s approach to Alternative Use Value!). 
Then when it comes to assessing the premium, market comparables are introduced:
“When undertaking any viability assessment, an appropriate minimum premium to the landowner can be established by looking at data from comparable sites of the same site type that have recently been granted planning consent in accordance with relevant policies. The EUV of those comparable sites should then be established. 

The price paid for those comparable sites should then be established, having regard to outliers in market transactions, the quality of land, expectations of local landowners and different site scales. This evidence of the price paid on top of existing use value should then be used to inform a judgement on an appropriate minimum premium to the landowner.”

I am struggling to interpret the document as tightening the methodologies that are currently followed, or indeed introducing any material standardisation of approach. 

The EUV+ position is covered in more detail by George Venning in an excellent blog post.
– There is a gesture towards standardisation in the indication that for “the purpose of plan making an assumption of 20% of Gross Development Value (GDV) may be considered a suitable return to developers in order to establish viability of the plan policies. A lower figure of 6% of GDV may be more appropriate in consideration of delivery of affordable housing in circumstances where this guarantees an end sale at a known value and reduces the risk.” However, there is no certainty: “Alternative figures may be appropriate for different development types e.g. build to rent. Plan makers may choose to apply alternative figures where there is evidence to support this according to the type, scale and risk profile of planned development.”
More fundamentally, I am sceptical that viability-testing allocations at plan-making stage is going to deliver. At that stage the work is inevitably broad-brush, based on typologies rather than site specific factors, often without the detailed input at that stage of a development team such that values and costs can be properly interrogated and without an understanding of any public sector funding that may be available. If the approach did actually deliver, significantly reducing policy requirements, so much the better, but that isn’t going to happen without viability arguments swamping the current, already swamped, local plan examination process.
Indeed, as was always going to be the case with the understandable drive towards greater transparency, the process is becoming increasingly theoretical (think retail impact assessment) and further away from developers opening their books to demonstrate what the commercial tipping point for them is in reality, given business models, funding arrangements, actual projected costs (save for land), and actual projected values. “Information used in viability assessment is not usually specific to that developer and thereby need not contain commercially sensitive data“. 
The document contains more wishful thinking:
“A range of other sector led guidance on viability is widely available which practitioners may wish to refer to.”
Excellent. Such as?
Topically, this week, on 6 and 7 March, Holgate J heard Parkhurst Road Limited’s challenge to the Parkhurst Road decision letter that I referred to in my 24 June 2017 blog post Viability & Affordable Housing: Update. The challenge turns on the inspector’s conclusions on viability. Judgment is reserved. 

We also should watch out for Holgate J’s hearing on 1 and 2 May of McCarthy and Stone & others v Mayor of London, the judicial review you will recall that various retirement living companies have brought of the Mayor of London’s affordable housing and viability SPG. 
The great thing about about writing a planning law blog is that the well never runs dry, that’s for sure. (Nothing else is). 
Simon Ricketts, 10 March 2018
Personal views, et cetera

Nothing Was Delivered

“Nothing was delivered/And I tell this truth to you/Not out of spite or anger/But simply because it’s true” (Bob Dylan)

It was the first meeting on 5 February of the prime minister’s housing implementation taskforce. The subsequent press statement summarises the event as follows:
“Today the Prime Minister chaired the first meeting of the Housing Implementation Taskforce at Downing Street.

She stressed the integral role all Government departments have in helping to fix the broken housing market and deliver 300,000 additional homes by the mid-2020s.

The taskforce discussed the steps Government has already taken, including further investment at the Budget, planning reform, releasing land faster, the Housing White Paper and building more affordable housing. They emphasised the key role of Homes England in driving forward change, and also focused on the supply of new housing, public sector land sales, land banking, house-building skills and building the infrastructure needed for new housing developments.

The Prime Minister reiterated that a step change was needed right across Government and that all departments needed to think creatively about how they can contribute to building the homes the country needs.”
That “300,000 additional homes by the mid-2020s” reference is an interesting one, reflecting the Government’s previous 11 January 2018 announcement of the creation of Homes England:
“Homes England will play a major role in fixing the housing market by helping to deliver an average of 300,000 homes a year by the mid-2020s.”
This is surely a tactical step back from the Conservative party’s 2017 manifesto commitment, with no longer any pre-2022 election target:
“We will meet our 2015 commitment to deliver a million homes by the end of 2020 and we will deliver half a million more by the end of 2022.”
A significant proportion of the country’s homes will need to come forward in London – the Mayor of London’s draft London Plan sets a target of around 65,000 homes a year, a significant increase from the previous plan figure of 42,000. 
These figures are only going to be achieved with a large degree of consensus between central government, the Mayor, boroughs and local communities. If I were prime minister (perish the thought) I would be worrying that in many areas, but particularly in London, there is increasing “spite or anger” (in the words of Mr Dylan). Inevitably, in any year with borough elections, planning becomes politicised but this year, with the repercussions of the Grenfell tragedy, the predictions of Conservative council losses and the internal battles within the Labour party, this is particularly so. EG has tracked the number of refusals in London up to the end of 2017. It makes for uncomfortable reading and the position will only be worsening. 


Against that background, is there a crisp appeals process? Not at all. The Planning Inspectorate’s performance statistics are still poor:


