We all had a good, evidence-based, moan about CIL on clubhouse last week.
Stonewater (2) Limited v Wealden District Council (Thornton J, 15 October 2021) is of course only the latest example of the complexities and uncertainties that arise – in particular on the question of application of reliefs and exemptions (the importance and number of which has been driven by the fact that CIL liability is in most cases so significant) but also on the question of how to mesh the operation of the CIL regime with the operation of the planning system without jamming the whole thing up.
Land with planning permission for 169 houses was acquired by Stonewater, a registered provider of affordable housing. The section 106 agreement provided for 59 dwellings within the development to be affordable housing, with a specified tenure mix. The number of affordable housing units was to “comprise 35% of the Dwellings within the Phase (which shall be rounded up to the nearest whole unit”.
Stonewater’s model was more enlightened than that of the developer which had secured the permission. Stonewater “regularly acquires sites which are subject to a section 106 agreement which secure a low or policy compliant level (35%) of affordable housing, with a view to increasing affordable housing delivery to 100%. The Court was told that this is not unusual, and the Claimant is not alone in doing so. Grants from Homes England are based on the principle that registered social housing providers provide additional affordable housing over and above the levels secured in planning obligations.”
Relief from CIL is available for affordable housing via social housing relief. There are criteria set out in regulation 49 of the CIL Regulations which do not include any requirement that the affordable housing is secured by way of section 106 agreement or condition. After all, if there is a clawback period of seven years within which CIL has to be paid with interest if the occupation no longer meets the criteria for relief.
Unsurprisingly, Stonewater sought social housing relief for the whole development, given that it proposed to deliver it all as affordable housing meeting the criteria in regulation 49. The council refused relief on the basis that a varied section 106 agreement would first be required, committing in the agreement for all the dwellings to be delivered as affordable housing. The council later additionally argued that the existing section 106 agreement was to be interpreted as rendering it unlawful for more than 35% of the dwellings to be delivered as affordable housing.
It might be asked why Stonewater didn’t simply enter into the section 106 agreement required – but of course that would have been likely to destroy its entitlement to Homes England funding given that on the face of it there would then be no additionality, and why should it enter into a further agreement if that was not required by the Regulations? Stonewater challenged the council’s decision by way of judicial review. The first issue melted away once the Secretary of State was joined as an interested party and the council conceded that a section 106 agreement obligation that a dwelling be delivered as affordable housing is not a prerequisite to a claim for social housing relief (although it can be useful evidence that the dwellings will be used in a way that meets the criteria for relief) – as did any notion that the relief is discretionary on the part of the authority rather than mandatory. So the only question was whether delivery of more than 35% of the homes would be in breach of the section 106 agreement.
The judge saw the 35% requirement as fixed, not a minimum:
“In my assessment, the language of the document points to an interpretation that the agreement controls the amount of affordable housing that can come forward, by fixing a specific requirement of 59 dwellings or 35% affordable housing. Paragraph 2(iii) of Schedule 1 says that precisely 35% of the units in any phase must be affordable. Accordingly, if the development proceeds in multiple phases, there must be 35% in each phase and thus, inevitably, as a matter of maths, 35% in aggregate. This specific requirement permeates the definitions, which draw a clear distinction between the ‘Affordable Housing Units’ which are “the 59 Dwellings … which shall be for use as affordable housing” and ‘the Private Dwelling Units’ which means everything other than the 59 Dwellings. Paragraph 3 of Schedule 1 provides the mechanism whereby the Council can exercise control in all cases (not just multiple phases) over the provision of affordable housing. The, broadly defined, Affordable Housing Scheme must be submitted for approval and development may not commence until the Council has approved it.
Accordingly, a scheme which provides less, or more units, of affordable housing would not comply with the section 106 requirement to provide 59 units and hence would be contrary to its terms and to that extent unlawful, albeit the Council would have a discretion to vary the Section 106 agreement or enter into a new agreement.”
I must say I find this a strained interpretation. As the claimant pointed out, there would be no reason in policy to restrict the amount of affordable housing in the scheme – why should the developer not be free to dispose of any of the dwellings at less than market value? Indeed, although not I think mentioned in the judgment, how would such a restriction meet the test in regulation 122? Would an authority really succeed in arguing that a developer was in breach of its section 106 agreement if it disposed of market units at less than market value? Of course not.
The judge asserted that “whilst affordable housing is generally desirable in policy terms, it does not follow that more affordable housing is always desirable without limit. There may be proper planning reasons to prefer a mixed scheme. For example, in this case, the Court’s attention was drawn to extracts from the Planning Officer’s report which suggest the expected CIL receipts from a scheme with 35% affordable housing were relevant to the decision making. The highways authority had expressed concern about the potentially severe impact from the development on the local highway network and considered mitigation was required. It was common ground that the necessary mitigation was to be funded by the CIL receipts from the development. However, it is neither necessary nor appropriate for this court to evaluate any preference for a mixed scheme on the facts of this case. It is sufficient to say that it is in accord with the statutory planning context, and / or “common sense”, to have a section 106 agreement which retains control over the provision of affordable housing. This does not defeat the achievement of more affordable housing since the Council, in the exercise of its planning judgment, may vary the Section 106 to permit this, if persuaded of its desirability.” However, how does this sit with the council’s position that it would grant the relief simply if Stonewater entered into a section 106 agreement varying the previous arrangements and requiring all the dwellings to be affordable?
Surely, instead, this was an overly prescriptive reading of the Regulations on the part of the authority and a strained interpretation of the section 106 agreement on the part of the judge? It is truly depressing to think about how long commencement of development is held up on schemes until disputes such as this are resolved – and how so much money has been wasted on all sides.
Simon Ricketts, 13 November 2021
Personal views et cetera
This week’s Planning Law Unplanned delicacies on clubhouse, at 6pm on Tuesday 16 November, will be Sage and Tulip. We’ll be hearing from Kate Olley, who appeared for Mr Sage in the recent High Court case on the important and topical question as to when planning permission is needed to run a business from home, and we’ll be discussing the Secretary of State’s refusal of planning permission for the Tulip in the City of London. Aside from Kate, our guests include arch-planorak, barrister Zack Simons. Thoughts on the decisions? Then join us, to listen or participate. Link to app here.
Time is money. Time is unmet needs. Time is unrealised public benefits.
I just wanted to capture some of the current, frankly depressing, data that is out there on application and appeal timescales.
The purpose of this post is to underline that there is a significant problem to be addressed. What to do about it will be for another post – there is certainly much that can be done that does not require (1) legislation (2) additional resources or (3) any procedural shortcuts.
A piece from yesterday’s Planning daily online: Council signs off 2,380-home urban extension almost four years after committee approval (£). Four years is certainly going it some but I can confirm from constant first-hand experience how difficult it can be to move a project from resolution to grant to permission at any speed. The larger or more complex the project, the longer those negotiations over the section 106 agreement and associated aspects can end up taking.
My colleague Lida Nguyen has been looking at the position in London. She has looked at all applications for planning permission which were referred to the Mayor between 3 January and 11 December 2020, so applications of potential strategic importance as defined in the Mayor of London Order 2008 and, for those which were then approved by the relevant borough (without intervention by the Mayor or secretary of State), she has looked at the average time that the application took from validation to the borough’s resolution to approve and from the borough’s resolution to approve to permission being issued. Discarding a few anomalous cases, this left 88 to be analysed.
In my humble view the statistics are appalling, but not surprising:
Application submission to resolution to approve
Median: 228.5 days
Mean: 269 days
Resolution to approve to grant of permission
Median: 218.5 days
Mean: 259 days
It’s rather deflating for applicants and (when you stand back from the detail) surely absurd that resolution to grant in reality only marks the halfway point to a permission in relation to significant projects in London. Wouldn’t it be a start for boroughs, the Mayor and those acting for applicants to set a target of halving each of those figures and agreeing the necessary steps to achieve that reduction?
My 25 May 2019 blog post Pace Making: Progress At PINS reported on Bridget Rosewell’s recommendation, adopted by the Planning Inspectorate, that inquiry appeals decided by an inspector (i.e. not recovered by the Secretary of State) should be decided within 24 weeks of receipt and that where the Secretary of State is to be the decision-maker, inspectors’ reports should be submitted to the Secretary of State within 30 weeks of receipt of the appeal. Initial progress was really impressive – until the first lockdown struck in March 2020. After a slow start (see my 2 May 2020 blog post There Is No E In Inquiry), PINS of course eventually, to the massive credit of all involved, embraced virtual hearings, inquiries and examinations and the risk of an impossible backlog was averted. However, it is clear from the latest Planning Inspectorate statistical update (19 August 2021) that there is still much work to do:
“The mean average time to make a decision, across all cases in the last 12 months (Aug 20 to Jul 21), was 27 weeks. The median time is 23 weeks.
The median time to decide a case decreased by 0.6 weeks between June and July 21, with the median being 21.4 weeks.
Median timeliness by procedure type is shown in the summary table below.
Performance since April 21 against the median measure has only varied by 0.7 weeks, between 21.4 weeks and 22.1 weeks. Performance had been improving between November 20 and March 21. For inquiries, in the last two months, cases have taken longer to decide as a result of very old enforcement inquiry cases being decided.
Enforcement decisions made in the last 12 months had a median decision time of 34 weeks. Looking at the annual totals, the median and mean time to decision for specialist decisions have been broadly the same as for enforcement decisions, and longer than the median for planning decisions. Since February 21 there has been a change in this trend, with Specialist cases being quicker than Enforcement.
The median time for planning appeals decided by inquiry under the Rosewell Process over the 12 months to July 21 is 35 weeks. This is quicker than other types of casework decided by inquiry.”
Whilst the extent of statistical information provided these days is welcome, it is difficult sometimes to track the figures through the different tables so as to work out what the likely timescale outcome for a prospective appellant will turn out to be. I have also looked in vain within the statistics for any information as the time being taken between appeal receipt and validation – a traditional black hole when it comes to appeal timescales. I’m also struggling to see any breakdown as to what the “Rosewell” inquiries were (35 weeks average) as compared to inquiries overall (79 weeks!).
That overall 27 weeks average is deceptively encouraging for anyone looking at anything other than a written representations appeal. Because those appeals make up 95% of the total of course they massively skew the mean figure. But even then, although not reflected in these statistics, my own anecdotal impression is that validation of appeals which proceed by way of written representations or hearing is very slow indeed, raising a large question mark over the overall statistics. Possibly something to do with the focus on Rosewell inquiry appeal targets. Am I being unfair? What solid information on this is there out there? If there isn’t any, why not??
In order to meet Rosewell targets, surely on that last table the 90th percentile needs to come down from 66 weeks to 24 weeks – and to be measured from receipt of appeal rather than validation?
Again, as with timescales for major applications in London, with appeal inquiries, surely we are looking at the need to more than halve current timescales?
All tables above have been taken from PINS documentation, for which thanks.
Simon Ricketts, 20 August 2021
Personal views, et cetera
Planning Law Unplanned is having a summer break this week, before returning at 6pm on Tuesday 31 August for somewhat of a BECG/DP9 special, London Elections 2022: Politics Meets Planning. Join the club here for notifications of this and future clubhouse Planning Law Unplanned events.
