Oliver’s Twist: Letwin’s Proposals For Large Housing Sites

Sajid Javid had given Sir Oliver Letwin the following terms of reference for his review into the “build out of planning permissions into homes” that was announced in the Autumn 2017 budget.

The Review should seek to explain the significant gap between housing completions and the amount of land allocated or permissioned in areas of high housing demand, and make recommendations for closing it. The Review should identify the principal causes of the gap, and identify practical steps that could increase the speed of build out. These steps should support an increase in housing supply consistent with a stable housing market in the short term and so that over the long-term, house prices rise slower than earnings. The review will provide an interim report to the Chancellor of the Exchequer and the Secretary of State for Housing, Communities and Local Government in time for Spring Statement 2018 and a full report for Budget 2018.”

Has Letwin’s final report (published alongside the budget on 29 October 2018) twisted itself away from the examination question that he was set? In my view, read as a set along with the previous two stages of his work, it is pretty clear how his thinking has developed. But he has ended up making a surprisingly radical and, to my mind, impractical, set of recommendations that surely will not find traction with this Government and which on any reflection would surely not increase the “speed of build out“. Perhaps due to the deadline he was set, the recommendations in the final report are not accompanied by any evidence. They are also set out in some detail (see for example the tables embedded in a later part of this blog post) at the expense of any commentary on, for example, the proposals to encourage timely delivery that were set out in the February 2017 white paper.

Dear Philip and Sajid

There have been three stages to his work. In his 9 March 2018 letter to the Chancellor and Secretary of State he provided this initial analysis:

The fundamental driver of build out rates once detailed planning permission is granted for large sites appears to be the ‘absorption rate’ – the rate at which newly constructed homes can be sold into (or are believed by the house builder to be able to be sold successfully into) the local market without materially disturbing the market price. The absorption rate of homes sold on the site appears, in turn, to be largely determined at present by the type of home being constructed (when ‘type’ includes size, design, context and tenure) and the pricing of the new homes built. The principal reason why house builders are in a position to exercise control over these key drivers of sales rates appears to be that there are limited opportunities for rivals to enter large sites and compete for customers by offering different types of homes at different price-points and with different tenures.

When a large house builder occupies the whole (or even a large part) of a large site, the size and style (and physical context) of the homes on offer will typically be fairly homogeneous. We have seen examples of some variation in size, style and context on some large sites; but the variations have not generally been great. It has become apparent to us that, when major house builders talk about the absorption rates on a large site being affected by “the number of outlets”, they are typically referring not only to the physical location of different points of sale on the site, but also and more importantly to differences in the size and style (and context) of the products being offered for open market sale in different parts of the site. Even these relatively slight variations are clearly sufficient to create additional demand – and hence additional absorption, leading to a higher rate of build out.

It is also clear from our investigation of large sites that differences of tenure are critical. The absorption of the ‘affordable homes’ (including shared ownership homes) and of the ‘social rented housing’ on large sites is regarded universally as additional to the number of homes that can be sold to the open market in a given year on a given large site. We have seen ample evidence from our site visits that the rate of completion of the ‘affordable’ and ‘social rented’ homes is constrained by the requirement for cross-subsidy from the open market housing on the site. Where the rate of sale of open market housing is limited by a given absorption rate for the character and size of home being sold by the house builder at or near to the price of comparable second-hand homes in the locality, this limits the house builder receipts available to provide cross-subsidies. This in turn limits the rate at which the house builder will build out the ‘affordable’ and ‘social rented’ housing required by the Section 106 Agreement – at least in the case of large sites where the non-market housing is either mixed in with the open market housing as an act of conscious policy (as we have frequently found) or where the non-market housing is sold to the housing association at a price that reflects only construction cost (as we have also seen occurring). If freed from these supply constraints, the demand for ‘affordable’ homes (including shared ownership) and ‘social rented’ accommodation on large sites would undoubtedly be consistent with a faster rate of build out. And we have heard, also, that the demand for private rented accommodation at full open market rents (the scale of which is at present uncertain) would be largely additional to, rather than a substitute for, demand for homes purchased outright on the open market.

The interim report

His interim report in June 2018 then focused on three issues:

• what the build out rate on large sites in areas of high housing demand actually is;

• why the rate of build out on these sites is as it is; and

• which factors would be most likely to increase the rate of build out on these sites without having other, untoward effects.

The interim report is a solid document with strong analysis and a variety of conclusions, one of which being that “if either the major house builders themselves, or others, were to offer much more housing of varying types, designs and tenures (and, indeed, more distinct settings, landscapes and street-scapes) on the large sites and if the resulting variety matched appropriately the desires of the people wanting to live in each particular part of the country, then the overall absorption rates – and hence the overall build out rates – could be substantially accelerated. The policy levers required to bring this about without damaging the economics of individual sites or the financial sustainability of the major house builders are topics for the second phase of my work, on which I shall report at the time of the Budget.”

The final report

And this is precisely what he has sought in part to do in his final report, published alongside the budget on 29 October 2018. I say in part, as there is no real analysis as to whether his proposed policy levers would or would not damage “the economics of individual sites or the financial sustainability of the major house builders“.

Underlying his conclusions seems to be his scepticism as to whether the encouragement in the NPPF for “residential developments to have a mix of tenures, types and sizes which reflect local housing demand (as well as emphasising the importance of good design)“, together with the 2018 NPPF’s requirement for local authorities to encourage the sub-division of large sites, is sufficient to lead to less homogenous development or “the prospect of significant increases in the rapidity of build out on such sites“.