Anecdotally, many developers and authorities are keeping politically controversial decisions away from committees until the other side of the 3 May local government elections, even though the formal purdah rules, summarised in a useful Local Government Association guide, largely allow for statutory processes to carry on.
The politically charged atmosphere in many boroughs isn’t just leading to refusals of permission against officers’ recommendations – leading in turn to officers having to spend time defending appeals, with inevitable repercussions for capacity to cope with other applications in the system – but it’s impeding the work of boroughs that seek to achieve housing development, particularly in relation to estate regeneration schemes, without which those London numbers are not going to be met. 
Progress on the Haringey Development Vehicle initiative, brought forward by Haringey Council with private sector joint venture partner Lendlease, has now been halted by leader councillor Claire Kober, with no further decisions to be taken before purdah commences on 26 March until after the 3 May local election. Given that, following sustained pressure over the project, she announced on 30 January that she will not be standing for re-election, its long term future may be in doubt. This was a strategy to bring about widespread development on sites in the council’s ownership, including the proposed delivery of up to 6,400 homes. The HDV would in due course formulate development proposals for sites and make planning applications, applications which would be assessed as against planning policy, with the power for the Mayor to intervene in the usual way, but plainly in Haringey even the nature of the vehicle to be used to bring about development, presumably because of the role to be played in it by a private sector developer, was seen by objectors as unacceptable. 
There is room for debate in a democracy as to the form that regeneration should take and the extent and types of affordable housing to be provided but if the HDV is not to happen, what will? In current political and financial reality, my fear is that an opportunity to increase housing at scale, including affordable housing, will be lost. It is vital that affordable housing, with tenures to meet needs, is provided. Will the collapse of the HDV render this more or less likely? What’s the alternative? What’s the objectors’ plan? To continue this position until a 2022 general election? 
Whilst the politics played out, unpleasantly according to Councillor Kober’s account, Ouseley J was writing his judgment in Peters v London Borough of Haringey. This was a crowdfunded judicial review that had been brought on behalf of campaign group Stop HDV, seeking to establish that the council had acted outside its powers in proceeding with the project. The hearing had taken place over two days in October 2017 but Ouseley J’s judgment, over 50 pages long, was only handed down on 8 February 2018. 
The main ground of challenge was a legalistic one if ever one there was: that the council had acted outside its powers in establishing with Lendlease a limited liability partnership as the vehicle to take forward its strategic aims, on the basis that section 4(2) of the Localism Act 2011 provides that where “a local authority does things for a commercial purpose, the authority must do them through a company“. The judge rejected the argument:
“To my mind, there is no doubt but that the Council’s purpose in entering into the arrangements setting up the HDV and governing its operation, including the relationship between the two partners, cannot be characterised as “a commercial purpose” within the scope of the Localism Act. Even more clearly is its dominant purpose not commercial. Any commercial component is merely incidental or ancillary, and not a separate purpose.”

“…the phrases to which Mr Wolfe took me do not show a separate commercial purpose, whether minor or not. It is important to examine why this is all being done. The purpose behind the Council’s entering into the HDV and associated arrangements is not that of a property investor, simply seeking to make a profit or to achieve a return on development or improved rentals. The purpose of the Council is to use and develop its own land to its best advantage so that it can achieve the housing, employment and growth or regeneration objectives that it has laid down. In order to achieve as much as it can, it has to achieve the best consideration on any disposal of its land; and it must be in other respects financially prudent, to produce returns in various ways which can be used to further its policy objectives. Achieving the return is neither the activity nor its purpose of itself.”

“The acquisition of other land in the context of regenerating a large estate is a commonplace, and, backed by compulsory purchase powers, it demonstrates not one whit that a separate activity of property development is being undertaken.”
In any event, the judge considered that the challenge in relation to this ground and others (lack of consultation, Equality Act) had been brought out of time. I understand that the claimant is likely to seek permission to appeal. 
In another part of London, progress is still slow on another regeneration project that has been to the High Court and back, the Aylesbury Estate. I covered in my blog post Regeneration X: Failed CPOs the decision of the Secretary of State to decline to confirm Southwark Council’s CPO based on his concern as to the effects of acquisition on leaseholders, a decision which was subsequently quashed by consent following a challenge brought by the council. A second inquiry that has been taking place into the order was adjourned on 31 January 2018 to resume for a further two weeks on 17 April. Judging from a ruling by the inspector prohibiting further filming at the inquiry it has been a lively event so far. 

According to the council’s statement of case:
“The acquisition of the Order Land will enable demolition of the existing buildings in order to replace the 566 existing units of social and privately owned housing with a mixed tenure development comprising 830 homes. Of these, 304 will be social rent, 102 will be intermediate (affordable homes available as shared ownership or shared equity) and 424 will be private (of which 48 will be for open market rent and the remainder for sale). Included in the social rent homes are 50 extra care units and 7 units for people with learning difficulties.”
Inevitably, whatever the gains in housing numbers to be achieved (and indeed the affordable housing of all tenures to be provided), there will be legitimately held concerns on the part of residents directly affected. The Mayor announced on 2 February 2018 “mandatory ballots of residents for schemes where any demolition is planned as a strict condition of his funding“. 
Meanwhile, elsewhere in Southwark, Delancey has continued to face resistance in relation to its proposed redevelopment of the Elephant and Castle centre. At a committee meeting on 16 January, members overturned an officer’s recommendation to grant planning permission. A final decision has now been deferred, following a revised offer as to affordable housing and other commitments reportedly made by the developer. 
Delivery of the right schemes, in a way which maximises the potential for affordable housing and the wide range of other requirements set out in the draft London Plan will not be easy. How will land owners and developers respond? Will the Mayor continue to intervene to direct refusal where the affordable housing proportion offered is considered to be less than the maximum reasonably achievable? Will he use his call-in powers where boroughs unreasonably withhold permission for schemes which would deliver homes at scale? The Government had proposed back in 2015 reducing the threshold above which the Mayor could intervene on planning applications from 150 to 50 homes but unless the Mayor is seen as using his existing powers regularly and proactively to increase housing delivery, this may remain on the Government’s to-do list. 
The housing numbers that the Government is targeting will not be achieved without an active and engaged private sector. What if land owners choose not to release their land? There is a remarkable degree of consensus between the Conservative and Labour parties as to the desirability of using compulsory purchase powers. I covered the Conservative party’s manifesto thinking in my blog post Money For Nothing? CPO Compensation Reform, Land Value Capture (20 May 2017), in which I tried to set out some of the complexities arising from any proposal to change CPO compensation principles so as to strip out planning “hope” value (as opposed to just being smarter about using CPO powers in a way that hope values haven’t arisen in the first place). There was much publicity this month arising from an announcement from Labour shadow minister John Healey reported in the Guardian on 1 February that “Labour is considering forcing landowners to give up sites for a fraction of their current price in an effort to slash the cost of council house building“. 
“Landowners currently sell at a price that factors in the dramatic increase in value when planning consent is granted. It means a hectare of agricultural land worth around £20,000 can sell for closer to £2m if it is zoned for housing.

Labour believes this is slowing down housebuilding by dramatically increasing costs. It is planning a new English Sovereign Land Trust with powers to buy sites at closer to the lower price. 