The Government’s First Homes announcements this week mean that we all need to understand the practicalities as to how this new form of discounted market sale housing will work and to plan around three key implementation dates.
From the guidance: “ Local plans and neighbourhood plans submitted for examination before 28 June 2021, or that have reached publication stage by 28 June 2021 and subsequently submitted for examination by 28 December 2021, will not be required to reflect the First Homes policy requirement”
(However: “Planning Inspectors should consider through the examination whether a requirement for an early update of the local plan might be appropriate.”)
28 December 2021
From the guidance: “The new First Homes policy requirement does not apply for the following:
• sites with full or outline planning permissions already in place or determined (or where a right to appeal against non-determination has arisen) before 28 December 2021”
28 March 2022
It also does not apply to “applications for full or outline planning permission where there has been significant pre-application engagement which are determined before 28 March 2022”.
So if you wish to avoid the new requirement and you are not in an area where a plan has been adopted under the transitional arrangements, you need to have submitted your application so that it will be determined (or so that that the statutory right to appeal on the basis of non-determination has arisen) by 28 December 2021 and if there is any doubt as to whether you will meet that deadline it would be prudent to have engaged in “significant pre-application engagement” such that the deadline for achieving permission is 28 March 2022.
“If an applicant wishes to amend a planning application to include First Homes which is already submitted and likely to be granted before these dates, the local planning authority should be flexible in accepting First Homes as an alternative type of tenure.
Local authorities should have flexibility to accept alternative tenure mixes for planning applications that are determined within the timescales identified above, although they should consider whether First Homes could be easily substituted for another tenure, either at 25% or a lower proportion.”
From the guidance:
“What is a First Home?
First Homes are a specific kind of discounted market sale housing and should be considered to meet the definition of ‘affordable housing’ for planning purposes. Specifically, First Homes are discounted market sale units which:
a) must be discounted by a minimum of 30% against the market value;
b) are sold to a person or persons meeting the First Homes eligibility criteria […];
c) on their first sale, will have a restriction registered on the title at HM Land Registry to ensure this discount (as a percentage of current market value) and certain other restrictions are passed on at each subsequent title transfer; and,
d) after the discount has been applied, the first sale must be at a price no higher than £250,000 (or £420,000 in Greater London).
First Homes are the government’s preferred discounted market tenure and should account for at least 25% of all affordable housing units delivered by developers through planning obligations.”
“Who is eligible to purchase a First Home?
A purchaser (or, if a joint purchase, all the purchasers) of a First Home should be a first-time buyer as defined in paragraph 6 of schedule 6ZA of the Finance Act 2003 for the purposes of Stamp Duty Relief for first-time buyers.
Purchasers of First Homes, whether individuals, couples or group purchasers, should have a combined annual household income not exceeding £80,000 (or £90,000 in Greater London) in the tax year immediately preceding the year of purchase.
A purchaser of a First Home should have a mortgage or home purchase plan (if required to comply with Islamic law) to fund a minimum of 50% of the discounted purchase price.
These national standard criteria should also apply at all future sales of a First Home.”
“How should the remaining 75% of affordable housing be secured through developer contributions?
Once a minimum of 25% of First Homes has been accounted for, social rent should be delivered in the same percentage as set out in the local plan. The remainder of the affordable housing tenures should be delivered in line with the proportions set out in the local plan policy.
For example, if a local plan policy requires an affordable housing mix of 20% shared ownership units, 40% affordable rent units and 40% social rent units, a planning application compliant with national policy would deliver an affordable housing tenure mix of 25% First Homes and 40% social rent. The remainder (35%) would be split in line with the ratio set out in the local plan policy, which is 40% affordable rent to 20% shared ownership, or 2:1. 35% split in this way results in 12% shared ownership; and 23% affordable rent.
In another example, if a local plan policy requires 80% of units to be shared ownership and 20% to be social rent, a policy compliant application would deliver 25% First Homes units, 20% social rent and 55% shared ownership.
If a local authority has an up-to-date policy on cash contributions in lieu of onsite contributions, then a planning application compliant with national policy will align with this approach.”
The requirement will be secured by our trusty friend, the section 106 agreement (or unilateral undertaking). The guidance states: “The government will publish template planning obligations for this purpose, which the local planning authority can use as a basis for agreements prepared locally.” A workable template (stress the word “workable”) would be very useful indeed.
How will this policy mechanism work across very different housing market areas across the country and what might be the unintended consequences? I recommend an excellent Lichfields blog post, First Homes: dicing with the discount (Rachel Clements and Bethan Haynes, 27 May 2021).
They ask where can First Homes potentially have the biggest impact?
“First Homes have the potential to have the greatest impact in areas where first-time buyers are currently priced out of the open market (at the entry-level) but where First Homes would be within reach, when the minimum 30% discount is applied. We estimate this represents around one in five authorities in England – around 63 in total.”
Will it avoid the problems that caused the previous Starter Homes concept to fail (e.g see my 29 February 2020 blog post Starter Homes Were A Non Starter – What Future For First Homes?)? What do we make of this continuing political decision to intervene in the market in the interests of encouraging home ownership at the expense (where viability is impacted) of affordable housing for rent, for those on a lower rung of the housing ladder?
There is plenty more to say on the subject, for instance the new opportunity arising to bring forward First Homes exception sites on allocated land outside the green belt or designated rural areas. But for now, I suspect that developers and local planning authorities alike will be wanting to do some basic number-crunching and to bear those three deadlines in mind.
Simon Ricketts, 28 May 2021
Personal views, et cetera
This Tuesday evening’s Planning Law, Unplanned Clubhouse session (6pm, 1 June) takes on a more general subject: “Has work taken over your life? Life hacks, work hacks”. Do come along and share your views, or just listen to the chat. An invitation to the app is here.
When I saw a limelon for the first time yesterday (some recently marketed lime/melon hybrid since you ask, and tangy and refreshing it is indeed), I naturally thought of the proposed combined infrastructure levy: what on earth is it?
Planning For The Future is of course work in progress and it may be churlish for us to expect it to have all the answers. After all, it is up to us to provide cogent responses to the current consultation process.
But the sections in the document on infrastructure contributions are very light indeed, given the central role that section 106 and the community infrastructure levy play in the current system and the obvious complexity of arriving at a system for a combined infrastructure levy that on the one hand does not choke off various forms of development in some areas by making it unviable and that on the other hand both (1) raises sufficient monies to secure the delivery of necessary social (e.g. affordable housing) and physical infrastructure and also (2) ensures for the benefit of both communities and developers that the infrastructure will actually be provided in the right place, at the right time.
•Update the evidence on the current value and incidence of planning obligations
• Investigate the relationship between CIL and S106
• Understand negotiation processes and delays to the planning process
• Explore the monitoring and transparency of developer contributions
• Understand the early effects and expectations for the changes to developer contributions brought in by the revisions to the NPPF
Chapter 3 (The value of Planning Obligations and the Community Infrastructure Levy) sets out some interesting findings:
“• The estimated value of planning obligations agreed and CIL levied in 2018/19 was £7.0 billion. This valuation is premised upon the assumptions identified in the appendix, corresponding to survey validity, respondent representation and the distribution of values.
• When adjusted to reflect inflation the total value of developer contributions in real terms is £500 million higher than in 2016/17, £300 million higher than in 2007/08.
• 67% of the value of agreed developer contributions was for the provision of affordable housing, at £4.7 billion; this is the same proportion as in 2016/17 and is the joint-highest to date.
• 44,000 affordable housing dwellings were agreed in planning obligations in 2018/19. This is a reduction since 2016/17, but the value of this housing has increased over the same period due to an increase in house prices in many areas with higher developer contributions.
• The value of CIL levied by LPAs was £830 million in 2018/19, with a further £200 million levied by the Mayor of London.
• The geographic distribution of planning obligations and CIL is weighted heavily towards the south of England. The South East, South West and London regions account for 61% of the total value. However, the value of developer contributions exacted in London has fallen since 2016/17 – down from 38% to 28% of the total aggregate value.”
There is nothing in the white paper that explicitly draws from the findings of that report in order to arrive at the wholly new mechanism that is proposed.
Some people seem to have picked up the message that the white paper means the end of the community infrastructure levy – a cause for celebration in some parts. But the white paper’s proposal for a combined infrastructure levy to my mind is CIL writ large, potentially just as complex, with a whole new set of rate setting, liability, payment and spending mechanisms and with the express objective of raising more monies than the current system. It warrants its own focus at this point, away from the noise of the other proposals in the white paper.
How to begin to unpick what is proposed in relation to CIL and section 106 planning obligations (and what the proposals in relation to section 106 mean for the delivery of affordable housing in particular)? I wrote down for myself five basic questions:
1. How will planning obligations work under the new system?
2. What will happen to CIL?
3. How will the new Combined Infrastructure Levy be set?
4. What requirements will there be on local authorities as to how they apply combined infrastructure levy receipts?
5. Under the new system, how can local planning authorities set requirements for affordable housing and seek to ensure that they are delivered?
In order to try to answer them (in a way which would have to work in relation to all of the proposed consenting routes: DCO, outline planning permission in plan, PiP (if different from outline permission in plan, not sure!), traditional planning permission, PD), then I cut and pasted the relevant passages from the white paper in their entirety (only leaving out the detail of some of the “alternative options” floated and leaving out the questions raised in the consultation). It is easy to read summaries and think “well there must be more detail in the document itself”. It is worth reading these passages to see the totality of the proposals.
After these passages I then see how far we can get in answering my questions.
“The process for negotiating developer contributions to affordable housing and infrastructure is complex, protracted and unclear: as a result, the outcomes can be uncertain, which further diminishes trust in the system and reduces the ability of local planning authorities to plan for and deliver necessary infrastructure. Over 80 per cent of planning authorities agree that planning obligations cause delay. It also further increases planning risk for developers and landowners, thus discouraging development and new entrants.”
“1.19. Fourth, we will improve infrastructure delivery in all parts of the country and ensure developers play their part, through reform of developer contributions. We propose:
• The Community Infrastructure Levy and the current system of planning obligations will be reformed as a nationally-set value-based flat rate charge (‘the Infrastructure Levy’). A single rate or varied rates could be set. We will aim for the new Levy to raise more revenue than under the current system of developer contributions, and deliver at least as much – if not more – on-site affordable housing as at present. This reform will enable us to sweep away months of negotiation of Section 106 agreements and the need to consider site viability. We will deliver more of the infrastructure existing and new communities require by capturing a greater share of the ulpift [sic] in land value that comes with development.
• We will be more ambitious for affordable housing provided through planning gain, and we will ensure that the new Infrastructure Levy allows local planning authorities to secure more on-site housing provision.
• We will give local authorities greater powers to determine how developer contributions are used, including by expanding the scope of the Levy to cover affordable housing provision to allow local planning authorities to drive up the provision of affordable homes. We will ensure that affordable housing provision supported through developer contributions is kept at least at current levels, and that it is still delivered on-site to ensure that new development continues to support mixed communities. Local authorities will have the flexibility to use this funding to support both existing communities as well as new communities.
• We will also look to extend the scope of the consolidated Infrastructure Levy and remove exemptions from it to capture changes of use through permitted development rights, so that additional homes delivered through this route bring with them support for new infrastructure.