He gives no evidence for this assumption. Even the 2012 NPPF (as now revised) is, after all, still working through into plans and permissions.

Instead of trying to work with the grain of the existing system, he recommends that “the Government should adopt a new set of planning rules specifically designed to apply to large sites. The purpose of these rules should be to ensure that all sites in areas of high housing demand whose size exceeds a certain threshold are subject to an additional form of planning control that requires those owning such sites to provide a diversity of offerings on the site which are able to address the various categories of demand within the local housing market. This, in turn, should ensure that houses can be built at a greater rate than at present on such sites, because the absorption rate for each category of housing will be complementary, yielding, overall, a greater absorption of housing by the local market as a whole in any given period.”

Ahead of a new legislative structure (both primary and secondary legislation) and an annex to the NPPF (I suspect it would take more than an annex – he’s driving a coach and horses through the thing as far as large housing sites are concerned), he envisages that the new rules could first be brought in by a written ministerial statement, secondary legislation and the policy annex. “If, for example, the Government decides to adopt my recommendations at the end of 2018, I suggest that it should be made clear to the owners of existing large sites in areas of high housing demand, and to those who are taking such large sites through the current planning system before commencing works, that the new rules governing planning permission for large sites will come into force at the start of 2021, and will therefore govern any permissions granted for large sites on or after that date.”

The primary legislation would:

” • define large sites both in terms of a size threshold (which might, for example, be set initially at 1,500 units2) and in terms of boundaries (to ensure that a site which is allocated as a single entity in a local development plan qualifies, even if it benefits from a number of different outline planning permissions);

• require local planning authorities, when granting allocations, outline permissions or final planning permissions for any large site or any part of a large site in areas of high housing demand, to comply with the new secondary legislation and the new planning policy relating to large sites – and, in particular, to include within all outline planning permissions for large sites in areas of high housing demand a requirement that ‘housing diversification’ on such sites should be a ‘reserved matter’; and

• establish the principle that all permissions for reserved matters granted in relation to such large sites should contain diversi cation requirements in accordance with the new secondary legislation and the new planning policy for large sites.”

The secondary legislation would:

” • amend the Town and Country Planning (Development Management Procedure)(England) Order 2015 to include type, size and tenure mix (alongside the current provision for prescription of access, appearance, landscaping, layout and scale) as characteristics that can be prescribed as reserved matters for large sites in areas of high housing demand; and

• require any applicant making an outline planning application for a large site or an application for final permission for a phase of a large site in an area of high housing demand to prepare a diversification strategy, specifying the types of diversity that will be exhibited on that site or in the part of the site to which the application refers.”

The new planning policy document would set out the diversification principles that are to apply to such large sites in areas of high housing demand in the future. By diversification, he means, for example, “housing of varying types, designs and tenures including a high proportion of affordable housing“, as well as “more distinctive settings, landscapes and streetscapes“. By all means strengthen the NPPF if further strengthening is needed (is it?) but how much of this is specific to schemes of 1,500 homes plus.

Then it really starts to get weird. Because there will be “scope for disagreement about whether a particular applicant has made a genuine effort to provide sufficient diversity to address multiple markets simultaneously and hence to increase the overall absorption rate and build out rate. Accordingly, in order to minimise recourse to appeal or litigation, I recommend that the Government should establish a National Expert Committee.

The primary purpose of this Committee should be to arbitrate on whether any application that causes a disagreement between the local planning authority and the applicant (and consequently comes to appeal) satisfies the diversification requirement, and is therefore likely to cause high build out rates.

The secondary purpose of the Committee would be to offer informal advice to any developer or local planning authority that was considering a large site application. I recommend that the Housing Secretary should guide local planning authorities to consult the National Expert Committee before approving any such large site application in an area of high housing demand.”

Why on earth would a new quango such as this be created?

For sites that will already have an outline planning permission before 2021, Letwin recommends that there should be financial incentives (ie government funding) for house builders to accept changes to their existing site plans. Developers would enter into a section 106 agreement to document their continued commitment to the diversity requirements. Letwin says that he has taken legal advice and is confident that the “voluntary transaction” that he proposes will prove to be lawful – perhaps, but it would certainly be unusual. Would the local planning authority be a party? Who would enforce?

One Step Beyond

He then goes “one step further” in relation to “large sites that have yet to be allocated within a local authority’s local plan“. He recommends “that the Government should, as part of the new primary legislation, introduce a power for local planning authorities to designate particular sites within their local plans as sites which can be developed only as single large sites and which therefore automatically become subject to the new planning rules for large sites. In addition, I believe that the local planning authority should be empowered to specify, at the time of designation, strong master-planning requirements including a strict design code as well as landscaping and full and specific infrastructure requirements.”

This in part appears to be a device to ensure that “the land value of those sites is not raised as far above the alternative use value as would be the case if a site were allocated in a local plan and subsequently obtained outline permission under our current rules“. But this can already be done by local planning authorities for good planning reasons, where comprehensive development is required for reasons of, for instance, sustainability or viability. Is Letwin going further than that?