This would be enabled by a change in the 1961 Land Compensation Act so the state could compulsorily purchase land at a price that excluded the potential for future planning consent.”
I haven’t seen any more detailed analysis of the proposal or indeed any fleshing out of the idea of an English Sovereign Land Trust. Personally I would prefer to see Homes England grasp the nettle, with their existing wide compulsory purchase powers, to acquire sites at a scale which would be difficult to achieve without compulsory purchase, thereby minimising “no scheme world” values. Labour’s English Sovereign Land Trust concept sounds very rural in concept and not a substitute for facing up to difficult challenges about maximising use in cities of public sector land, about densifying suburbs and about effective approaches to estate renewal. 
And given the supposed cross-party support for increasing housing delivery, wouldn’t it be good to try to depoliticise the process where we can, rather than demonise the participants whether from public or private sector? I’ve previously blogged about the multiplicity of reviews being undertaken, to which list can now be added the CLG Commons Select Committee’s land value capture inquiry, for which the deadline for evidence is 2 March 2018). What scope can we find for consensus, about priorities, about the respective roles of the public and private sector, about funding of social housing and about the appropriate use of compulsory purchase?
Simon Ricketts, 10 February 2018
Personal views, et cetera

Viability Assessment Is Not A Loophole, It’s A Noose

Congratulations to Shelter’s PR team. Its report, Slipping through the loophole: How viability assessments are reducing affordable housing supply in England, with a deliberately emotive reference in its accompanying 1 November 2017 press release to a ‘legal loophole exploited by developers‘ was lapped up largely uncritically by the media:
Loophole that allows developers to avoid building affordable homes leads to huge shortfall Telegraph, 31 October 2017
Majority of affordable homes lost due to legal loophole exploited by developers, show figures Independent, 1 November 2017

Revealed: The ‘Loophole’ Developers Use To Avoid Building More Affordable Homes Huffington Post, 31 October 2017
SHAMEFUL GREED Developers are using a legal loophole to build less affordable homes than required in order to protect their profit margins The Sun, 1 November 2017

Some basic truths are being conveniently forgotten. I set out some of them in my 28 May 2017 blog post, Affordable Housing Tax and won’t repeat them here, save to say that we need to pause and reflect whether public policy on affordable housing provision is in a good place at all at present. 
The aim of the Shelter report is to seek to persuade the Government to follow through with its proposed limiting of the role of viability assessment at application, as opposed to plan-making, stage. This proposal is being consulted upon in Planning for the right homes in the right places consultation paper, responses to which are due by 9 November 2017.
But the report is unbalanced. The description of the assessment process is over-simplistic. It asserts blandly that developers “can cite viability concerns to lower the amount of affordable housing they are required to provide, in order to guarantee them a 20% profit margin and inflate their bids for land”, playing down the scrutiny given by the authority’s valuers (or district valuer if the authority so chooses) and by the Planning Inspectorate on appeal (see for example my 24 June 2017 blog post that referred to the Parkhurst Road and Newcombe House decisions). The report repeatedly refers to 20% profit on a scheme as if it is a standard benchmark dreamed up by developers, when in reality a scheme by scheme approach is required. Often that figure has indeed been accepted, but on the basis that it is determined to be appropriate as a tipping point. Given the risks inherent in any major scheme (the paper wrongly states that “the developer’s profit is effectively guaranteed by the viability loophole” – not guaranteed, not a loophole) how much profit would a provider of capital require in order to invest in that project rather than in any other commercial development or investment? 20% sounds about right to me?
The report ends up laying most of the blame at paragraph 173 of the NPPF:
“…To ensure viability, the costs of any requirements likely to be applied to development, such as requirements for affordable housing, standards, infrastructure contributions or other requirements should, when taking account of the normal cost of development and mitigation, provide competitive returns to a willing land owner and willing developer to enable the development to be deliverable.”
It seeks to show the effect that this supposed change in approach has had on the delivery of affordable homes by way of section 106 agreement:

It is interesting to look at this table alongside other tables in the research work from which it is drawn, Rethinking planning obligations: balancing housing numbers and affordability (Dr Sue Brownill and Dr Youngha Cho, School of the Built Environment Oxford Brookes University, March 2017):


In my view NPPF has been far less influential than other changes such as the loss of Government funding. 

By political sleight of hand, moral and legal responsibility for funding the provision of affordable, ie subsidised, housing has over the last decade moved largely onto the owners of land being brought forward for residential development and the promoters of those schemes. What level of affordable housing do these schemes have to bear? In reality, given such high policy targets, as much as can be extracted in negotiations, often with a review mechanism in the section 106 agreement allowing for further extraction at later stages in the development, preserving only as a potential return whatever benchmark land value and developer’s profit percentage has been agreed upfront in the viability assessment. 
As I explained in my Affordable Housing Tax blog post, section 106 requirements in relation to affordable housing largely started in the 1990s and became progressively entrenched in policy through the 2000s. But, prior to reductions in government funding, first in 2005 and then in 2011, the basis for developer commitments towards affordable housing was very different. Developers would commit in their section 106 agreement to affordable housing provision on the basis of securing a minimum base price for the units, usually being obliged to market the opportunity to nominated registered providers (known as registered social landlords until 2008). The quantum of the registered provider’s bid would depend upon the level of social housing grant secured from the Housing Corporation (replaced by the Homes and Communities Agency) and/or local authority. The nature of tenure of the affordable housing, and quantum, would depend upon the base price secured and in turn, in large part, upon the availability of social housing grant. “Cascade” provisions would specify the policy priorities in terms of tenure/quantum where the minimum base price could not be achieved. The minimum base price would commonly be linked to the Housing Corporation’s Total Cost Indicator (TCI), ie its estimate, area by area, of the normal cost of providing different types of housing. Social housing grant was commonly as high as 40 to 60% of TCI. But from around 2011 , with little fanfare and no public debate, social housing grant ceased to be available for section 106 affordable housing. 
As a result of that fundamental change in approach, affordable housing requirements are now pretty much a straight tax on land value (where the developer can pass the cost to the land owner through paying less for the land) and otherwise a tax on development. Often in reality the cost cannot be passed on – land owners have existing uses for their land, other potential development options or simply a minimum aspiration below which they will not go. Equally, land may have been acquired by an irrationally exuberant purchaser, unwilling now to crystallise a loss.   
Viability assessment is a necessary evil, but don’t assume that developers relish it:
– Via review mechanisms it can end up capping the maximum return that is achievable, an unattractive option when weighed against the uncapped risks that arise through any development project.  
– The toxic nature of the public debate, placing at the developer’s door a problem not of its making.

– The increasing risk that commercially sensitive information will need to be shared publicly.  

– The slow, expensive and unpredictable nature of the process, involving various consultants, all paid for by the developer – plainly, going with the policy grain will always be an easier option.

There is of course a debate to be had as to the relative extent to which land owners, developers and the state should fund affordable housing. I hope that we are indeed about to have that debate. There are some faint but encouraging signs, for instance the announcement by the prime minister in her party conference speech of £2bn towards social housing, the promised green paper and Sajid Javid’s recent urging that the Chancellor should borrow to build homes. We await the Autumn budget on 22 November with interest. In the meantime, unless local planning authorities are going to reduce massively their affordable housing requirements (unlikely, it’s needed), there is no alternative to viability appraisal. By all means, let’s make it work better but, without it, we will have even fewer homes built. 
Inevitably, we’ve been there before. See for example an ODPM report, July 2005: The Value for Money of Delivering Affordable Housing through Section 106:
“7.1  The research confirms that s.106 plays an important role in the delivery of affordable housing. However, there are other factors besides s.106 which have a significant influence on the provision of affordable housing. Some of these factors affect the availability of land, others affect the capacity to negotiate affordable housing contributions, still others affect the financial capacity of RSLs and other stakeholders. Such factors include: 
…

– Other planning obligations – the requirement for other essential planning obligations can reduce the contribution available to affordable housing. 