“4.5. Securing necessary infrastructure and affordable housing alongside new development is central to our vision for the planning system. We want to bring forward reforms to make sure that developer contributions are:
• responsive to local needs, to ensure a fairer contribution from developers for local communities so that the right infrastructure and affordable housing is delivered;
• transparent, so it is clear to existing and new residents what new infrastructure will accompany development;
• consistent and simplified, to remove unnecessary delay and support competition in the housebuilding industry;
• buoyant, so that when prices go up the benefits are shared fairly between developers and the local community, and when prices go down there is no need to re-negotiate agreements.
4.6. The Government could also seek to use developer contributions to capture a greater proportion of the land value uplift that occurs through the grant of planning permission, and use this to enhance infrastructure delivery. There are a range of estimates for the amount of land value uplift currently captured, from 25 to 50 per cent. The value captured will depend on a range of factors including the development value, the existing use value of the land, and the relevant tax structure – for instance, whether capital gains tax applies to the land sale. Increasing value capture could be an important source of infrastructure funding but would need to be balanced against risks to development viability.”
“4.7. We propose that the existing parallel regimes for securing developer contributions are replaced with a new, consolidated ‘Infrastructure Levy’.
Proposal 19: The Community Infrastructure Levy should be reformed to be charged as a fixed proportion of the development value above a threshold, with a mandatory nationally-set rate or rates and the current system of planning obligations abolished.”
“4.8. We believe that the current system of planning obligations under Section 106 should be consolidated under a reformed, extended ‘Infrastructure Levy’.
4.9. This would be based upon a flat-rate, valued-based charge, set nationally, at either a single rate, or at area-specific rates. This would address issues in the current system as it would:
be charged on the final value of a development (or to an assessment of the sales value where the development is not sold, e.g. for homes built for the rental market), based on the applicable rate at the point planning permission is granted;
• be levied at point of occupation, with prevention of occupation being a potential sanction for non-payment;
• include a value-based minimum threshold below which the levy is not charged, to prevent low viability development becoming unviable, reflecting average build costs per square metre, with a small, fixed allowance for land costs. Where the value of development is below the threshold, no Levy would be charged. Where the value of development is above the threshold, the Levy would only be charged on the proportion of the value that exceeded the threshold ; and
• provide greater certainty for communities and developers about what the level of developer contributions are expected alongside new development.
4.10. The single rate, or area-specific rates, would be set nationally. It would aim to increase revenue levels nationally when compared to the current system. Revenues would continue to be collected and spent locally.
4.11. As a value-based charge across all use classes, we believe it would be both more effective at capturing increases in value and would be more sensitive to economic downturns. It would reduce risk for developers, and would reduce cashflow difficulties, particularly for SME developers.
4.12. In areas where land value uplift is insufficient to support significant levels of land value capture, some or all of the value generated by the development would be below the threshold, and so not subject to the levy. In higher value areas, a much greater proportion of the development value would be above the exempt amount, and subject to the levy.
4.13. To better support the timely delivery of infrastructure, we would also allow local authorities to borrow against Infrastructure Levy revenues so that they could forward fund infrastructure. Enabling borrowing combined with a shift to levying developer contributions on completion, would incentivise local authorities to deliver enabling infrastructure, in turn helping to ensure development can be completed faster. As with all volatile borrowing streams, local authorities should assure themselves that this borrowing is affordable and suitable.
4.14. Under this approach the London Mayoral Community Infrastructure Levy, and similar strategic Community Infrastructure Levies in combined authorities, could be retained as part of the Infrastructure Levy to support the funding of strategic infrastructure.
4.15. In bringing forward the reformed Infrastructure Levy, we will need to consider its scope. We will also consider the impact of this change on areas with lower land values.”
Alternative options proposed: “The Infrastructure Levy could remain optional and would be set by individual local authorities”. “Alternatively, the national rate approach could be taken, but with the aim of capturing more land value than currently, to better support the delivery of infrastructure”
“Proposal 21: The reformed Infrastructure Levy should deliver affordable housing provision
4.20. Developer contributions currently deliver around half of all affordable housing, most of which is delivered on-site. It is important that the reformed approach will continue to deliver on-site affordable housing at least at present levels.
4.21. Affordable housing provision is currently secured by local authorities via Section 106, but the Community Infrastructure Levy cannot be spent on it. With Section 106 planning obligations removed, we propose that under the Infrastructure Levy, authorities would be able to use funds raised through the levy to secure affordable housing.
4.22. This could be secured through in-kind delivery on-site, which could be made mandatory where an authority has a requirement, capability and wishes to do so. Local authorities would have a means to specify the forms and tenures of the onsite provision, working with a nominated affordable housing provider. Under this approach, a provider of affordable housing could purchase the dwelling at a discount from market rate, as now. However, rather than the discount being secured through Section 106 planning obligations, it would instead be considered as in-kind delivery of the Infrastructure Levy. In effect, the difference between the price at which the unit was sold to the provider and the market price would be offset from the final cash liability to the Levy. This would create an incentive for the developer to build on-site affordable housing where appropriate. [Footnote: As above, a Section 106 planning obligation could still be used to secure a covenant on the land, where necessary. However, the value would be captured through the Infrastructure Levy, rather than Section 106. ] First Homes, which are sold by the developer direct to the customer at a discount to market price, would offset the discount against the cash liability.
4.23. Under this approach we recognise that some risk is transferring to the local planning authority, and that we would need to mitigate that risk in order to maintain existing levels of on-site affordable housing delivery. We believe that this risk can be fully addressed through policy design. In particular, in the event of a market fall, we could allow local planning authorities to ‘flip’ a proportion of units back to market units which the developer can sell, if Levy liabilities are insufficient to cover the value secured through in-kind contributions. Alternatively, we could require that if the value secured through in-kind units is greater than the final levy liability, then the developer has no right to reclaim overpayments. Government could provide standardised agreements, to codify how risk sharing would work in this way.
4.24. We would also need to ensure the developer was incentivised to deliver high build and design quality for their in-kind affordable homes. Currently, if Section 106 homes are not of sufficient quality, developers may be unable to sell it to a provider, or have to reduce the price. To ensure developers are not rewarded for low standard homes under the Levy, local authorities could have an option to revert back to cash contributions if no provider was willing to buy the homes due to their poor quality. It is important that any approach taken maintains the quality of affordable housing provision as well as overarching volumes, and incentivises early engagement between providers of affordable housing and developers. Local authorities could also accept Infrastructure Levy payments in the form of land within or adjacent to a site. Through borrowing against further Infrastructure Levy receipts, other sources of funding, or in partnership with affordable housing providers, they could then build affordable homes, enabling delivery at pace.
4.25. Alternative option: We could seek to introduce further requirements around the delivery of affordable housing. To do this we would create a ‘first refusal’ right for local authorities or any affordable housing provider acting on their behalf to buy up to a set proportion of on-site units (on a square metre basis) at a discounted price, broadly equivalent to build costs. The proportion would be set nationally, and the developer would have discretion over which units were sold in this way. A threshold would be set for smaller sites, below which on-site delivery was not required, and cash payment could be made in lieu. Where on-site units were purchased, these could be used for affordable housing, or sold on (or back to the developer) to raise money to purchase affordable housing elsewhere. The local authority could use Infrastructure Levy funds, or other funds, in order to purchase units.”
“Proposal 22: More freedom could be given to local authorities over how they spend the Infrastructure Levy
4.26. It is important that there is a strong link between where development occurs and where funding is spent. Currently, the Neighbourhood Share of the Community Infrastructure Levy ensures that up to 25 per cent of the levy is spent on priorities in the area that development occurred, with funding transferred to parish councils in parished areas. There are fewer restrictions on how this funding is spent, and we believe it provides an important incentive to local communities to allow development in their area. We therefore propose that under this approach the Neighbourhood Share would be kept, and we would be interested in ways to enhance community engagement around how these funds are used, with scope for digital innovation to promote engagement.
4.27. There is scope for even more flexibility around spending. We could also increase local authority flexibility, allowing them to spend receipts on their policy priorities, once core infrastructure obligations have been met. In addition to the provision of local infrastructure, including parks, open spaces, street trees and delivery or enhancement of community facilities, this could include improving services or reducing council tax. The balance of affordable housing and infrastructure may vary depending on a local authority’s circumstances, but under this approach it may be necessary to consider ring-fencing a certain amount of Levy funding for affordable housing to ensure that affordable housing continues to be delivered on-site at current levels (or higher). There would also be opportunities to enhance digital engagement with communities as part of decision making around spending priorities. Alternatively, the permitted uses of the Levy could remain focused on infrastructure and affordable housing, as they are broadly are at present. Local authorities would continue to identify the right balance between these to meet local needs, as they do at present.”
“ 5.19. If a new approach to development contributions is implemented, a small proportion of the income should be earmarked to local planning authorities to cover their overall planning costs, including the preparation and review of Local Plans and design codes and enforcement activities.”
Back to my questions:
1. How will planning obligations work under the new system?
It is said in the paper that the “current system of planning obligations under Section 106 should be consolidated under a reformed, extended ‘Infrastructure Levy’.” There will no longer be “months of negotiation of Section 106 agreements”. “Section 106 planning obligations [will be] removed”.
The proposals seem to assume that section 106 is simply a mechanism for securing provision of affordable housing and other “developer contributions”. Whilst that is its main role at present, it is a mechanism for a wide range of commitments – see this table from the accompanying study:
The joy of section 106 is its flexibility to circumstances and policy, enabling the applicant commit to commit, in a way that binds successors in title, to all necessary mitigation measures that cannot be secured by way of planning condition and which are necessary to overcome what would otherwise be reasons not to allow the proposed development to proceed. On more complex developments it is the only tried and tested way in which appropriate mechanisms can be arrived at to make sure that, for instance, necessary infrastructure comes forward at the right time and by way of a sensible process, bespoke to the circumstances of the development, agreed between the parties. There is no proposal in the paper (although it has previously been floated by some) that the role of planning conditions could be expanded.
Where financial contributions are paid to a local planning authority under a section 106 agreement they can only be used for the specified purposes, whereas the proposals in relation to the consolidated infrastructure levy appear to be more loose: “We could also increase local authority flexibility, allowing them to spend receipts on their policy priorities, once core infrastructure obligations have been met.”What is meant by “core infrastructure obligations”? The core infrastructure obligations necessary to make a particular development acceptable? If so, then a document will need to be drawn up which surely will be as complex as a section 106 agreement – when will the school come forward, using the developer’s infrastructure levy contribution, how, where and when? Local employment and training measures, provision and maintenance of open space and play areas, carbon reduction commitments, commitments to specified transport improvements and the formulation and implementation of transport plans – are all these to be swept away? If so, the document needs to explain either why this is acceptable and desirable or how these matters will otherwise be addressed.
Additional confusion arises when these bold statements as to the removal of section 106 obligations are then contrasted with the footnote to paragraph 4.22: “As above, a Section 106 planning obligation could still be used to secure a covenant on the land, where necessary. However, the value would be captured through the Infrastructure Levy, rather than Section 106”. What does that mean? What would the “covenant on the land” and if the only point is to make sure that the infrastructure levy binds successors in title, why not leave that for the legislation itself?