What if there is no good planning reason why the site could not be sustainably be built out in parts? And what is indeed a single development? This will all prove hugely contentious. Particularly given that he goes on to indicate that to “ensure that a reasonable balance is struck between promoting the public interest through increased diversity and faster build out rates on the one hand, and proper recognition of the value of the land on the other hand, I recommend that the Housing Secretary (when issuing updated viability guidance alongside the new planning framework) should guide local planning authorities towards insisting on levels of diversity that will tend to cap residual land values for these large sites at around ten times their existing use value.”

No evidence is given as to why the level above which land values would be expropriated by the state without compensation (which, after all, would be the effect of the proposal) is set at 10 x EUV.

Letwin recognises that significant support will be needed from Homes England: “planning rules are by their nature passive and reactive. They can prevent things from happening (if they are properly enforced); but they can only do a very limited amount to encourage applicants to follow the spirit of the rules and hence to achieve fully the outcomes the rules have been created to achieve.”

He then goes on to visualise local authorities being empowered to bring forward sites themselves via a development vehicle, in one of two ways:

(a) the local authority could use a Local Development Company (LDC) to carry out this development role by establishing a master plan and design code for the site, and then bringing in private capital through a non-recourse special purpose vehicle to pay for the land and to invest in the infrastructure, before “parcelling up” the site and selling individual parcels to particular types of builders/providers offering housing of different types and different tenures;”

(b) the local authority could establish a Local Authority Master Planner (LAMP) to develop a master plan and full design code for the site, and then enable a privately nanced Infrastructure Development Company (IDC) to purchase the land from the local authority, develop the infrastructure of the site, and promote a variety of housing similar to that provided by the LDC model described above.

He sees local authorities that use these vehicles being given “clear” compulsory purchase powers over the large sites that the authorities allocate and indicates that “it would also make sense to consider the possibility of giving local authorities such CPO powers in relation to large sites that have been allocated in their local plan in the past but which have not obtained outline permission after a long period has elapsed.”

Even when compulsory purchase compensation values have been reduced by the mechanisms requiring build out as a single site (query how that is defined in practice) and by increasing the required diversity until the 10 x uplift on EUV is not exceeded, will development (with the required diversity) be viable for a local authority to bring forward? Will any authority have the resources for the task? Will non-recourse lending really be available to the extent that would be required? Why would anyone start on the process of promoting a large site for development when it can be snaffled as part of a larger “single site” in this way?

The notions in the report could be read as moving to the public sector the role of strategic land promotion companies, which I suspect (for all that they are maligned) to be responsible for a high proportion of the major housing sites that do come forward at present. So, to misappropriate Kit Malthouse’s recent analogy that he applied to Homes England, we would lose some WD40 in the system: the companies with the incentive to identify sites, assemble them, identify and overcome infrastructure constraints, devise a viable and acceptable form of development, pursue allocation and permission, open up land with strategic infrastructure and dispose of parcels to house builders. And, going back to the original terms of reference, this will “increase the speed of build out“?

I appreciate that this report was delivered to a deadline, which it achieved, but (unlike the previous stages of Sir Oliver’s review) it seems to me to lack any robust evidential basis at all to justify the wholly new structure that it proposes for allocating, permitting and delivering schemes with 1,500 or more dwellings. Nor does the review interest itself with any more practical nudges that could be introduced into the current system. If it just goes on the “nice but radical ideas” shelf, another year will have been wasted, without any real progress towards making practical improvements that might improve build out rates. After all, Homes England is already playing a hugely positive role in unlocking large-scale housing development and indeed on 30 October 2018 published its strategic plan for 2018/2019 – 2022/2023, setting how it intends to go much further to use its “land, money, powers and influence to increase the pace, scale and quality of delivery“. When the Government responds to the Letwin report in early 2019 I will be looking to see whether any measures that are to be taken forward will pragmatically assist Homes England’s practical work – they are the ones rolling up their sleeves on all this.

Lastly, if as a consequence of implementation of these proposals we were to see the private sector focusing its attention on smaller sites, in preference to these sites which can really make a difference in terms of delivering at scale, that would in my view be inconsistent with the brief that was set.

Stick or twist?

Simon Ricketts, 3 November 2018

Personal views, et cetera

PS No sooner had I finished this post and poured some strong coffee than I saw this morning’s announcement that the Secretary of State has appointed Professor Sir Roger Scruton to chair a ‘Building Better, Building Beautiful’ Commission – no-one could criticise the current build out rate of MHCLG when it comes to reports and reviews.

LAMP lighter

Market Value Minus Hope Value = ?

Stop me if you’ve heard this song before but…

The clamour continues for Parliament to revise the principles of compulsory purchase compensation, currently set out in section 5 of the Land Compensation Act 1961.

None of the clamourers have, as far as I know, set out precisely what amendments they would make to section 5, but the concern appears to be that the principles allow land owners to benefit unduly from a windfall, by allowing them in part to be compensated for the hope that planning permission would have been granted for a valuable form of development on the land being acquired, were it not for the compulsory acquisition, and that this is unfair; goes beyond what might be considered to be “market value”, and/or is holding back the development of new homes.

This isn’t a new song. In my 20 May 2017 blog post, Money For Nothing? CPO Compensation Reform, Land Value Capture, I tried to read between the lines of what was being said in the February 2017 housing white paper and in the May 2017 Conservative manifesto on the question of reforming the compulsory purchase compensation process.

But the volume is getting louder.

The issue is being considered by the House of Commons Communities and Local Government Select Committee in its land value capture inquiry, the final session of which is on 5 September 2018, with evidence to be given at that final session by planning minister Kit Malthouse.