– Rent restructuring – this can affect the ability of the RSL to raise loans. 

– The grant regime – the abolition of LASHG has implications for affordable housing delivery if it is not replaced by other means. The short term nature of the bidding regime for funds can delay or postpone a scheme.”

See also written evidence submitted to the Communities and Local Government Committee by by Professor Tony Crook, Ms Sarah Monk, Dr Steven Rowley and Professor Christine Whitehead in 2006:
”  Our research suggests that most (nearly three quarters) of Section 106 affordable housing units have an injection of public subsidy in the form of Social Housing Grant. At first sight this is odd and does not sit easily with one of our interpretations of Section 106, ie that developer contributions replace the need for subsidy. This might suggest policy “failure” but ignores the context within which Section 106 works best. Our evidence shows that planning gain delivers affordable housing in high price areas where land is expensive. What developers’ contributions appear to have done to date is to reduce the price of this expensive land to one that RSLs can afford within Housing Corporation funding guidelines. So, despite significant developers’ contributions, mounting on average to 5% of the gross development value across Section 106 sites (both the market and non-market elements), SHG is still needed to make the homes affordable and the schemes viable. In a recent calculation we have estimated that developers’ contributions on schemes agreed in 2003-04 were valued at £1,200 million. In looking at how Section 106 provides funding, we also need to recognise that Section 106 negotiations between developers and planners are not just about affordable housing contributions, but are usually about a much wider range of contributions, both in terms of physical off-site infrastructure and wider community needs, including school buildings. Affordable housing is not necessarily the highest priority and hence there may be little by way of developers’ contributions left over once other requirements have been negotiated and agreed. Thus both the expense of the land and the competing claims on planning gain explain the need for SHG, although without a clear negotiating and “accounting” framework there may well be risks that SHG inadvertently cross-subsidises these other planning “gains”.”


Eleven years on and it seems to me that we are in a much worse position. Whilst some grants are of course still available, social housing grant is long gone and in many areas a large non-negotiable slice has taken out by CIL (supposedly to be spent by authorities on infrastructure that unlocks development but that is not how it has turned out at all).

If the 2017 answer is to rely on land owners and developers to pay for affordable housing, let that be the outcome of a proper political debate and written into policy rather than the current unsatisfactory situation, which appears to me to be intellectually dishonest. If you’re going to tax market participants, do it openly, explain why you’re doing it and be sure that the mechanism is efficient in delivering the agreed objectives – more housing and more affordable housing, of all tenures. 
Simon Ricketts, 4 November 2017
Personal views, et cetera

PSI-Apps

Nothing in this blog post is intended to suggest in any way that planning in London is a game of psychology, politics and process but here are the basic rules, as applied this month by Sadiq Khan in Wandsworth and Barnet. 
PSI applications are defined in the Mayor of London Order 2008 as applications of “potential strategic importance” that fulfil at least one of the criteria set out in the Schedule to the Order. 

PSI applications have to be referred to the Mayor before they are determined by the borough council (I include in that term for ease the Corporation of the City of London and Westminster City Council) and referred again, if he requires it, after their determination and before the permission or refusal is issued – stage 1 and stage 2 referral respectively. 
The Mayor has two special powers:
First, subject to various detailed criteria and procedural requirements he can direct refusal (see my 9 September 2017 blog post Policing The SPG: New Scotland Yard). The borough council must then issue a refusal notice and the applicant has its usual right of appeal to the Planning Inspectorate. Advanced players of the game (not a game) take the view that the Mayor’s direction is potentially revocable, so in some circumstances the borough may hold off issuing its refusal notice and further negotiations will ensure. (I note for example that the New Scotland Yard refusal notice has not yet been issued). 
Secondly, again subject to various detailed criteria and procedural requirements, he can direct that he should be the local planning authority and then determine it himself (almost inevitably by granting planning permission) following a representation hearing (before which there is a stage 3 report). Until this month he had only determined two applications by this route, Hale Wharf in Haringey and Palmerston Road in Harrow (see my 18 March 2017 blog post London Calling: Mayoral Interventions).
We now have two more examples: 
Homebase site, Swandon Way, Wandsworth 
As set out in his press release, the Mayor has resolved on 17 October 2017 to approve a scheme by National Grid UK Pension Scheme next to Wandsworth Town railway station for 348 homes. Wandsworth Council had resolved to refuse permission for the development of the site due to the height and scale of the development and its proximity to a nearby conservation area. The development included 23% affordable homes. The developer has now agreed to increase that figure to 35%, with the majority in the first phase of development, and with review mechanisms as per the Mayor’s SPG. 
He had called in the scheme on 26 June 2017, noting that Wandsworth was significantly underperforming against its borough 33% affordable housing target. 
The Stage 1, 2 and 3 documents are at this link.
National Institute for Medical Research site, Mill Hill



The Mayor resolved to approve on 6 October 2017 a scheme by Barratt London for 460 homes on the National Institute for Medical Research site, the Ridgeway, Mill Hill. Barnet Council’s planning committee had resolved to refuse planning permission against officers’ advice, with the proposed reasons for refusal referring to effect on a conservation area, on green belt and on trees. In his 2 May 2017 call in letter he stated that Barnet Council is “currently significantly under-delivering against its annualised housing completions targets and the borough’s affordable housing targets.” The Mayor secured an increased affordable housing commitment, from 20% plus off-site financial contribution, to 40%. 
The Stage 1, 2 and 3 documents are at this link.
So it may be said that the Mayor is achieving on these schemes the percentages that he has flagged in the SPG. But I do have some open questions:
1. Where is the developer’s focus now to be in preparing proposals – on meeting local and borough concerns and aspirations or on achieving, via density, a development that is sufficiently viable to deliver the affordable housing percentages that may lead to the Mayor stepping in to assist if local discussions become difficult?
2. By his pragmatic actions, is the Mayor giving more weight to the SPG (non-statutory guidance, not policy) than it deserves, particularly in insisting on fairly rigorous adoption of the review mechanisms in the SPG?

3. When we see the draft London Plan at the end of next month, are we going to see various policies that cannot be said to be “strategic” but are drilling down to issues which should be left to be addressed at borough level?