Is anyone out there clearer at this stage ?
2. What will happen to CIL?
The community infrastructure levy will be replaced by the consolidated infrastructure levy, which will work in various significantly different ways to the current system. For instance:
• It will be a “nationally-set value-based flat rate charge”. I try to unpick this in my answer to question 3 below.
• It will be “levied at point of occupation”.
• “Revenues would continue to be collected and spent locally.”
• “we would also allow local authorities to borrow against Infrastructure Levy revenues so that they could forward fund infrastructure. Enabling borrowing combined with a shift to levying developer contributions on completion, would incentivise local authorities to deliver enabling infrastructure, in turn helping to ensure development can be completed faster.” [If a developer needs specific infrastructure to be delivered in order to enable development to proceed, how will this be documented? What if, as is usually the case, the developer would prefer to deliver the infrastructure, e.g. build the school?]
• The “London Mayoral Community Infrastructure Levy, and similar strategic Community Infrastructure Levies in combined authorities, could be retained as part of the Infrastructure Levy to support the funding of strategic infrastructure” [Is this retained as in retained under the current CIL system so that in London CIL would continue to operate alongside the new levy, or is this retained as in “rolled into”?]
• “We will also look to extend the scope of the consolidated Infrastructure Levy and remove exemptions from it to capture changes of use through permitted development rights” [This is odd – development pursuant to PD rights is not exempt from CIL at the moment. Is this flagging more widely that exemptions will be removed? That would have been a sensible, simplifying, approach were CIL levels to be reduced, but here we are faced with an increased Infrastructure Levy…]
3. How will the new Combined Infrastructure Levy be set?
• It will be a “nationally-set value-based flat rate charge, set nationally, at either a single rate, or at area-specific rates”. [Clearly this can’t in any circumstances mean a nationally-set flat rate charge of x per square metres but must mean a nationally-set proportion of (I assume) gross development value.]
• There will be “a value-based minimum threshold below which the levy is not charged, to prevent low viability development becoming unviable, reflecting average build costs per square metre, with a small, fixed allowance for land costs. Where the value of development is below the threshold, no Levy would be charged. Where the value of development is above the threshold, the Levy would only be charged on the proportion of the value that exceeded the threshold”. [When would the developer have certainty that the threshold was not exceeded, or indeed as to what the value (and therefore charge) is considered to be, through what procedure and with what rights to appeal against the valuation? Is the valuation a notional one, applying a formula, or an actual valuation?]
• “buoyant, so that when prices go up the benefits are shared fairly between developers and the local community, and when prices go down there is no need to re-negotiate agreements.” [the timing of the valuation date will be critical, as will how to deal with phased and revised schemes and so on].
• “It would aim to increase revenue levels nationally when compared to the current system” [so more than £7bn, on the basis of the findings in that study – in a way which will need not to disincentivise owners and developers from carrying out development].
That’s all I can glean from the document. It seems to me that local planning authorities will lose much flexibility, for instance in the setting of differential rates for different types of floorspace (the document does focus to a significant extent on residential development – what rate would be set for, say, offices, logistics or retail, particularly given the weaker relationship between non-residential uses and the delivery of affordable housing, and what about not for profit development – will we need to reintroduce a number of the current CIL exemptions?
4. What requirements will there be on local authorities as to how they apply combined infrastructure levy receipts?
• “With Section 106 planning obligations removed, we propose that under the Infrastructure Levy, authorities would be able to use funds raised through the levy to secure affordable housing”. I try to unpick this in my answer to question 5 below.
• “We could also increase local authority flexibility, allowing them to spend receipts on their policy priorities, once core infrastructure obligations have been met. In addition to the provision of local infrastructure, including parks, open spaces, street trees and delivery or enhancement of community facilities, this could include improving services or reducing council tax.” [So, infrastructure levy surplus receipts (after delivery of “core infrastructure”) become unhypothecated tax receipts – the less the authority spends on infrastructure, the lower it can keep its council tax, hmm…]?
• “If a new approach to development contributions is implemented, a small proportion of the income should be earmarked to local planning authorities to cover their overall planning costs, including the preparation and review of Local Plans and design codes and enforcement activities.”
5. Under the new system, how can local planning authorities set requirements for affordable housing and seek to ensure that they are delivered?
• “We will be more ambitious for affordable housing provided through planning gain, and we will ensure that the new Infrastructure Levy allows local planning authorities to secure more on-site housing provision”.
• “This could be secured through in-kind delivery on-site, which could be made mandatory where an authority has a requirement, capability and wishes to do so. Local authorities would have a means to specify the forms and tenures of the onsite provision, working with a nominated affordable housing provider. Under this approach, a provider of affordable housing could purchase the dwelling at a discount from market rate, as now. However, rather than the discount being secured through Section 106 planning obligations, it would instead be considered as in-kind delivery of the Infrastructure Levy. In effect, the difference between the price at which the unit was sold to the provider and the market price would be offset from the final cash liability to the Levy. This would create an incentive for the developer to build on-site affordable housing where appropriate. First Homes, which are sold by the developer direct to the customer at a discount to market price, would offset the discount against the cash liability.” [So presumably the developer could net-off the costs of on-site delivery from its infrastructure levy liability. How is this to be documented? Who adjudicates on the obvious valuation issues arising?]
• “Under this approach we recognise that some risk is transferring to the local planning authority, and that we would need to mitigate that risk in order to maintain existing levels of on-site affordable housing delivery. We believe that this risk can be fully addressed through policy design. In particular, in the event of a market fall, we could allow local planning authorities to ‘flip’ a proportion of units back to market units which the developer can sell, if Levy liabilities are insufficient to cover the value secured through in-kind contributions. Alternatively, we could require that if the value secured through in-kind units is greater than the final levy liability, then the developer has no right to reclaim overpayments. Government could provide standardised agreements, to codify how risk sharing would work in this way” [How to safeguard against misuse?]
• “To ensure developers are not rewarded for low standard homes under the Levy, local authorities could have an option to revert back to cash contributions if no provider was willing to buy the homes due to their poor quality.”
• “Local authorities could also accept Infrastructure Levy payments in the form of land within or adjacent to a site.” [Back to ensuring a robust valuation process].
Again, maybe it’s just me but I’m left scratching my head. This is a wholly different approach to extracting contributions for affordable housing and for ensuring that they are delivered. Basic questions:
• How will the requirements (quantum, tenure mix, size] be set at policy stage and determined at application stage (in advance of valuations) such that there can be confidence that development will not be stalled through lack of viability?
• Are we moving to a system where all affordable housing is delivered by a local authority nominated housing provider, with less ability for the developer to seek to improve viability?
• How can there be any confidence that this mechanism will result in more on-site affordable housing than at present?
Again, thoughts welcome – it’s not that the proposals can’t be made to work, it’s just that much more input is required and, in my view, a cautious approach needs to be taken so as to guard against the inevitable unintended consequences.
The deadline for consultation responses is 29 October. We are likely to be collating a Town response, if only on specific issues such as this. If you would be interested in feeding in your thoughts, then please let me know, although, health warning, we are not in the business of designing fruit by committee!
are probably the three words I most associate with the planning system in England, since you asked.
The main part of this post is a commentary by special guest and fellow Town partner Duncan Field on the Government’s Planning for the future white paper, published on 6 August 2020.
But before we get to that, some initial comments from me on timescales.
The consultation period on the white paper ends on 29 October 2020.
The aspiration in the document is that (subject to time extensions for recent plans) new local plans should be in place by the end of this Parliament, so by Spring 2024. Given that those local plans will take up to 30 months to be put in place under the new system proposed, the necessary primary legislation will need to have been passed and in force, with any necessary accompanying Regulations and guidance, by Autumn 2021.
By way of proxy for legislative timescales, the less ambitious Housing and Planning Act 2016 and Neighbourhood Planning Act 2017 each took around seven months to pass through the necessary Parliamentary stages, which would mean introducing a Bill by the beginning of 2021. One perhaps has to look back to the Localism Act 2011 for planning legislation of equivalent complexity. That took eleven months from soup to nuts.
Something is going to have to give – either there is going to be rushed consideration of these proposals, which still need significant refinement, or that “end of this Parliament” aspiration is going to have to be reconsidered before long.
But in any event, things can be expected to move quickly.
The timescales in that document for the four sets of proposals within it are as follows:
· changes to the standard method for assessing local housing need: “Following the outcome of this consultation, the Government will update the planning practice guidance with the revised standard method for assessing local housing need.”
· securing of First Homes through developer contributions in the short term until the transition to a new system: “We intend to begin by making planning policy changes, to ensure that clear expectations are set. However, to ensure that First Homes are delivered, nationwide, on a consistent basis, we are keeping under consideration the option to strengthen the policy through primary legislation at a future date. We also intend to introduce an exemption from the Community Infrastructure Levy for First Homes, to enable delivery prior to wider developer contribution reform. This would require changes to regulations. Lastly, we are also considering significant reforms to the system of developer contributions. We will ensure that First Homes willcontinue to be delivered under a reformed approach”
· supporting small and medium-sized builders by temporarily lifting the small sites threshold below which developers do not need to contribute to affordable housing: “Following the consultation, a decision will be taken on whether to proceed with this approach. If it is taken forward, this could be through the introduction of a Written Ministerial Statement in the Autumn.”
· extending the current Permission in Principle to major development: “Following this consultation, if we introduce Permission in Principle by application for major development, we aim to introduce amending regulations this Autumn, with the regulations expected to come into force by the end of the calendar year. Changes to the fee structure would require separate changes to the Planning Fees Regulations.”
The white paper is in my view a considered document and less radical than might have been expected, although certainly ambitious in its breadth. Proposals spin out of it, one after the other, often just in a sentence or two. There are of course areas where there needs to be further thought or explanation. For me, there are two big ones in particular:
⁃ the way in which housing numbers are to be set by the Government for individual authorities and how to resolve the inevitable tension between a swifter examination process and a process that allows proposals in a plan (and the basis for proposals not being in the plan) to be properly tested (particularly where the plan is going to be the equivalent of a series of outline planning permissions for its growth areas);
⁃ how this new infrastructure levy is really going to work and how obligations are going to be addressed that presently are dealt with by way of section 106 agreement, in particular the delivery of affordable housing.
There will also have to be a clear working through of the respective powers and responsibilities across the system, as between government, strategic authorities, local planning authorities and neighbourhoods.
I must say that I found Chris Katkowski QC’s explanations in the latest Have We Got Planning News For You episode really helpful in bringing the proposals, and the thinking behind them, to life. And, boring to say, there is no substitute for reading the actual document.
Planning for the Future begins with some fairly combative language, referring to “our outdated and ineffective planning system” and drawing comparisons with a patched up building which needs to be torn down.
In truth the Government’s proposals do not go quite as far as that and in practice, to continue with the same analogy, we might end up with a better and more sustainable outcome if we were to save the parts of the “patched up building” which have architectural merit. The biggest problem with the current system is not that it is all inherently bad but that it is not sufficiently resourced; it is a pity that planning reforms by successive Governments have never really grappled with that central issue. The good news on this occasion is that the new system will be accompanied by a comprehensive skills and resources strategy for local authorities and key participants in the system; let’s hope the Government delivers on that.