A pan-political coalition of 16 NGOs including Shelter, the National Housing Federation, the TCPA, CPRE and Crisis wrote an open letter to the Secretary of State on 18 August 2018 calling for reform. It was reported in absurd terms on the Sun that day:

A little more (but not much more) detail is set out in Shelter’s blog post An unlikely coalition for land reform (21 August 2018). Shelter has been lobbying on this issue, from the time that its head of policy and housing development was Toby Lloyd, now Theresa May’s housing adviser within Number 10.

The IPPR think tank (one of the signatories to the open letter) has also now published a report The Invisible Land: The hidden force driving the UK’s unequal economy and broken housing market (28 August 2018). It has the same tune:

I hesitated before writing this blog because the response is so obvious.

The law does not operate at all in the way that these people assume. No real life examples are given. Indeed, there is no indication that any practising CPO surveyor or lawyer has assisted with either the Shelter-led group’s work or the IPPR’s work. Show of hands?

The law is as set in, for example:

⁃ the written evidence submitted to the Select Committee inquiry by the Compulsory Purchase Association. The evidence includes examples of claims made following the Olympic Park CPO.

⁃ Jonathan Stott’s blog post Land value capture – Wild goose chase could lead to changing compulsory purchase legislation for the worse (11 June 2018)

⁃ Richard Harwood QC’s article (August 2018) (with his April 2018 paper given to the Compulsory Purchase Association on Land Value Capture a useful more detailed and wide ranging read).

It’s odd how the pendulum slowly swings. The refrain always used to be that the compensation system, providing the land owner with equivalence and nothing above that to reflect the compulsory nature of the acquisition, encouraged elongated objections and disputes in a way that apparently was not the case in, for example, France. Parliament (under a Labour Government), sought to address that in the Planning and Compulsory Purchase Act 2004 by introducing home loss payments, for qualifying residential occupiers, amounting to 10% of the market value of their interest up to £61,000 and, for qualifying property investors and business owners, basic loss payments amounting to up to 7.5% of the market value of their interest up to £75,000, together with additional occupier loss payments amounting up to 2.5% of the market value of their interest up to £25,000. In retrospect, the numbers were probably not large enough materially to affect the behaviour of those faced with compulsory purchase but the principle is perfectly logical given the monies to be saved by the public purse in removing or reducing objections to compulsory purchase.

It’s not rocket science to deduce that threatening to acquire land at less than market value (ie less than what the owner could have received for the land if he or she had chose to sell it on the open market – albeit of course the last thing he or she usually wants is to sell it!) would lead to:

⁃ owners being even more likely to hold out against compulsory acquisition in whichever way they can.

⁃ if the hope of securing permission for development is to be ignored (accepting that a land owner can never claim compensation for any value generated by the scheme underlying the compulsory acquisition – we are only talking about the prospect of development in the no scheme world), land owners and promoters of development not risking their own money in the promotion of land for development. Why would they, if the acquiring authority is going to be able to step in and effectively take the benefit of that work for free?

Maybe the problem is one of terminology. Do people think that “hope” value is something that is just that, hope, rather than a forensic examination of whether, and if so, what, development would have been likely to be approved if the scheme underlying the CPO had been cancelled on the valuation date? Maybe they should read some decisions of the Lands Chamber of the Upper Tribunal (the Lands Tribunal, in old money) or of the courts, for instance last year Bridgend County Borough Council v Boland (Court of Appeal, 14 July 2017). Do they think that the Tribunal has ever been over-generous to a claimant in reaching its determination as to what might have been approved in the no scheme world? Examples would at least take the debate forward.

The IPPR paper points to Germany by way of example, where the German zoning system obviously largely removes the concept of hope value – you’re zoned or you’re not. But that is not at all our UK planning system. Should it be? Well that’s another interminable debate and shall we get Brexit out of the way first before, er, we move towards a continental planning system?

Of course, the idea might work as part of a system where all major development is promoted by a public body, whether or not backed by a private sector development partner. But that is a world away from where we are, is alien to our market based economy and likely to lead to long bottle-necks given the lack of suitable resources at present within most local authorities, as well as lead to questionable outcomes in terms of procurement and in terms of sustainable, economically efficient, development. The public sector does not even have the resources to allocate the right land for development without massive input from the private sector in promoting specific sites (terminology problem again – “promoting” isn’t about PR but about spending, at risk, large amounts of money on preliminary technical work, to a significant level of detail, to ascertain constraints, infrastructure requirements and capacity).

And of course, there may be political arguments for acquiring land compulsorily at less than market value. But let’s be clear that such an exceptional political intervention would need to be justified. If the current clamour is in truth a clamour for the state to be able to dispossess people of their property for less than what it is worth, be brave enough to say so, explain why it is necessary in the public interest and then we can have the debate on that footing.

But if the idea is indeed to pick up land at or near existing use value, conceptually that really isn’t difficult under the present system. Be a brave authority by allocating land for a new settlement, covering land in as many ownerships as is necessary, making clear that of course it has to be developed in its entirety to be sustainable and that piecemeal development will not be acceptable. Be clear in your policy making that recourse will be had to compulsory purchase powers where necessary. Set out the extent to which the development is dependent on new infrastructure. Make clear where the new infrastructure would not be coming forward were it not for the new settlement proposal. The practical difficulty lies more with the fact that, for compulsory purchase to be a credible delivery mechanism such that the local plan policy can be shown to be “sound”, most local authorities would need private sector backing and most private sector participants would not underwrite significant compensation liabilities without being pretty certain that there will be planning permission. This is the scratch in the record that you don’t get past. Here’s where you need to lift the stylus and move it on a bit, whether that’s a role for Homes England funding or by allowing significant new settlements to be promoted as an NSIP so that the necessary planning and compulsory purchase steps can take place at the same time.