4. Where deals are done to ensure an increased affordable housing percentage, will the increased pressure on viability in fact delay those schemes coming to fruition?

5. In some circumstances, will we see developers either seeking to ensure that their schemes meet the PSI application threshold, so as to come within the Mayor’s ambit, or conversely, seeking to ensure that they remain below the radar? Where will the balance lie – more big schemes, or fewer?

6. To what extent is party politics relevant? Is the Mayor more likely to intervene in Conservative boroughs such as Wandsworth and Barnet?

In the meantime, there are plenty of rumours about the Mayor’s planning policy direction, from tightening up on the criteria for student housing schemes to scrapping density matrices. All will no doubt be revealed on 29 November. 
Simon Ricketts, 21 October 2017
Personal views, et cetera

Mending The Planning System (Has Anyone Tried Switching It Off And On Again?)

When I recently blogged about the Raynsford review of the planning system, I really wasn’t expecting shadow CLG Secretary of State Roberta Blackman-Woods to announce yet another one at the Labour party conference, at a CPRE fringe event. This is CPRE’s write-up. It will be called “People and Planning”. According to Building magazine we can expect proposals to streamline the compulsory purchase system and “tougher measures to stop developers sitting on sites“, as well as a rethink on CIL and on the Government’s recently announced OAN methodology consultation. 
Labour leader Jeremy Corbyn had the following passages in his conference speech, leading on from references to the Grenfell Tower tragedy:
“We have a duty as a country to learn the lessons from this calamity and ensure that a changed world flowers . I hope that the public inquiry will assist. But a decent home is a right for everyone whatever their income or background. And houses should be homes for the many not speculative investments for a few. Look at the Conservative housing record and you understand why Grenfell residents are sceptical about their Conservative council and this Conservative government.

Since 2010: homelessness has doubled, 120,000 children don’t have a home to call their own, home ownership has fallen, thousands are living in homes unfit for human habitation. This is why alongside our Shadow Housing minister John Healey we’re launching a review of social housing policy – its building, planning, regulation and management.

We will listen to tenants across the country and propose a radical programme of action to next year’s conference. But some things are already clear tenants are not being listened to.
We will insist that every home is fit for human habitation, a proposal this Tory government voted down. And we will control rents – when the younger generation’s housing costs are three times more than those of their grandparents, that is not sustainable.

Rent controls exist in many cities across the world and I want our cities to have those powers too and tenants to have those protections. We also need to tax undeveloped land held by developers and have the power to compulsorily purchase. As Ed Miliband said, “Use it or lose it”. Families need homes.

After Grenfell we must think again about what are called regeneration schemes.

Regeneration is a much abused word.

Too often what it really means is forced gentrification and social cleansing, as private developers move in and tenants and leaseholders are moved out. 

We are very clear: we will stop the cuts to social security.

But we need to go further, as conference decided yesterday.

So when councils come forward with proposals for regeneration, we will put down two markers based on one simple principle:
Regeneration under a Labour government will be for the benefit of the local people, not private developers, not property speculators. 

First, people who live on an estate that’s redeveloped must get a home on the same site and the same terms as before.

No social cleansing, no jacking up rents, no exorbitant ground rents. 

And second councils will have to win a ballot of existing tenants and leaseholders before any redevelopment scheme can take place.

Real regeneration, yes, but for the many not the few.

That’s not all that has to change.”

Liberal Democrats’ leader Vince Cable took a similar theme in his own party conference speech:
“If there is any single lesson from the Grenfell disaster, it is that people in poverty aren’t listened to. Nowhere is inequality more marked than in the housing market. Property wealth for the fortunate coexists with growing insecurity and homelessness for many others. Home ownership, which spread wealth for generations, is no longer a realistic prospect for younger people with moderate means.

To put this right, we must end the stranglehold of oligarchs and speculators in our housing market. I want to see fierce tax penalties on the acquisition of property for investment purposes, by overseas residents. And I want to see rural communities protected from the blight of absentee second home ownership, which devastates local economies and pushes young people away from the places where they grew up. 

Homes are to live in; they’re not pieces on a Monopoly board. But whatever we do with existing homes will not be enough. A doubling of annual housing supply to buy and rent is needed. 

For years politicians have waffled about house building while tinkering at the edges of the market. I want to recapture the pioneering spirit that in the mid-20th century brought about developments like Milton Keynes and the new towns…I want to see a new generation of garden cities and garden villages spring up in places where demand presently outstrips supply.

But we know that private developers alone will not make this happen.Just as social reformers in the 1950s and 60s saw government roll up its sleeves and get involved with building, government today has a responsibility to be bold…and to build more of the homes we need for the 21stcentury. It is utterly absurd that councils are allowed to borrow to speculate in commercial property…but are stopped from borrowing to build affordable council houses.”

The shadow of Grenfell of course looms over the politics of planning and social housing. Secretary of State for Communities and Local Government, Sajid Javid, had earlier in the month announced a “green paper on social housing“:
“A wide-ranging, top-to-bottom review of the issues facing the sector, the green paper will be the most substantial report of its kind for a generation.

It will kick off a nationwide conversation on social housing.

What works and what doesn’t work.

What has gone right and what has gone wrong,

Why things have gone wrong and – most importantly – how to fix them.”
Shelter also put out a press release, big on hyperbole, short on analysis, referring to the ‘legal loophole’ of ‘secret viability assessments’, focusing on the reduced levels of affordable housing achieved in Kensington and Chelsea compared to the borough’s 50% policy target and making the explicit link to Grenfell:
“New research from Shelter reveals that a legal loophole has been used by housing developers to avoid building 706 social homes in Kensington and Chelsea – more than enough to house families made homeless from the Grenfell tower fire.”

How is the government’s position on the role of viability in planning (set out in paragraph 173 of the National Planning Policy Framework, a non-statutory, hardly obscure, planning policy document, now over five years’ old) a “legal loophole“?
Poor Raynsford review, is planning is too political for whatever emerges from it to gain traction? Its recommendations are due to be presented to next year’s party conferences. I hope that clear distinctions are drawn between changes to be made to the basic legislative hardware of the system (is it resilient, efficient, clear for users?) and to be made to the software (the NPPF, PPG structure – is it kept up to date to reflect the Government’s policy priorities and guiding users’ behaviour appropriately?), the purpose of the changes being to influence the content, scale, quality and pace of the data processing: individual plans and decisions actually coursing through the system, leading most importantly to delivery of political priorities, whatever they may be for the next Government. The review is somewhat hamstrung by not being able to set out those priorities as its starting point. 
So, what of the Government’s position? Regardless of what will be said at the forthcoming Conservative party conference, surely the current Government is not currently in a strong position to make further major changes. However, there is much unfinished legislative business, arising from:
– partly implemented enabling legislation (Housing and Planning Act 2016, Neighbourhood Planning Act 2017)

– uncompleted consultation processes (the Housing White Paper and associated documents, February 2017; Planning For The Right Homes In The Right Places, September 2017)

– other previously floated initiatives (for instance in the Conservative Party’s 2017 general election manifesto)

– other previous initiatives, partly overlapping with the above (a House of Commons library briefing paper dated 12 July 2017 lists 22 pre-June 2017 announcements that have not yet been implemented, or cancelled). 