Further on in the document there are some powerful words from the Secretary of State which bring home just how important a time this is for the planning system and what it can deliver. It is hard to disagree with any of this:
The outbreak of COVID-19 has affected the economic and social lives of the entire nation. With so many people spending more time at home than ever before, we have come to know our homes, gardens and local parks more intimately. For some this has been a welcome opportunity to spend more time in the place they call home with the people they love. For others – those in small, substandard homes, those unable to walk to distant shops or parks, those struggling to pay their rent, or indeed for those who do not have a home of their own at all – this has been a moment where longstanding issues in our development and planning system have come to the fore.
Onto the objectives for reform, which can be summarised as follows:
• Reduce complexity and with it, uncertainty and delay.
• In doing so, deliver a more competitive market with a greater diversity of developers.
• Remove the discretionary nature of individual development management decisions and replace it with a rule-based system of development control.
• In doing so, reduce planning risk and the cost of capital for development.
• Reduce the time it takes to produce a local plan.
• Simplify assessments of housing need, viability and environmental impacts.
• Restore public trust and encourage more widespread public participation.
• Get better at unlocking growth and opportunity, encouraging beautiful new places, supporting town and city centres and revitalising existing buildings as well as new development.
• Harness digital technology.
Linked to this is a long list of desired outcomes including the user experience, home ownership, access to infrastructure, economic growth and innovation.
We then come to the main proposals which the Government intends to bring forward:
1. Local plans
a. These will be simplified so that they only identify land for development, the sites that should be protected and the development that can take place. There would be three categories of land:
i. Growth – sites suitable for comprehensive development which, once allocated, will have outline approval for development.
ii. Renewal – sites where smaller scale development is appropriate, which would benefit from a statutory presumption in favour of development once allocated.
iii. Protected – sites with environmental or cultural characteristics where development should be subject to more stringent controls.
An alternative approach might be a more binary system (growth and renewal with permission in principle versus protected areas) or more scope for the existing development management approach in areas other than those allocated for “growth”.
b. Plans should become digital, visual and map-based, interactive and data rich, using a standardised approach to support open access.
c. Local plans (and neighbourhood plans) will be more focused on giving clear area-specific requirements for land that is allocated for growth and renewal including design codes; generic development management policies and duplication of national policy and guidance needs to be avoided.
d. Plans should be subject to a single test of achieving sustainable development instead of the current tests for soundness and the duty to co-operate. There would be no Sustainability Appraisal and instead this would be replaced by a simplified process for assessing the environmental impact of plans.
e. Local plans would meet housing need by reference to a standard method for establishing housing requirements developed and set at a national level; this would mean distributing the national housebuilding target of 300,000 new homes annually, and one million homes by the end of the Parliament, taking into account local factors including constraints, opportunities and affordability. The Housing Delivery Test would stay.
f. Local plans would have to be brought forward by reference to a fixed 30 month statutory timescale with six stages and individual timings for each stage.
g. Local planning authorities would be under a duty to review their plans every 5 years; powers of intervention would remain such as the issuing of directions and preparation of a plan in consultation with local people.
h. Neighbourhood Plans to be retained but with more focus on form of development to reflect the proposals for Local Plans.
This is a refreshingly clear vision of what local plans might become and a digitalised system would be transformative for the user experience and public engagement. However, there are some big questions around how to encourage strategic planning across local authority boundaries for the bigger than local issues (the Government is open to suggestions), how in practice the “sustainable development” test would work and, linked to that, how robust the new environmental assessment process will be.
Equally as important, what will the effect of these promised changes be on current local plans? Without further incentives or assurances around their continuing effect in any transitional arrangements as we switch over to the new system, there must be a real concern they will be halted in their tracks.
2. Development Management
a. As indicated above, growth areas allocated in a local plan would have outline permission for the principle of development; details would be agreed and full planning permission achieved through a new reserved matters process, a local development order or possibly, on bigger sites, via a development consent order.
b. Renewal areas would benefit from a new statutory presumption in favour of development and would benefit from either a new automatic consenting route where specified forms of development meet design and other prior approval requirements, a faster planning application process or a local or neighbourhood development order.
c. Proposals which do not conform to the local plan in renewal and growth areas could still come forward, exceptionally, through a planning application process.
d. In protected areas, proposals will have to be brought forward via a planning application (subject to any permitted development rights or local development orders) and will be judged against the NPPF.
e. Generally, the development management process will be based on a more streamlined end-to-end process with firm deadlines for determination through a mix of:
ii. Data access;
iii. Shorter and standardised applications with reduced or limited supporting material;
iv. A standardised approach to technical information, conditions and developer contributions; and
v. Delegation of detailed planning decisions to planning officers where the principle of development has been established.
f. The Government will build in incentives for prompt determination of applications by local planning authorities such as deemed approval of some applications or refunds of application fees.
g. The process will still be subject to call-in powers and appeals but the Government expects the volume of call-ins and appeals to reduce over time.
h. There will be encouragement for faster build out by making provision in local plans/design codes for a variety of development types by different builders (picking up on the conclusions of the Letwin Review).
This vision for the new development management system feels less clear: permission in principle and outline planning permission are used interchangeably in places as a consequence of land being allocated for growth; however, over and above this, there appears to be provision for a “full” planning permission through a new reserved matters system or local development orders or even development consent orders. Would this not remove a lot of the benefit of allocating land for growth? There is also a myriad of possible ways in which land allocated for renewal might gain consent and, in the meantime, we retain the current planning application process as well. If the Government is not careful it might add to the complexity of development management.
Certainly, we can all get on board with the much-needed streamlining of the development management process from end to end, with more standardisation, reducing the quantity of application documents and increased use of digital technology. However, resourcing this change will be key to its success.
3. Building better, building beautiful and sustainable places
Design and place-making is still high up on the Government’s political agenda. Proposals in this space include the following:
a. A National Model Design Code to be published in the Autumn which will work alongside the National Design Guide and the Manual for Streets; together these are expected to have a bearing on design of new communities and to guide decisions on development. (This will be an early entrant into the current planning system.)
b. Local guides and codes are to be prepared wherever possible to reflect local character but need to have input from the local community before they are given any weight in the planning process.
c. A new expert body will be set up to help local authorities make use of design guidance and codes, as well as performing a wider monitoring and challenge role for the sector.
d. The much-heralded “fast-track” for beauty will be achieved through:
i. The NPPF – which will have provision for schemes that comply with local design guides and codes to be approved quickly;
ii. Legislation to require that sites in growth areas should have a masterplan and site-specific code as a condition of the permission in principle which is granted through allocation in the local plan; and
iii. Widening permitted development rights through the use of “pattern books” for different building types.
e. The NPPF will require targeted consideration of measures to support climate change mitigation and adaptation. (In our view, policy has been playing catch-up on climate change for some time – this is long overdue and should be welcomed.)
f. There will be a quicker and simpler framework for assessing environmental impacts, stepping away from the current frameworks such as Strategic Environmental Assessment, Sustainability Appraisal and Environmental Impact Assessment. The key requirements for the new framework will be:
i. early consideration;
ii. clear and easy to understand; and
iii. avoidance of duplication.
A further consultation on this is expected in the Autumn.
g. The Government intends to review and update the planning framework for listed buildings and conservation areas, to ensure their significance is conserved while allowing, where appropriate, sympathetic changes to support their continued use and address climate change.
h. Improvements to the energy efficiency standards for buildings will be brought forward to help meet the 2050 net zero commitment.
The intention here is clear and consistent with the recent focus of the Government on design and beauty in the planning system. The area with the most loaded questions is the promised framework for assessing environmental impact; in our view, there is clear scope to reduce the voluminous and highly technical nature of the current framework but now is not the time to water it down in terms of its ambit and its protective function. We will have to wait until the Autumn to find out more.
There are radical proposals for the funding of infrastructure:
a. Replace S106 obligations and the current version of Community Infrastructure Levy with a new Infrastructure Levy calculated as a fixed proportion of the development value above a threshold, with a mandatory, nationally-set rate or rates (potentially variable by area).
b. This new levy will be charged on the final value of a development (or an assessed sales value where the development is not sold, e.g. build to rent) by reference to the rate in force when planning permission is granted. This would have to be paid before occupation.
c. Local authorities would be able to borrow against Infrastructure Levy revenues so that they could forward fund infrastructure.
d. The London Mayoral Community Infrastructure Levy and similar strategic Community Infrastructure Levies in combined authorities could be retained.
e. The Infrastructure Levy Could be extended to capture changes of use without additional floor area and through permitted development.
f. The new levy would be extended to fund affordable housing. Allowance would be made for in-kind delivery on-site, which could be made mandatory where an authority has a requirement, a capability to deliver on site and wishes to do so. In those circumstances local authorities would be able to specify the form and tenure of the on-site provision. The Government anticipates that there would need to be a considered policy approach to the risk of imbalance between the value of the agreed in-kind delivery and the fluctuating nature of the levy liability, contingent as it will be on the development value.
g. Local authorities could be given more freedom on how they spend the levy.
There is a lot of detail to be worked through here. Setting the new levy at a level which does not deter development (and indeed land supply through the price paid by developers) will be key and a difficult issue to judge.
The Government will also need to be scrupulous in ensuring that affordable housing continues to come forward using levy funds and still comes forward as part of mixed and balanced communities.
The removal of the blunt and inflexible tool that we have come to love or hate in the form of CIL is welcome in our view and with it the removal of a considerable amount of confusing and time-consuming red tape. For practical reasons – not least delivering site-specific solutions for development – we are not sure we are witnessing the end of S106 obligations or an equivalent just yet but they will undoubtedly be slimmed down.
The consultation document ends with a few final proposals and thoughts from Government on the delivery of a new planning system:
a. As a first step there is a parallel consultation on changes to the current system including extension of Permission in Principle (by application to major development), the standard method for assessing local housing need, First Homes and supporting SME builders by temporarily lifting the small sites threshold below which developers do not need to contribute to affordable housing. More here: https://www.gov.uk/government/consultations/changes-to-the-current-planning-system
b. The Government sees a potential delivery role for development corporations.
c. The reforms are considered likely to reduce judicial review risk.
d. The need for resources and skills is recognised and will be addressed through a comprehensive strategy. In principle, the Government’s view is that the cost of operating the new planning system should be principally funded by the beneficiaries of planning gain – landowners and developers – rather than the national or local taxpayer. Funding may also be achieved through application fees and potentially the new infrastructure levy or- to a limited extent – general taxation.
e. The Government intends to strengthen the powers for local planning authorities to enforce against breach of planning control and provide incentives for enforcement action to be taken.
To end where this overview began, resources are key and a comprehensive strategy to ensure the sufficiency of funding and skills will be very welcome, as long as it does what it says on the tin. This will be vital to the success of the new system.
We know now what the Government wants to achieve. It is up to all of us in the sector to help them make it work and if parts of the system are worthy of retention for their “architectural” merit, to explain why that is, with reference to the Government’s objectives.
Validation and determination of applications for planning permission
No changes have been made to the timescales for determining planning applications. Developers are however encouraged to agree extensions of the period for determination. Local authorities have been urged to give priority to validating urgent COVID-19 related applications for planning permission and associated consents.