The frustrating thing is that the compulsory purchase compensation process is far from perfect and much could be done to reduce uncertainty for acquiring authorities and their private sector partners (usually fully underwriting the authority’s liability by way of an uncapped CPO indemnity agreement). The areas where the risk of significant compensation liability can discourage use of compulsory purchase are not questions of what hope value can be attributed to the prospect that the land might have been developed for other valuable purposes in the no scheme world (where the situation arises – not often – the position is usually well documented and can largely be quantified). In my experience the scary risks, where large and unpredictable compensation numbers can in fact arise, are more in such areas as:

⁃ does the land being acquired hold, in the no scheme world, a ransom value over other adjoining land which might have been developed in the no scheme world?

⁃ where business premises are being acquired, is the business likely to claim disturbance compensation on the basis of total extinguishment (by demonstrating that there is not a reasonable relocation opportunity open to it)? If so, the acquiring authority will often have little feel for what the ultimate justifiable compensation figure will be due to lack of access to information that is confidential to the business, other than published accounts.

But my basic pleas are:

⁃ for the Government to take a careful look at how the present system works in practice before making any amendments to section 5.

⁃ for those seeking to justify changes to the system to be more precise about their concerns, based on real examples, and as to what changes they are seeking.

⁃ for Parliament one day to have time to review properly and consolidate compulsory purchase legislation.

Oh and, obviously, the answer to the question was that Market Value minus Hope Value = < Market Value.

Simon Ricketts, 31 August 2018

Personal views, et cetera

Let A Million New Homes Bloom

It is financially, legally and politically challenging to deliver new communities but without them the gap will continue to widen as between the quantity – and quality – of homes that the country needs and those that are built.

Credit should be given to the Government for continuing to push. Are its efforts too diffuse and/or insufficiently strategic, in terms of being within a clear framework, or is it simply being pragmatic in encouraging locally-supported proposals without specifying locations or indeed the process for delivery? That is for others to judge but this blog post is intended to serve as a reminder of where we stand by way of ministerial statements, and particularly focuses on where we are with the Cambridge-Milton Keynes-Oxford arc.

NPPF

The July 2018 NPPF continues, by way of paragraph 72, to support locally-led new settlements, with a change from the March 2018 draft in the reintroduction of the reference from the 2012 NPPF to garden city principles:

The supply of large numbers of new homes can often be best achieved through planning for larger scale development, such as new settlements or significant extensions to existing villages and towns, provided they are well located and designed, and supported by the necessary infrastructure and facilities. Working with the support of their communities, and with other authorities if appropriate, strategic policy-making authorities should identify suitable locations for such development where this can help to meet identified needs in a sustainable way. In doing so, they should:

a)  consider the opportunities presented by existing or planned investment in infrastructure, the area’s economic potential and the scope for net environmental gains;

b)  ensure that their size and location will support a sustainable community, with sufficient access to services and employment opportunities within the development itself (without expecting an unrealistic level of self-containment), or in larger towns to which there is good access;

c)  set clear expectations for the quality of the development and how this can be maintained (such as by following Garden City principles), and ensure that a variety of homes to meet the needs of different groups in the community will be provided;

d)  make a realistic assessment of likely rates of delivery, given the lead-in times for large scale sites, and identify opportunities for supporting rapid implementation (such as through joint ventures or locally-led development corporations); and

e)  consider whether it is appropriate to establish Green Belt around or adjoining new developments of significant size.”

Garden Communities Prospectus

MHCLG published on 15 August 2018 its Garden Communities prospectus, inviting “bids for ambitious, locally supported, proposals for new garden communities at scale. In return for tailored assistance to help design and deliver the vision for these places, we expect local areas to deliver significant housing and economic growth. We will look to assist as many as we can, in locations where there is sufficient demand for housing.

Bids are due by 9 November 2018. The prospectus sets out the necessary criteria as follows:

Scale

The Government “will prioritise proposals for new Garden Towns (more than 10,000 homes), but will consider proposals for Garden Villages (1,500-10,000 homes) which are particularly strong in other aspects. For instance, demonstrating exceptional quality or innovations, development on predominantly brownfield sites, being in an area of particularly high housing demand, or ability to expand substantially further in the future.”

Strategic fit

All proposals must demonstrate how the new garden community fits with the housing need for the housing market area, including expected future population growth. We will prioritise proposals which respond to housing need in high demand areas. We also particularly welcome proposals which release more land through local plans to meet local housing need, and / or go above local housing need.

All proposals should demonstrate how the new garden community fits with wider strategies to support economic growth and increase productivity. We expect to see ambitious proposals which create a variety of new jobs and the timely delivery of infrastructure necessary to underpin this.”

Locally-led

Strong local leadership is crucial to developing and delivering a long-term vision for these new communities. All proposals should have the backing of the local authorities in which they are situated, including the county council in two-tier areas. We are particularly interested in proposals which demonstrate collaboration across local authority boundaries. To ensure that the potential local growth benefits have been considered, it will be desirable for proposals to have the support of the Local Enterprise Partnership, where the area has one.