 I have tried to take stock of where we are in terms of legislative as opposed to policy changes. This is a list of where I believe we are with the main planning law provisions of the 2016 and 2017 Acts (with relevant commencement dates indicated, although check the detail: in many cases a provision in primary legislation may have been switched on but still requires further secondary legislation for it to have any practical effect):

 Housing and Planning Act 2016 

 * Starter homes – providing a statutory framework for the delivery of starter homes – not in force, not really needed since the Housing White Paper u-turn

* Self-build and custom housebuilding – requiring local authorities to meet demand for custom‐built and self‐built homes by granting permissions for suitable sites – from 31 October 2016

* Neighbourhood planning changes – from 12 May 2016

* Permission In Principle/Brownfield Land Registers

    * Housing and Planning Act 2016 (Permission in Principle etc) (Miscellaneous Amendments)(England) Regulations 2017 – 6 March 2017

    * Town and Country Planning (Permission in Principle) Order 2017 – 15 April 2017

    * Town and Country Planning (Register of Previously Developed Land) Regulations 2017 – 16 April 2017

* Extension of Government’s ability to designate poorly performing LPAs such that non-major applications can be made direct to the Planning Inspectorate – from 12 July 2016

* Planning freedoms schemes – from 13 July 2016

* Resolution of disputes about planning obligations – not in force

* NSIPs including a housing element where functional link or close geographical link – from 6 April 2017

* Powers for piloting alternative provision of processing services – from 12 May 2016 (but no pilots yet)

* Urban Development Corporations/designation of new town areas – from 13 July 2016

* Compulsory purchase changes – mostly from 3 February 2017

Neighbourhood Planning Act 2017 
 * Neighbourhood planning changes – (partly) from 19 July 2017, subject of a previous blog post)

* Power to direct preparation of joint local development documents – not yet in force

* Restrictions on pre-commencement planning conditions – from 19 July 2017 (although Regulations not yet made)

* Restriction on PD rights re drinking establishments

    * Town and Country Planning (General Permitted Development) (England) (Amendment) (No 2) Order 2017 from 23 May 2017 (subject of a previous blog post)

* More compulsory purchase changes – partly in force, various commencement dates

 And these are the limited areas where we can expect further legislation:

* CIL reform (probably limited reform in this Parliament)

* Further PD rights? Maybe not. There has been silence in relation to upwards extensions in London and further rural PD rights, although limited light industrial to residential PD rights come into force for three years from 1 October 2017, following amendments to the General Permitted Development Order last year. 

* 20% increase in planning application fees (definitely)

* Completion notices reform (maybe, floated in Housing White Paper, subject of a previous blog post)

* Statutory three month deadlines for Secretary of State decisions (maybe, floated in Housing White Paper)

* Planning appeal fees (maybe, floated in Housing White Paper). 

* Regulations as to the “technical details” procedure for permissions in principle (definitely)

 I had to get my head round all of this in preparing to speak at Conference.*

*The RTPI’s Planning Issues For The Housing Agenda conference on 4 October.

Simon Ricketts, 30.9.17

Personal views, et cetera

Housing Needs: Assessed Or Assumed?

The new draft methodology to be used by English local planning authorities for determining their level of housing need is deceptively simple. Is it indeed too simple?
The current system (difficulty level: advanced)
The NPPF currently advises that LPAs should “use their evidence base to ensure that their Local Plan meets the full, objectively assessed needs for market and affordable housing in the housing market area”. They should:
“prepare a Strategic Housing Market Assessment to assess their full housing needs, working with neighbouring authorities where housing market areas cross administrative boundaries. The Strategic Housing Market Assessment should identify the scale and mix of housing and the range of tenures that the local population is likely to need over the plan period which: 

* meets household and population projections, taking account of migration and demographic change; 


* addresses the need for all types of housing, including affordable housing and the needs of different groups in the community (such as, but not limited to, families with children, older people, people with disabilities, service families and people wishing to build their own homes); and 


* caters for housing demand and the scale of housing supply necessary to meet this demand”

The PPG provides more detailed guidance but in practice the recommended approach is complex, relying on a shifting, uncertain evidence-base with subjective judgements to be made. Disputes over the calculation of “objectively assessed needs” are far too time-consuming, technocratic, uncertain and expensive. 

Local Plans Expert Group’s recommendations (difficulty level: intermediate)
Back in September 2015, the then Secretary of State, Greg Clark, and then housing and planning minister, Brandon Lewis (I know, seems like another era), appointed an independent Local Plans Expert Group “with a remit to consider how local plan making can be made more efficient and effective“. Its impressive line-up was as follows: 
Members
John Rhodes OBE – Quod, Director – Chair 

Adrian Penfold OBE – British Land, Head of Planning 

Councillor Toby Elliott – Swindon Borough Council, Cabinet Member 

Derek Stebbing – Chelmsford City Council, Planning Policy Manager 

John Howell OBE MP FSA – Member of Parliament for Henley 

Keith Holland – retired Planning Inspector 

Liz Peace CBE 

Richard Harwood OBE QC – 39 Essex Chambers 

Advisors 

Christopher Katkowski QC – Landmark Chambers 

Ian Manktelow – Wycombe District Council, Team Leader, Planning Policy 

Matthew Spry – Nathaniel Lichfield & Partners – Senior Director 

LPEG’s report was published on 16 March 2016, together with a separate volume of appendices, within which Appendix 6 sets out a simplified, standardised approach to the assessment of housing need. The methodology is summarised in this table: 


It was a detailed, thoughtful piece of work, delivered quickly. The Government then took almost as long again to publish what can best be described as a holding response on 7 February 2017, alongside publication of the housing white paper:

“The White Paper confirms that the Government will consult on options for introducing a more standardised approach to assessing housing requirements. The outcome of this consultation will be reflected in changes to the National Planning Policy Framework. We want councils to use the standardised approach and will incentivise them to do so, as this will help to speed up and reduce the cost of the plan making process for those authorities that use it. The White Paper indicates that our decision making for the £2.3bn Housing Infrastructure Fund is likely to factor in whether authorities intend to apply the new standardised approach to assessing housing requirements. 