Publicising applications for planning permission
Temporary regulations (expiring on 31 December 2020) were made and came into force on 14 May to supplement existing publicity arrangements for planning applications, listed building consent applications and environmental statements for EIA development. There is now flexibility to take other reasonable steps to publicise applications and environmental statements if the usual specific requirements cannot be discharged relating to site notices, neighbour notifications, newspaper publicity or availability of hard copy documents. Steps can include the use of social media and electronic communications and they must be “proportionate to the scale and nature of the development”. Guidance has also been issued on this topic.
MHCLG has made it clear that planning conditions should not be a barrier to allowing developers and site operators flexibility around construction site working hours to facilitate safe working. Where only short term or modest increases in working hours are required, LPAs are encouraged to use their discretion to not enforce against a breach of working hours conditions. Where longer term measures or other significant changes are required, applications to amend conditions should be made, which LPAs should prioritise and turn around in 10 days. Requests to work up to 9 pm Monday to Saturday should not be refused without very compelling reasons.
Community infrastructure levy
The existing CIL regulations of course allow charging authorities limited flexibility to defer CIL liability. Amendments will be made to the regulations “in due course” to increase flexibility, but that will still depend upon charging authorities deciding to exercise the new discretion available to them. Authorities will be able to defer payments, temporarily disapply late payment interest and provide a discretion to return interest already charged. However, these changes will only apply to small and medium-sized developers with an annual turnover of less than £45 million. It remains to be seen how this limitation will be addressed in the regulations, for example where a special purpose vehicle, potentially offshore, has assumed liability. The new instalment policies for deferred payments will only apply to chargeable development starting after the changes come into effect, but they are anticipated to apply to “phases“ of the development starting after that date. The announcement on 13 May added that “existing flexibilities and the government’s clear intention to legislate should give authorities confidence to use their enforcement powers with discretion and provide some comfort to developers that, where appropriate, they will not be charged extra for matters that were outside of their control.”
Section 106 planning obligations
Local planning authorities are encouraged to consider the deferral of section 106 obligations, e.g. financial payments. This will require variations to existing section agreements and undertakings. Local planning authorities are encouraged generally to take a “pragmatic and proportionate” approach to the enforcement of section 106 planning obligations
PINS issued a further update on 13 May. Site visits are being commenced and PINS is considering whether there are types of cases that can proceed without a site visit. The first digital appeal hearing took place on 11 May as a pilot and PINS is aiming for 20 further examinations, hearings and inquiries in May and June. It is also exploring hybrid options – a mix of in person and by video public/telephone hearings and is considering “social distance” events.
MHCLG is working on ways to address the local plans process in order to meet aspirations to have all local plans in place by 2023. In particular, the use of virtual hearings and written submissions is being considered.
Regulation 12 of the Local Government and Police and Crime Commissioner (Coronavirus) (Postponement of Elections and Referendums) (England and Wales) Regulations 2020 prevents any neighbourhood planning referendum from taking place until 6 May 2021. Updated guidance was issued in April allowing neighbourhood plans awaiting referendums to be given significant weight in decision making.
Nationally Significant Infrastructure Projects
The government is working with consenting departments to support the continuation of decision-making to minimise the impact of current restrictions on the consideration of DCO applications and the Planning Inspectorate has updated its guidance.
Compulsory purchase orders
There is now pragmatic advice as to the service of documents. Acquiring authorities are encouraged to allow more time for responses to requests for information about interests in land or submitting objections to CPO. There is also encouragement to authorities to act responsibly regarding business and residential claimants, particularly regarding the timing of vesting orders and payment of compensation, which is particularly relevant when considering evictions. Authorities are reminded of their obligation to make advance payments of compensation in accordance with statutory time limits given cash flow difficulties which claimants may currently face.
To my mind, this is all welcome and congratulations are due in particular to the relevant civil servants. Of course, there is more to be resolved, for instance the vexed question of extending time limited planning permissions (see my 4 April 2020 blog post Pause Not Delete: Extending Planning Permissions) as well as the Regulations in relation to CIL, but it is good to see this progress. No wonder MHCLG’s Simon Gallagher was prepared to come on this week’s Have We Got Planning News For You!
When, as it will, this current terrible phase of the Covid-19 pandemic passes, what needs to be done to ensure that we catch up on efforts to provide housing and resume economic activity?
The main purpose of this blog post, into which a number of my partners at Town have contributed their thoughts (although all errors and omissions are mine), is to try to answer that question.
But first, what is presently being done to make sure that our system continues to operate, efficiently but fairly?
It is encouraging to see the great efforts being made by many local planning authorities to keep going with decision making, by way of innovative approaches to decision making and greater use of officers’ delegated powers, and the commitment of so many officers and members, continuing to work from home against a background of other domestic pressures and technological constraints. It will be excellent to see proactive moves by authorities to amend their constitutions, with necessary safeguards such as chief executive oversight, where there are specific rules against certain categories of application being dealt with other than by committee. Some of the options are set out in a piece by barrister Jonathan Easton, Local authority decision making in a time of crises, 19 March 2020. The Government has also confirmed that it “will consider bringing forward legislation to allow council committee meetings to be held virtually for a temporary period” (Robert Jenrick reaffirms support for councils in their coronavirus response, MHCLG press release, 16 March 2020); the Association of Democratic Services Officers and Lawyers in Local Government wrote jointly to the Secretary of State on 17 March 2020 setting out the full extent of changes that would be needed for local government decision making to function properly during this period of social distancing. The quicker the better please!
It is frustrating after the resounding success of the Rosewell reforms to see planning appeal inquiries, as well as informal hearings and local plan examinations, postponed as a result of the virus (see Coronavirus (COVID-19) – Planning Inspectorate guidance – updated 18 March 2020) – but of course the reason is plain. So far the postponements only relate to those scheduled up to 23 April but surely this will roll forward in due course. The Bar has made much of discussions with the Planning Inspectorate for greater use of video conferencing – which is the stock in trade for all of us at the moment – microsoft teams, zoom, you name it, we’re all on it! But keeping the professionals communicating with the inspector in a structured way is one thing – what about the “public” element of a public inquiry? [subsequent addition to blog post: see this subsequent excellent Landmark Chambers paper Fairness and public participation in video or telephone hearings for planning appeals during the COVID-19 crisis]. For all but the most controversial or complex appeals (so perhaps not those which have been recovered by the Secretary of State), should appellants be given the option of having their appeals determined by written representations, even if until now the appeal has been identified as appropriate for a hearing or inquiry?
The courts have also been quick to consider how to respond. An update from the Lord Chief Justice on 17 March 2020 spoke of the “urgent need to increase the use of telephone and video technology immediately to hold remote hearings where possible”, the “considerable flexibility” provided for in the Civil Procedure Rules and the courts’ “immediate aim is to maintain a service to the public, ensure as many hearings in all jurisdictions can proceed and continue to deal with all urgent matters”. Indeed, colleagues had an early taste of this on 19 March, with Deputy High Court Judge Alice Robinson handing down judgment from open court in a section 288 challenge (following a hearing earlier in the week), with the advocates and parties at the other end of the telephone. Clause 53 and Schedule 24 of the Coronavirus Bill (introduced into the House of Commons on 19 March 2020) proposes greater flexibility in relation to the use of live video and audio links, with appropriate protections, for a temporary period of two years (whoch period may be shortened or extended). I also recommend this excellent piece, Tim Buley QC shares his thoughts on the Public law courts during the coronavirus crisis, which pulls together much of what is currently being done, or contemplated.
Some ideas, looking ahead
Just a week or so ago seems like an age away. The Secretary of State set out a range of proposals for further reform of the planning system in his Planning for the future document (12 March 2020). He announced:
“In the Spring, we will publish a bold and ambitious Planning White Paper. It will propose measures to accelerate planning. It will maximise the potential of new technologies to modernise the system. It will make it easier for communities to understand the planning system and play a role in decisions that affect them. Together, the measures it puts forward will set out a pathway to a new English planning system which is fit for the future”.
That talk of a “new English planning system” seemed to herald some of the thinking from the Policy Exchange’s paper Rethinking the Planning System for the 21st Century (27 January 2020) and, after all, its co-author Jack Airey is now a 10 Downing Street advisor. I wrote a critique of the paper in the Estates Gazette (Let’s rethink the rethink, 5 March 2020) but perhaps I was being a little premature. Because maybe, once all this subsides, it is time to look at for instance:
⁃ the potential for more of a zoning-style approach, which could begin to be introduced fairly simply by placing a proper duty on authorities to prepare brownfield land registers (as well as making it mandatory for local authorities to import into their registers all sites identified by the Government in its promised national brownfield sites map) and then increasing the scope for use of the ‘permission in principle’ procedure e.g. by allowing it to be used for more than just housing-led development and allowing permission in principle to be established through site allocations in a local plan.
⁃ greater use, this time with better safeguards against abuse, of permitted development rights. After all, setting aside the problems caused by that lack of appropriate safeguards, since the permitted development right to convert offices to residential was initially introduced for a temporary three year period from May 2013 (following an initial announcement in the March 2011 budget), many thousands of new homes have been created at much greater speed than traditional planning application routes would have achieved. Desperate times call for desperate measures. Planning For The Future announces that the Government will introduce “new permitted development rights for building upwards on existing buildings by summer 2020, including to extend residential blocks by up to two storeys and to deliver new and bigger homes. We will also consult on the detail of a new permitted development right to allow vacant commercial buildings, industrial buildings and residential blocks to be demolished and replaced with well-designed new residential units which meet natural light standards.” Devil’s question: if we are to have permitted development rights to demolish and rebuild, why not go further and have permitted rights, with equivalent safeguards, to carry out residential development on already cleared brownfield land (as an alternative to the enhanced brownfield land register/permission in principle proposal above)?
Surely, all these ideas will need to be considered, against the backdrop of months of lost housing delivery and a severe knock to economic confidence.
But I would suggest that, ahead of that promised White Paper, which will surely now slip considerably, there are a number of shorter-term measures to make adjustments in order to make up for the time that has been lost as a result of this crisis. In considering these, I recognise the inevitable tension between on the one hand measures that seek to “put on hold” aspects of our system, particularly time limits, and on the other hand measures to keep the system moving.
We need to learn from recent history. In the wake of the global financial crisis, on 1 October 2009 the Government introduced a temporary measure “to make it easier for developers and local planning authorities to keep planning permissions alive for longer during the economic downturn so that they can more quickly be implemented when economic conditions improve.” Guidance as to the operation of the provisions was set out in Greater flexibility for planning permissions (23 November 2009, amended 1 October 2010 and eventually withdrawn 7 March 2014). (The same document gave guidance as to the operation of the helpful section 96A non-material amendments procedure, introduced at the same time.)
We urgently need an equivalent measure reintroduced or, perhaps more simply, an automatic six months’ extension to all planning permission time limit conditions. After all there is already a year’s automatic extension under section 91 (3A) of the Town and Country Planning Act 1990 where a planning permission is subject to judicial review proceedings. The thinking should extend to other fixed deadlines, for instance in relation to the implementation of compulsory purchase orders and NSIPs.