Proposals should set out how the local community is being, or will be, engaged and involved at an early stage, and strategies for continued community engagement and involvement. We are clear that local communities – both current and future residents – must have a meaningful say in developing the proposal from design to delivery.”

Garden community qualities

High quality place-making is what makes garden communities exemplars of large new developments, and all proposals must set out a clear vision for the quality of the community and how this can be maintained in the long-term, for instance by following Garden City principles.”

Deliverability and viability

Proposals should address:

⁃ delivery models and timescales

⁃ infrastructure requirements

⁃ opportunities to capture land value

⁃ access to finance and private sector investment

(NB this post is not intended to be an update to my 20 May 2017 blog post Money For Nothing? CPO Compensation Reform, Land Value Capture. However, I would note first the specific advice in the new NPPF that local planning authorities’ role in identifying and helping to bring forward land for development should “include identifying opportunities to facilitate land assembly, supported where necessary by compulsory purchase powers, where this can help to bring more land forward for meeting development needs and/or secure better development outcomes” and secondly the open letter, Sharing land value with communities dated 20 August 2018 from 16 campaign groups to the Secretary of State, which included the request that Parliament “should reform the 1961 Land Compensation Act to clarify that local authorities should be able to compulsorily purchase land at fair market value that does not include prospective planning permission, rather than speculative “hope” value.” It is interesting to see the broadness of consensus between a variety of organisations but these issues are not at all straight-forward! More in due course.)

Delivery timescales and accelerated delivery

We will prioritise proposals that offer a strong prospect of early delivery and a significant acceleration of housing delivery. They should consider the scope for innovative ways to deliver new homes, such as off-site construction, custom build and self-build, as well as providing opportunities for a diverse range of house builders. Priority will be given to proposals that can demonstrate how build out will be achieved at pace, whilst maintaining quality.”

In terms of delivery vehicles, the prospectus says this:

Whilst we are not prescribing any particular model, for proposals at scale, a Development Corporation may be an appropriate vehicle to consider. We have taken action to enable the creation of new locally accountable New Town Development Corporations. These vehicles can help provide long-term certainty to private investors, resolve complex co-ordination challenges, invest directly in infrastructure that unlocks development, and use compulsory purchase powers to help lay out a new town.

(The reference to “new locally accountable New Town Development Corporations” is a reference to the new mechanism available for designating new towns by way of the New Towns Act 1981 (Local Authority Oversight) Regulations 2018 which were made and came into force on 23 July 2018. Guidance as to their operation was published in June 2018.)

Who can apply?

The support of the relevant local planning authority or authorities is a prerequisite:

Proposals are invited from local authorities and private sector partners (such as master developers or land owners). Proposals submitted by private sector partners must be expressly supported by the local authority.

We particularly welcome joint proposals from one or more local authorities, as well as proposals which demonstrate support from developers and / or landowners.”

Cambridge-Milton Keynes-Oxford corridor

There is specific paragraph in relation to the CaMKOx corridor (or whatever we are meant to call it):

For proposals within the Cambridge – Milton Keynes – Oxford corridor, Government will continue to work with local partners to consider how the delivery of new homes and settlements can best support the overarching vision for the axis. This includes the contribution these places can make to the National Infrastructure Commission’s finding that up to 1 million homes will need to be built in the corridor by 2050, if the area is to maximise its economic potential.”

CaMKOx

There are a number of related Government-sponsored initiatives in relation to the Cambridge-Milton Keynes-Oxford corridor.

The Government published in November 2017 its vision for the corridor, Helping the Cambridge, Milton Keynes and Oxford corridor reach its potential, alongside the Autumn budget and the National Infrastructure Commission’s report Partnering for Prosperity: A new deal for the Cambridge- Milton Keynes-Oxford Arc. The NIC report sets out its conclusion that:

The Cambridge-Milton Keynes-Oxford arc must be a national priority. Its world-class research, innovation and technology can help the UK prosper in a changing global economy. But success cannot be taken for granted. Without urgent action, a chronic undersupply of homes could jeopardise growth, limit access to labour and put prosperity at risk.

The Commission’s central finding is that rates of house building will need to double if the arc is to achieve its economic potential. This requires a new deal between central and local government – one which aligns public and private interests behind the delivery of significant east-west infrastructure and major new settlements, and which seeks commitment to faster growth through a joined-up plan for jobs, homes and infrastructure. Any deal must give local areas the certainty, freedoms and resources they need to create well-designed, well-connected new communities.”

Two significant transport infrastructure projects were seen by the NIC as critical to unlocking development: the East West Rail scheme connecting Oxford and Cambridge by rail and the Oxford-Cambridge Expressway road proposal. But the report also makes important recommendations as to necessary governance, seeking

• “New powers giving councils greater certainty over future investments, and allowing them to fund and raise finance for major infrastructure improvements that deliver new homes

• A jointly agreed plan for new and expanded housing settlements, supported by New Town Development Corporations and new infrastructure design panels

• New statutory spatial plans and investment strategies for each sub-region should be developed, as part of a 50-year vision for the arc as a whole

The Government’s vision states:

1.7 The government welcomes the NIC’s finding that up to 1 million homes will need to be built in the corridor by 2050, if the area is to maximise its economic potential.