We expect councils that decide not to use the methodology to explain why not and to justify the methodology that they have adopted. We will consult on what constitutes a reasonable justification for deviating from the standard methodology, and make this explicit in the National Planning Policy Framework.”

The Government’s proposals (difficulty level: elementary)
It is interesting that politicians (again) select a group of recognised experts and then embark on a significantly different approach. Perhaps the group wasn’t brave enough in its quest for a one size fits all formula or perhaps it recognised that, if it did, the figures would not be fit for purpose. 
However, a year after the publication of LPEG’s report, the Government has published, for consultation, its proposals: Planning for the right homes in the right places: consultation proposals (14 September 2017). The consultation period expires on 9 November 2017. 
“Subject to the outcome of this consultation, and the responses received to the housing White Paper, the Government intends to publish a draft revised National Planning Policy Framework early in 2018. We intend to allow a short period of time for further consultation on the text of the Framework to make sure the wording is clear, consistent and well-understood. Our ambition is to publish a revised, updated Framework in Spring 2018.” Planning Practice Guidance will be updated at the same time.
LPEG’s recommended approach has been further simplified, reduced indeed to a formulaic approach which will have to be followed by LPAs save in “compelling circumstances” which “will need to be properly justified, and will be subject to examination.” Amongst the elements that appear to have been stripped back from the LPEG recommendations are
– Just using ONS’ projected numbers of households as the demographic baseline for each area

– No ten year migration scenario sensitivity test

– No looking at vacancy and second home rates

– No separate consideration, as part of this methodology, of the need for affordable housing although LPAs should identify the housing need for individual groups, such as those in need of affordable housing, via a streamlined process (the Government invites suggestions as to how that might work). We also wait to see what will be in the forthcoming “green paper on social housing” announced by Sajid Javid in his speech to the National Housing Federation on 19 September 2017)

The proposed formula is as follows:

A cap is proposed on the level of any increase:

“We propose to cap the level of any increase according to the current status of the local plan in each authority as follows: 

a)  for those authorities that have adopted their local plan in the last five years, we propose that their new annual local housing need figure should be capped at 40 per cent above the annual requirement figure currently set out in their local plan; or

b)  for those authorities that do not have an up-to-date local plan (i.e. adopted over five years ago), we propose that the new annual local housing need figure should be capped at 40 per cent above whichever is higher of the projected household growth for their area over the plan period (using Office for National Statistics’ household projections), or the annual housing requirement figure currently set out in their local plan.”

DCLG has applied the new methodology to every authority in England, arriving at an overall housing need figure of 266,000 a year (including 72,000 in London) broken down authority by authority on a spreadsheet (which may not open on mobile devices). The table warns that the numbers are “indicative” and “should be treated with caution” (indeed various errors have already been found) but inevitably they have been pored over by those on all sides, whether to make the case for or against additional housing in a particular area. 

There are some curious outcomes due to the way that, for example, anticipated or planned employment growth that will lead to additional housing pressure has not been factored in, save indirectly to the extent that it may have an effect on housing affordability. The affordability ratio further skews the increases towards the south with many authorities in the north and the Midlands showing decreases as a result of these factors, regardless of their actual level of ambition. The paper stresses that LPAs can plan for more homes than the number arrived at by the methodology but to what extent will the existence of the lower number encourage objectors to push back?
The transitional provisions will certainly encourage many LPAs to make sure that their plans have been submitted for examination by 31 March 2018:

This is the briefest of overviews. The paper includes further proposals to which no doubt I’ll be coming returning. In the meantime, for a full analysis of the new approach and its likely implications, I recommend Lichfields’ paper, written by LPEG adviser Matthew Spry. 

Simon Ricketts, 20.9.17
Personal views, et cetera

Policing The SPG: New Scotland Yard

Pour encourager les autres or an early demonstration of zero tolerance? 

The Mayor of London’s direction of refusal on 4 September 2017 in relation to a section 73 application to amend a 2016 planning permission for redevelopment of the former Metropolitan Police’s headquarters, so soon after publication of the final version of his affordable housing and viability SPG (see my 20 August 2017 blog post, 20 Changes In The Final Version Of The London Mayor’s Housing & Viability SPG) has certainly focused minds. 

The sale of New Scotland Yard was reported in the Guardian in December 2014 under the headline “Daylight robbery? New Scotland Yard is bought for £370m by developer: Abu Dhabi investor buys famous police headquarters for £370m and says he will replace the block with luxury apartments”. The piece reports that the then Mayor’s Office for Policing and Crime “put New Scotland Yard on the market in September [2014] and said it would have cost over £50m to bring the building back up to standard. It bought the freehold for £123.5m in 2008. The sale forms part of a major revamp of the Met estate, which has raised £215m so far through the sale of 52 buildings (with plans to sell up to 200 buildings by 2016/17). The overhaul is estimated to save over £60m in annual running costs by 2016.” The then Metropolitan Police Commissioner was reported as saying that the sale was “absolutely vital“. The move was going to save more than £6m a year in running costs. The sale proceeds “would be used to kit out bobbies on the beat with tablets, smartphones and body cameras.”