There are various section 106 obligations which provide for ongoing financial contributions or measures with significant ongoing costs, not linked to progress with stages of development. The Government should surely provide firm guidance to authorities that they must readily agree to the renegotiation of such provisions to take into account the current standstill period if the evidence is, for any specific development, that this is necessary and justified.
In London, there is a particular issue with the early stage viability review mechanism required by the Mayor. The review is triggered if “substantial implementation” (usually development above ground floor level) has not happened within two years of planning permission being issued. Surely we should be avoiding the unnecessary bureaucracy inherent in that process where we can and for most major schemes the 24 months’ deadline is challenging even with a fully deployed design and construction team. Again, boroughs and the Mayor should surely be urged to agree to vary such arrangements so as to allow for an appropriate extension, whether it turns out to be three months, six months, or longer. Flexibility is also urgently needed with agreements that are currently being negotiated and we have been considering various potential drafting options so as to secure that outcome.
Publicity and consultation arrangements for planning applications need to be adapted to fit this world of social distancing and self-isolation: much of this can occur anyway through innovative use social media and other online consultation tools but there should be a temporary lifting of legislative requirements which will currently serve little purpose and may prove difficult to fulfil, such as the deposit of physical copies of Environmental Statements in the community (under Regulation 23 of the Town and Country Planning (Environmental Impact Assessment) Regulations 2017) and the erection of site notices under Article 15 of the Development Management Procedure Order.
Any such proposal would need underwriting from the Government but, as part of any planned economic bounce-back, should there be a year’s window within which schemes can commence free from CIL or with a significant deferment of payments (subject to clawback unless the chargeable development is completed within a specified number of years)? Should the three years period for the “in use” exemption be extended (surely the answer is yes)?
Given the disruption and in some cases the reduction in the capability of local authorities to determine planning applications and in light of the current postponement of hearings and inquiries by PINS there must also be a case for easing the burden on the current system and deferring costs for applicants and would-be appellants by introducing a temporary extension of the statutory period for determination of planning applications and the time limit for appealing against refusal or deemed refusal of planning permission under Articles 34 and 37 of the Development Management Procedure Order.
There will surely need to be adjustments to the operation of the housing delivery test so as not to unfairly penalise authorities facing, for no fault of their own, a slow down in housing starts.
Some have called for the Government to suspend litigation deadlines and limitation periods for the duration of the crisis. It is difficult to see how an across the board standstill would not cause substantial injustices, but should the usual judicial review and statutory challenge periods be extended in relation to decisions taken after a specified date, or perhaps for a temporary period to extend the deadline to three months?
Finally, taking into account the consequences of its social distancing measures, the Government has already announced on 17 March 2020 that permitted development rights will be extended for a period of 12 months to allow the temporary change of use of pubs, bars and restaurants to hot-food take aways; one can readily see that further temporary extensions of permitted development rights might be necessary – e.g. change of use of offices, industrial buildings or warehouses to use for the sale of food and other convenience goods and change of use of hotels and hostels to hospitals or healthcare centres. Planning law will need to be nimble.
It’s times like these we learn to live again.
Simon Ricketts, 21 March 2020
Personal views, et cetera
With thanks to my partners and colleagues at Town. If any of these ideas chime with other organisations’ thoughts, please speak to any of us.
Tower Hamlets Council’s revised CIL charging schedule came into effect on 17 January 2020, imposing borough CIL for the first time on its large allocated sites, so you will appreciate its double disappointment at the Secretary of State allowing the Westferry Printworks site appeal, against the inquiry inspector’s recommendations, in a decision letter dated 14 January 2020. The CIL figure could have been up to £50m, according to evidence given at the inquiry on behalf of the appellant.
The scheme is for a “comprehensive mixed-use redevelopment comprising 1,524 residential units (Class C3), shops, offices, flexible workspaces, financial and professional services, restaurants and cafes, drinking establishments (Classes B1/A1/A2/A3/A4), community uses (Class D1), car and cycle basement parking, associated landscaping, new public realm and all other necessary enabling works” at Westferry Road on the Isle of Dogs.
There has been a furious response from the council. At a full council meeting the following day, 15 January 2020, a resolution was passed to examine “all available options, including a judicial review“. The East London Advertiser reports Mayor John Biggs as saying:
“It is a massively tall and dense development. Something of 40 floors on the island is an outrage. By making the decision on Tuesday we also lose a massive sum of money. This development will place a huge impact on the island. It is a scandal and outrageous. We will be doing everything in our power [including] seeking a judicial review.”
The potential impact of borough CIL on the viability of the proposals obviously had been raised by the appellant as a potentially relevant matter, given that it would go to viability. Unsurprisingly, the appellant had sought to include a mechanism within its section 106 agreement for a potential reduction in affordable housing should the Secretary of State’s decision letter be issued after the revised CIL charging schedule had been adopted, a proposal which both the inspector and Secretary of State rejected.
The timing of the decision letter meant that this issue went away – it would have been an interesting one to test, given that the situation often arises where an applicant or appellant is in the hands of the decision maker as to whether permission will be issued before a revised CIL charging schedule comes into effect and why shouldn’t a section 106 agreement mechanism to neutralise the effect be appropriate where the viability appraisal has not taken the potential additional CIL liability into account?
The decision letter was plainly ready to be issued, why should it have been held back?
The appeal had been lodged in relation to an application submitted by Westferry Developments Limited (the owner of the site is Northern & Shell, the development manager is Mace) on 24 July 2018. The appeal was recovered for the Secretary of State’s own determination on 10 April 2019. Tower Hamlets asked for more time to formulate their position in relation to the proposals but this was refused by the Secretary of State, as recorded in a report to a meeting of Tower Hamlets’ strategic development committee on 14 May 2019:
“This report is seeking the authority of the committee for officers to defend an appeal which has been submitted to the Secretary of State by the developer. The Secretary of State has imposed a timetable which requires that this report is considered by the Committee on 14th May 2019 in time for the council to submit a Statement of Case by 22nd May 2019 in order to avoid breaching the imposed timetable and making the authority liable for costs for unreasonable behaviour. As the report had not been written when the timetable was imposed, the Council asked Secretary of State to review the timetable and he has declined. These are the special circumstances justifying the urgency.”
The previous Mayor of London (whatever happened to him?) had intervened and granted planning permission for an earlier scheme for the site in 2016 for “comprehensive mixed use redevelopment of 118,738 m2 including buildings ranging from 2-30 storeys (tallest 110 m AOD) comprising: a secondary school, 722 residential units, retail use, restaurant and cafe and drinking establishment uses, office and financial and professional services uses, community uses, car and cycle basement parking, associated landscaping and new public realm“. That planning permission has been implemented by the demolition of the printworks and works to construct a new basement.
The latest application had been on the basis of an offer of 35% affordable housing, although not policy compliant due to the proposed tenure mix, justified by reference to viability appraisal. When the appeal was submitted, unsurprisingly, given that on appeal the decision maker would expect an updated viability appraisal, that offer was withdrawn and at the time of the 14 May 2019 committee meeting there was just an indication that a revised viability assessment would be submitted and that the revised offer would be less than 35%.
The committee resolved that the proposals would have been refused on the following grounds:
⁃ Townscape and visual impact
⁃ Wind Impact on the Docklands Sailing Centre
⁃ Affordable housing – amount
⁃ Housing mix and choice
The inquiry started on 7 August 2019. This was an important appeal for the council, as can be seen from this July 2019 Facebook post from a councillor, encouraging opposition to the proposals:
In the evidence for the inquiry, the affordable housing offer had been reduced to 21% on the basis of an updated viability assessment.
In this summary that follows I am plagiarising some of an internal note prepared by my Town partner Louise Samuel (into which I may now introduce errors, all mine):
• The inspector accepted that the existing permission should be treated as a fallback, which formed an appropriate basis for assessing an alternative use value for the purposes of arriving at a benchmark land value.
• However, the inspector did not agree with how the appellant had calculated the benchmark land value (see IR 507 on for BLV discussion) and considered that the 21% offer was unlikely to be the maximum reasonable provision for the site. He did not, however, set what the maximum reasonable provision would be.
• Whilst Tower Hamlets criticised the appellant for resiling from its previous 35% offer, the Inspector notes that it was clear that the appellant was responding to the Mayor’s fast-track approach (which requires at least 35%) and so took a commercial view despite the fact that it was not supported by the viability assessment at the time. He concluded that this was not, in itself, a reason to reduce the weight to be attached to the Assessment before him (see para 530 of the IR).
• The Inspector’s view was that the consented scheme provided many of the same benefits but without causing the same harm to heritage assets. Because of the consented fallback, the only benefits that carried weight were those in addition to the consented position.
• The Secretary of State agreed that it is likely that the scheme could provide more affordable housing (“21% does not…represent the maximum reasonable amount of affordable housing”) but still considered that the additional benefits (compared to the consented fallback scheme) of: (a) housing (802 more units of which 142 would be affordable, with a policy compliant tenure split of 70% affordable rent 30% intermediate); and (b) employment during construction, were enough to grant permission. The Secretary of State gave these benefits significant weight whereas the Inspector had attached moderate weight to these benefits. The Secretary of State took into account that “there is no evidence before him of any other scheme which might come forward or what level of affordable housing might be delivered by any such scheme”.
• The Secretary of State considered these benefits to be enough to outweigh harm to important heritage assets (Grade I Old Royal Naval College; Grade I Tower Bridge; and the Greenwich World Heritage Site).
• The section 106 agreement included both an early and late stage viability review, which means that the percentage of affordable housing may increase, albeit the Inspector criticised the limited effectiveness of these.
An interesting decision in that we would need to go back almost two years to find another recovered appeal for housing development which the Secretary of State has allowed in London. Contrast for instance with the 19 July 2019 Chiswick Curve decision letter, appeal dismissed by the Secretary of State against his inspector’s recommendations, where he gave only moderate weight to the provision of 327 dwellings, whereas the Inspector had given significant weight to the housing offer (the decision has been challenged by the appellant – Louise and colleagues acting), and contrast with for instance the 1 Cambridge Heath Road 10 June 2019 decision letter, again an appeal dismissed against his inspector’s recommendations.
Much to chew over for those promoting, or otherwise engaged with, major projects in London.
I thought I would start 2020 by trying to establish some common ground, before then mentioning what happened shortly before Christmas in relation to the Elephant & Castle and Old Oak projects, both controversial in different ways. The questions are long but I hope that the answers are short.
Do we all agree that…
1. more housing is needed for those who cannot afford homes that are being built by the private sector in their local area, even when these are required to be sold or let at significant discounts to market rates – and that what we call that housing (eg social housing/socially rented) and the nature of the body that delivers and manages it (housing associations or other registered providers, local authorities) are secondary issues?
2. the current system of seeking to require developers to deliver that housing (whoever then manages it) is not working and is hugely inefficient, in that: (1) local policy expectations set out in local plans are often not met, due to those expectations being determined not to be viable – leading to prolonged negotiations and local objection (2) the complexities and multitude of inputs to any negotiated section 106 affordable housing package, often including intricate mechanisms to provide for later reviews of the viability position, are at best a costly distraction for all parties (needing to be tooled up with valuation and QS professionals) and at worst are prone to lead to huge delays and, over time, the prospect of renegotiation where the negotiated outcome is not sufficiently attractive to funders, or where (almost inevitably) circumstances have changed during the long course of the process?