1.8 The government has agreed a housing deal with Oxfordshire, committing to a target of 100,000 homes in the county by 2031 in return for a package of support for infrastructure and economic growth, which could include supporting the growth of employment sites across the county such as Science Vale, one of the most successful science and technology clusters in the UK. This rate of housing delivery would be consistent with a corridor-wide ambition for 1 million new homes by 2050.

1.9 The government pledges to build on the Oxfordshire deal by working with the central and eastern parts of the corridor in 2018, to realise its housing ambitions.

1.10 As the NIC has recommended, the government will also consider opportunities for one or more major new settlements in the corridor. It will do so by bringing together public and private capital to build new locally-proposed garden towns, using appropriate delivery vehicles such as development corporations. The government will work closely with the Homes and Communities Agency and local partners to explore such opportunities further.”

In terms of governance:

1.15 The government invites local partners to work with it through 2018 to agree a long term vision for the whole corridor up to 2050. This will set out how jobs, homes and infrastructure across the corridor will be planned together to benefit existing and new residents, while balancing economic growth with the protection and enhancement of the area’s historic and environmental assets.

1.16 The government believes this long-term vision should be underpinned by a series of joint statutory plans across the corridor which would deliver the vision through the planning system. As a first step, Oxfordshire has agreed, through its housing deal with government, to bring forward for adoption a joint statutory plan across the whole county. The government urges other areas in the corridor to propose how they will work together with a view to adopting a small number of joint statutory plans at the earliest opportunity to ensure that planning for business and housing is coordinated with the delivery of strategic and local infrastructure.”

In terms of capturing increases in land value:

1.18 The government will be consulting on changes to the mechanisms currently available to local authorities (the Community Infrastructure Levy (CIL) and Section 106 agreements) to make them easier to use and more flexible. This will enable local authorities to capture land value uplift taking place in the corridor more effectively. For example, the government will consult on changes to CIL that would make it easier for authorities to capture land value increases around new railway stations.

1.19 As a starting point, the government expects authorities and delivery bodies in the Cambridge – Milton Keynes – Oxford corridor to use existing mechanisms of land value capture, and the potential new mechanisms announced at Autumn Budget 2017 (subject to consultation) to capture rising land values from the additional public investment in a fair way, having regard to the announcements made at Budget 2017.

1.20 The government will also encourage authorities to explore the introduction of a Strategic Infrastructure Tariff, in addition to CIL, supported by appropriate governance arrangements. These approaches will require developers to baseline their contribution towards infrastructure into the values they pay for land.”

East West Rail

Network Rail made an application to the Secretary of State for Transport for a Transport and Works Act Order in relation to phase 2 of its East West Rail scheme on 27 July 2018, which is the central section of the line, including track and signalling upgrades between Bicester, Bedford, Aylesbury and Milton Keynes, including the reinstatement of a ‘mothballed’ section of railway between Bletchley and Claydon Junction. The deadline for representations is 7 September 2018. Phase 1, the western section between Oxford and Bicester, is already complete.

Oxford-Cambridge Expressway

Highways England is expected to announce its preferred route for the Oxford-Cambridge Expressway this Autumn. The three potential corridors are:

– Option A – southern, via Aylesbury, linking to the M1 south of Milton Keynes

– Option B – central, following the east-west rail corridor

– Option C – northern, roughly following the existing A421 to the south of Bicester and via Buckingham to the east of Milton Keynes

The local authorities and communities affected of course all have differing views as to the route that should be selected. A critical (you might guess from its title) piece about the project by George Monbiot, This disastrous new project will change the face of Britain, yet no debate is allowed was published by the Guardian on 22 August 2018. The scheme will be promoted in due course as a Nationally Significant Infrastructure Project. Given that the selected route will not be the subject of a Planning Act 2008 national policy statement it is inaccurate to suggest that “no debate is allowed“, although of course, as with other elements of the planning for CaMKOx, it has been iterative, without any form of Government framework that might be argued to require strategic environmental assessment.

Given the 9 November 2018 deadline for bids in the Garden Communities Prospectus, it is curious to note that Planning minister Kit Malthouse wrote to local authorities across the Cambridge-Milton Keynes-Oxford corridor on 26 July 2018, inviting them “to bring forward ambitious proposals for transformational housing growth, including new settlements” with a much earlier deadline of 14 September 2018:

The National Infrastructure Commission has stated that realising its full potential as a world class economic hub would require delivery of up to 1 million new homes here by 2050. The Government welcomes this ambition. Last year, we set out a significant programme of investment in infrastructure, housing and business to support it.

Realising the ambition of 1 million homes here will require additional action from central and local partners. This action includes Government’s planning reforms, our national programmes such as the Housing Infrastructure Fund, the forthcoming national prospectus inviting proposals for locally-led new garden communities, and further work to understand the potential for housing growth across the corridor.

Government will also soon begin detailed analysis to explore potential locations for new settlements across the corridor, their alignment with transport infrastructure, and any environmental considerations.”

The precise choreography as between these calls for proposals, a decision as to the final route the Oxford-Cambridge Expressway (which in itself will be relevant to the identification of potential sites) and what local planning authorities should be doing in the meantime in relation to their emerging and submitted plans is also causing some concern within affected local authorities, if the letter dated 14 August 2018 from the leader of Vale of White Horse District Council, in response to the Malthouse letter, is anything to go by. And is the one million homes in addition to authorities’ current growth proposals?