The piece reports the sale agent as saying that the sale showed “continuing international confidence in the London market”. “What was clear was that all the bidders could appreciate just what a special opportunity it was”. 
The article goes on: “The new luxury apartments are expected to generate up to £100m in stamp duty when they are sold, as they will be priced over the £925,000 level that attracts a 10% rate.”
The police vacated the building in November 2016 once the purchaser, BL Development Limited (registered in Jersey but reported in the press as “an investment vehicle controlled by UAE-based Abu Dhabi Financial Group”) obtained planning permission from Westminster City Council in April 2016 for a redevelopment comprising 268 apartments. The section 106 agreement dated 27 April 2016 provides for ten affordable homes together with a £10m payment in lieu – and no review mechanism, so a once and for all deal. 
The previous Mayor, Boris Johnson, did not intervene in the planning process. Indeed, the timing rather suggests that the application was referred to him in the run up to the 5 May 2016 Mayoral election and conveniently planning permission was issued before Sadiq Khan’s success in that election.  
I do not know how rigorous or otherwise the viability assessment was at that stage, but it does seem that the benchmark land value used was £277m, some way below the amount that the developer had to pay in reality to secure the site. The sale of this public sector land generated £370m, a figure which would otherwise have come from the tax payer to subsidise police operations. The developer was going into the viability negotiation only able to assume a value for the site that was almost £100m below what it had paid, so it could hardly be said that the whole of the problem lies at the door of the developer for having overpaid for the site in a highly competitive disposal process. 
The Mayor could of course have required as a condition of the sale process that the purchaser provide a minimum of affordable housing and thereby depressed everyone’s bids, and ultimately the sale price, accordingly. He didn’t – a political choice. 
The same month as the police leave the building, November 2016, BL Development Limited make a section 73 application to optimise the scheme – a further 27 apartments, reduced basement space, fewer car parking spaces, other design changes. Its viability assessment seeks to justify (a position accepted by Westminster City Council’s viability consultants) that no further affordable housing can be secured without the scheme being unviable, meaning a reduction in the percentage of affordable housing that would be delivered (net of the in lieu contribution) from 4% to 3%.
Westminster City Council resolves on 16 May 2017 to approve the application, despite strong concerns expressed by the Mayor at stage 1 referral on 20 March 2017. There is then a very long delay before the final stage of the process, namely stage 2 referral to the Mayor where he has a fixed 14 days’ period within which to decide whether to wave it through, call it in or direct refusal. I have no direct knowledge but I assume that discussions were continuing with the Mayor’s viability team to seek to neutralise their position and in any event to make process with the necessary variation to the section 106 agreement – perhaps also to await sight of the final version of the Mayor’s affordable housing and viability SPG. The Mayor’s SPG is published on 16 August and the application is finally referred on 24 August. On the day before the application was referred to the Mayor the applicant increases its affordable housing offer by one unit, on a “without prejudice” basis, on the condition that no viability review mechanism would be required.  
Big stakes for the developer. Is the Mayor going to intervene on such a high profile site which has generated a massive return for his authority? But, on the other hand, how would he maintain credibility in his SPG without intervening on a scheme with, at face value and without descending in detail into the viability position, such a low level of affordable housing, both as originally granted (just before he could do anything about it) and (particularly) as amended?
The application was a natural one to choose from the Mayor’s perspective as it gives rise to a number of the issues addressed in the SPG, for instance:
– approach to section 73 applications

– current affordable housing commitment well below 35% threshold

– issues in relation to assessment of assumed land value, projected sales rates and profit

– land formerly in public ownership

The Mayor’s direction states that the “level of affordable housing provision proposed is wholly unacceptable” for two reasons:

“Affordable housing provision: The proposed affordable housing contribution of 10 intermediate units (3.3% by unit, 2.9% by habitable room) and £10 million off-site payment in lieu has not been adequately justified. The methodology undertaken by the applicant to assess the viability of the scheme is not in compliance with the Mayor’s Affordable Housing and Viability SPG and leads the GLA to conclude that more affordable housing could be supported within the scheme. On the basis of the evidence presented, the applicant has not demonstrated that the scheme will deliver the maximum reasonable amount of affordable housing, and the proposals are therefore contrary to London Plan Policy 3.12 and the Mayor’s Affordable Housing and Viability SPG. 

Viability review mechanism: No provision has been made in the draft s.106 agreement for viability review mechanisms. Given the low level of affordable housing proposed and the significant length of the development programme, the use of review mechanisms is essential in order to reassess the viability of the scheme and determine whether additional affordable housing could be supported. The absence of viability review mechanisms does not therefore support the delivery of the maximum reasonable amount of affordable housing on the site, and is contrary to London Plan Policy 3.12 and the Mayor’s Affordable Housing and Viability SPG.”

The stage 2 report sets out GLA officers’ “significant concerns with the applicant’s approach to the assessment of the viability of the scheme…These include the applicant’s approach to land value, sales rates and profit”. 

So what were the problems identified?
1. The applicant’s viability consultants argued that the 2016 permission had been implemented and that it should should form the basis of comparison with the amended scheme to determine whether it is viable. The 2016 permission viability assessment had previously concluded that the 2016 permission scheme was not viable even with no affordable housing. The applicant had since reviewed its assessment of that scheme and asserted that it was now in fact viable due to assumptions as to lower build costs, lower finance costs and a lower profit target, leading to a higher benchmark land value (£159.34m). When the extant scheme is being used as the baseline for the section 73 scheme, obviously improvements in the viability of the extant scheme raise the bar in terms of how profitable the section 73 scheme would need to be. The report found that this approach was inappropriate “and leads GLA officers to conclude that more affordable housing could have been achieved within the extant scheme, or otherwise that the extant scheme does not provide a reasonable basis for determining the viability of this s. 73 scheme”.
2. The Council’s viability consultants do not escape criticism. They had adopted a market value approach to arrive at a benchmark land value of £200m but, in the view of GLA officers, the consultants had “not demonstrated that their approach to site value properly reflects planning requirements for affordable housing or has been adjusted to ensure that it is compatible with the current day basis of the applicant’s assessment, as required by the Mayor’s SPG”. 

3. The applicant’s appraisal apparently did not factor in a £19.5m reduction in build costs due to a reduction in the size of the basement. 

4. An IRR (internal rate of return) approach was taken to determining a target profit. The SPG states that an IRR approach “is sensitive to the timings of costs and income, and in such cases these value inputs must be robustly justified“. The report finds that the development programme assumed for the project of 8.4 years was long for a scheme of this size and inconsistent with the construction plan submitted with the ES. Slower assumed delivery would depress the profitability of the scheme. A cross-check of profit as a factor of gross development value and of gross development costs (now required by the SPG where IRR is used) showed higher than typical rates of profit. An additional contingency on construction costs was included which was not agreed. 

5. The absence of early and late stage review mechanisms was deprecated. The developer unsuccessfully argued that to include them would be a disincentive to proceed with the section 73 scheme, as opposed to the extant scheme, which does not have them.

6. There is then this political point which I feel uneasy about given the extent to which the previous Mayor had extracted value from the site via the disposal process: “This is a site that has recently been transferred from public ownership, and is in one of the highest value areas in the country. The applicant’s affordable housing offer of 3-4% must be considered in this context.”

So what next? BL Development will need to decide whether to (1) appeal against the directed refusal (which would be a fascinating test of the status to be given to the SPG and indeed the robustness or otherwise of the various viability approaches) (2) sharpen its pencil with a view to a further application or (3) simply build out the extant scheme, fewer units, the agreed affordable housing provision, no review mechanism. 
More widely there are some public policy issues arising as to public land disposals. Maximum value can be extracted at the disposal stage or the disposal opportunity can be used to require, as a bid condition, higher levels of affordable housing than would be possible if the site were sold on an unconstrained basis. But (pace Boris Johnson) you shouldn’t be able to have your cake and eat it. 
Simon Ricketts, 9.9.17
Personal views, et cetera