In promoting what will be significant change for many in the Cambridge-Milton Keynes-Oxford arc and what will be of vital importance to the country as a whole (in terms of the potential that is there to be unlocked in terms of homes and economic growth) the Government is treading a fine line. Its strategy appears to be not to go down the route of one set-piece consultation document (along the lines of the much maligned HS2 white paper) but rather to promote (without the commitments to a fast-track through the planning system that were so controversial in relation to the ecotowns programme) a range of interventions, some ostensibly voluntary (hold up your hands if your authority wants growth – against the backdrop of likely combined authorities and joint plans), some inevitably less so.

Will local planning authorities and communities rise to the challenge? The notion of new community NSIPs appears to remain off the table, probably for good reason given the practical good sense in successful proposals being locally driven. But what if that one million homes figure is simply unachievable on a locally led basis?

Simon Ricketts, 24 August 2018

Personal views, et cetera

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

CIL: Haven’t Found What I’m Looking For

So now we know. We will all be continuing to scratch our heads over CIL. 
My 25 March 2017 blog post CIL: Kill Or Cure? summarised the main October 2016 (but only published February 2017) recommendations of the CIL review team: “the replacement of the current system with a more standardised approach of Local Infrastructure Tariffs (LITs) and, in combined authority areas, Strategic Infrastructure Tariffs (SITs). LITs would supposedly be set at a low level calculated by reference to a proportion of the market value per square metre of an average three bedroom property in the local authority area…For developments of ten dwellings or more, there would be a return to the flexibility of section 106 for provision of site-specific infrastructure (netting off LIT liability) and of course abolition of the pooling restriction.”

The team’s brief had been:
“Assess the extent to which CIL does or can provide an effective mechanism for funding infrastructure, and to recommend changes that would improve its operation in support of the Government’s wider housing and growth objectives.” 
In February, the Government promised to respond to the team’s recommendations alongside the Autumn 2017 budget.  Here we are, two years on from when the CIL review team’s work was commissioned in November 2015. The Autumn budget policy paper published on 22 November 2017 does indeed respond to the team’s recommendations, in the following terms:


Going through the proposals:

Removal of section 106 pooling restrictions, recommended by the CIL review team, is to be welcomed. Of course that should not be a green light for authorities in relation to a development proposal to revert to blanket tariff type section 106 requirements which would fail the regulation 123 test and wider principles recently set out by the Supreme Court in the Aberdeen case (see my 28 October 2017 blog post). 
Speeding up the process of setting and revising CIL, also recommended by the CIL review team, needs greater care in my view. It made sense as part of the review team’s concept of lower rates, arrived at in a more mechanistic manner than is currently the case. But there is no hint of lower rates in the Government’s proposal. Accordingly, close scrutiny is required. It is difficult enough as it is to have a meaningful influence on the process. The indication that higher zonal CILs could quickly be introduced to seek to capture land value uplifts around stations for instance is interesting but such interventions will need to be introduced with care if they are not in fact to discourage land owners from making their property available. 
Allowing authorities to set rates that better reflect the uplift in land values between a proposed and existing use was not a proposal that was considered by the CIL review team. It adds a further degree of complexity to the process. Charging schedules will have more categories. Precise floorspace calculations will be required not just of the proposed development but of the building that is to be replaced. Unintended consequences will inevitably arise and influence development strategies.  
A change of the indexation basis to house price inflation from build costs was not recommended by the CIL review team and will marginally complicate the process of calculating indexation, given that different areas will be experiencing differing inflation rates. And why is house price inflation relevant to non-residential floorspace?
Allowing combined authorities and planning joint committees with statutory plan-making functions the option to levy a Strategic Infrastructure Tariff was recommended by the CIL review team but that was against the backdrop of CIL being replaced with a lower “local infrastructure tariff”. Any additional net cost to owners and developers will directly affect viability, ie reduce the amount of affordable housing that schemes could otherwise afford. If the ability to rely on viability arguments is to be reduced, as the Government separately proposes, this is definitely going to impede delivery. Furthermore, why does affordable housing always lose out to infrastructure, particularly when charging authorities are proving very slow in spending the CIL monies that they have so far collected?
The proposals make no mention of the CIL Review team’s proposal, widely supported, of allowing infrastructure to be delivered via section 106 agreements in connection with larger developments, recovering the flexibility and opportunities for efficiency that the CIL system has removed. 
What next?
There will be detailed consultation on these and other changes, ahead of or possibly alongside the draft revised NPPF (rumoured now to have slipped to April 2018) before regulations are made which would probably now not come into force until early 2019. Earlier regulations are expected to deal with the specific ambiguity within regulation 128A affecting section 73 applications (highlighted in the VOA ruling mentioned in my CIL: Kill Or Cure blog post and since challenged by way of judicial review by the charging authority, Wandsworth) – but the transitional provisions within those regulations, and the extent to which the clarification should have retrospective effect, will need careful thought. 
For my part I find it incredibly disappointing that this whole process has been so slow and that the considered recommendations of the review team appear to have been cherry picked, destroying any internal coherence in what is proposed. Aside from correcting some obvious flaws, there appears to be nothing that will reduce CIL’s complexity, the problems arising from the multiplicity of exemptions, the straitjacket that it imposes in relation to more complex schemes and the high rates that are being set with little real scrutiny – indeed quite the reverse. The Government may have answers to these criticisms but simply relying on one paragraph in the budget policy paper really isn’t good enough.  
Simon Ricketts, 24 November 2017
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