3. it is in the public interest for communities within developments to be socially and economically diverse?
4. the system worked more easily when much more Government money was available to support affordable housing by way of grant (without grant obviously a requirement to deliver social housing has a huge impact on the viability of a scheme) and that we need to get back to a system that (1) is simple (2) delivers housing that is truly affordable for those who need it (3) is efficient and (4) does not delay development more generally?
5. government (ie our) money needs to be spent where it can have most beneficial impact and is most needed?
There has been a lot of government tinkering but don’t we have to get back to those fundamentals? I’m not sure that the Government’s promised Social Housing White Paper is going to get us there, given the absence of relevant detail about affordable housing in the Conservatives’ manifesto – talk about owning first homes is a world away from the very different challenges faced by so many.
I’m sorry to be a cracked record – see my 28 May 2017 blog post Affordable Housing Tax or 4 November 2017 blog post Viability Assessment Is Not A Loophole, It’s A Noose. We could look at the idea of expanding CIL to include a social housing contribution, so that local authorities can deliver or procure it, with the option of provision on site counting as works in kind? But I’ve previously been against further rolling out another complex and inefficient regime, ie CIL, and most authorities, hollowed out and stretched as they are, are not currently in any position to deliver or procure social housing at scale. Instead, personally I would simply prefer that we go back to the old way – grants to providers so as to reduce the impact on viability for the developer of providing social housing.
In the meantime, we have to make the current system work. My 8 June 2019 blog post The Bottom Line: Updates On CIL And Viability reported on the RICS professional statement on financial viability in planning, which came into effect on 1 September 2019, and mentioned the revisions made to viability passages of the PPG by the Government on 9 May 2019, reflecting changes to the NPPF that seek to ensure, amongst other things, that detailed viability examination takes place at plan-making stage rather than when applications come forward.
“We are not seeking comments contrasting the government framework with a market-based appraisal. Comments should focus on whether our draft guidance gives effect to government policy and practice guidance, in an administratively efficient way, in order to deliver the objectives of the NPPF.”
Make your views known.
In the meantime…
Elephant & Castle
Delancey’s proposed redevelopment of the Elephant & Castle shopping centre and London College of Communication has long been controversial. It proposes a large mixed-use development comprising a range of buildings of up to 35 storeys, with a mix of uses including 979 dwellings (proposed to be for rent rather than sale) and accommodation for retail, office, education, assembly and leisure along with a remodelling of the London Underground station. One of the lines of attack for objectors, including the 35% Campaign, has been the perceived lack of “genuinely affordable” housing.
Planning permission was granted by the London Borough of Southwark on 10 January 2019. Just before Christmas, in Flynn v London Borough of Southwark (Dove J, 20 December 2019), the High Court rejected a crowdfunded challenge to the permission brought on behalf of the 35% Campaign. The grounds of challenge all turned on the affordable housing deal that Southwark struck in the section 106 agreement with the developer.
The case doesn’t turn on any particularly interesting legal principles or make any new law. But the facts, set out in careful detail by Dove J, illustrate precisely the concerns that lay behind my attempt just now to establish some common ground:
The policy background is not straightforward, with a changing position both at borough level and at London Plan level.
The Mayor has set out criteria in his 2017 affordable housing and viability SPG for different tenures of affordable housing, including social rent (target rents determined through the national rent regime), affordable rent (rent controls requiring a rent of no more than 80% of the local market rent), intermediate (available for rent or sale at a cost above social rent but below market levels – and eligible only to households whose annual income is within a defined range) and intermediate London Living Rent (only available to households renting with a maximum income of £60,000 without sufficient current savings to purchase a home within the local area).
The adopted London Plan requires boroughs to seek the “maximum reasonable amount of affordable housing…when negotiating on individual private residential and mixed use schemes, having regard to” a number of factors, including “development viability” and the “availability of public subsidy”.
Within the Elephant & Castle area, Southwark’s adopted plan seeks a minimum requirement of 35%, on the basis of a split of 50% social rented and 50% intermediate housing. Its emerging plan seeks, in relation to build to rent developments, a different tenure split for the 35%: social rent equivalent (ie social rent level but not managed by registered provider) 34% minimum, affordable rent (aka discount market rent) capped at London Living Rent equivalent 52% minimum, affordable rent (aka discount market rent) for household incomes between £60,000 and £90,000 per year 14% minimum. The lack of social rent reflects the specific nature of build to rent developments, where it is more efficient for all of the housing to remain under single management rather than for a separate registered provider to be introduced.
At the time Delancey’s application first went to committee on 16 January 2018, its proposal was 36% affordable housing based upon habitable rooms, with the 36% made up as follows: 10% social rent equivalent, 46% London Living Rent, 43% discount market rent. The non policy compliant offer (in terms of tenure split) was based on an agreed viability assessment. Despite a recommendation for approval, members deferred a decision until a meeting scheduled for 30 January 2018 at which they intended to formulate reasons for refusal. The day before the follow-up meeting the developer made further proposals in relation to the affordable housing offer and the application was deferred to a subsequent meeting.
The revised proposal was to replace 33 social rent equivalent units with 74 socially rented units, all to be located on the western part of the development and to be owned and operated either by the borough or by a registered provider. This changed the tenure split (of the 35% affordable housing dwellings) to: social rent 24.9%, London Living Rent 27.9%, discount market rent 47.2%.
In June 2018 the offer was increased again. The developer’s consultants indicated that following “in-principle agreement from the GLA to provide grant funding towards the proposed scheme” the number of social rent units could be increased to 116 homes, or 38.1% of the 35% of the units that were to be affordable.
The application was approved at a committee meeting on 3 July 2018. It was acknowledged in the report that the proposed tenure split was still not policy compliant but was justified by way of the agreed viability appraisal. The report also noted that there would need to be a fallback arrangement in the section 106 agreement to cater for the possibility that the developer might choose after all to develop the western part of the development on a for sale rather than for rent basis (in which case the affordable housing requirement for that part of the site would return to 50% social rented, 50% intermediate).
If all of this does not start to give an idea of the inevitable complexity of negotiations on a scheme such as this, then consider the viability appraisal. As is common with a significant longterm development, where application of the more straightforward benchmark land value plus developer’s profit approach does not reflect accurately the financial modelling of a project over time, viability was judged against a minimum internal rate of return for the developer.
The latest RICS draft guidance defines internal rate of return (or “IRR”) as follows:
“The rate of interest (expressed as a percentage) at which all future project cash flows (positive and negative) will be discounted in order that the net present value (NPV) of those cash flows, including the initial investment, be equal to zero. IRR can be assessed on both gross and net of finance.”
However, unless I have missed it, there is no guidance anywhere as to when an IRR approach is appropriate and how to arrive at and test the inputs and modelling.
The agreed benchmark was 7.15% IRR, with annual growth to 11% over the construction period. Review mechanisms in the section 106 agreement provide that 50% of any excess are to be applied to increasing the affordable housing provision up to a policy compliant level/tenure split.
The claimant had three grounds of challenge. The first turned on an alleged inaccuracy in the way that the GLA’s offer of funding had been reported – it had not been formally confirmed and discussions were at an “in principle stage”. The second alleged that one of the detailed mechanisms in the section 106 agreement departed from the relevant head of term in the committee resolution. The third related to the mechanism in the section 106 agreement for determining the affordable housing to be provided if the western part of the site turned into a “for sale” development, but a deed of variation had been entered into after the challenge was brought, largely correcting the error that had been identified.
Dove J rejected each of the grounds, whilst accepting that each was arguable. (1) The report did not materially mislead members. (2) The section 106 mechanism was not outside the scope of the committee resolution (“True it is that the solutions arrived at are not a literal interpretation of paragraph 364 [of the report to committee], in that they do not include for the provision of land and a substantial cash dowry to construct the social rented units but, in my judgment, that was not required in order to remain within the scope of the delegation granted by the members”). (3) The approach to the fallback (“for sale”) scenario was “entirely rational and appropriate”. Part of the claimant’s criticism of the arrangements turned on whether the additional affordable housing in these circumstances should be social rented units rather than the social rented equivalent units provided for. The judge saw nothing relevant in the distinction:
“In terms of the matters raised by the Claimant the quality of tenure enjoyed by tenants in social rented equivalent properties are, as the nomenclature suggests, equivalent to those in social rented properties. Of course, there may well be nuanced differences between them as a consequence of them being separately defined. Furthermore, they will be managed in different ways as the definition implies. Be all of this as it may, in my view the important point is that the requirement of the officers’ report was a review in terms of affordable housing, and whether the additional habitable rooms were to be provided as social rented or social rented equivalent accommodation was not identified as being in any way a critical point upon which the delegation to the officers of authority to enter into the section 106 obligation turned. Put another way, whatever may be the nuanced differences between social rented equivalent property and social rented units that was not identified as a key requirement in relation to the review mechanism contemplated were the developer to take up the fall-back scenario.”
Will the new guidance make any of this more straight forward? I doubt it. Would proper funding for social rent and social rent equivalent housing? Of course it would.
Old Oak and Park Royal Local Plan
The recent NPPF and PPG changes of course seek to move the viability spotlight to the point at which sites are allocated for development. The Old Oak plan was examined last year under the previous NPPF but viability matters were still centre stage and the inspector’s findings may be an indicator of the detailed scrutiny that is likely to be given to the viability in particular of strategic sites (taken together with proposed policy requirements in terms of infrastructure delivery and affordable housing).
One of the key issues for the inspector was whether the proposed allocation of the 54 acre Cargiant site for residential and associated development was viable. Cargiant had itself attempted development of its site in the past. It had concluded that it would be unviable to contemplate relocating or extinguishing its business and carrying out the development – and took the position that there was no reasonable prospect within the plan period of the Old Oak and Park Royal Development Corporation (“OPDC”) being in a position to carry out such proposals, even by resorting to compulsory purchase and even with the benefit of £250m Housing and Infrastructure Fund monies which had been agreed in principle to be allocated by MHCLG.
My firm acted for Cargiant and so I will restrict myself to pointing out the level of detail to which the inspector went in his interim findings on viability of Cargiant site proposal (10 September 2019) before concluding that the allocation would be unviable and therefore unsound.
The day after the general election, on 13 December 2019, the OPDC announced that it would change its proposals, which will now leave Cargiant in place:
“The Old Oak and Park Royal Development Corporation (OPDC) has today set out a revised approach to deliver tens of thousands of new homes and jobs through collaboration with major public sector landowners.
The regeneration of Old Oak, Park Royal and surrounding areas in west London, has the potential to deliver 25,500 new homes and 65,000 jobs over the next 30 years. OPDC has already approved plans for over 5,000 homes including 1,500 already completed or being built.
The shift in approach has been triggered by recent, rapid increases in industrial land values in west London which mean that it is currently not financially viable to deliver OPDC’s early regeneration plans at Old Oak North. This area, close to the planned new HS2 interchange station, includes the 54-acre site that is owned and operated by Cargiant, which had originally been earmarked for development.
Earlier this year, the Planning Inspector, in his interim report on the OPDC’s draft Local Plan, de-designated the Cargiant site from Strategic Industrial Land, but also concluded that Old Oak North had become commercially unviable for residential-led development at this time.”
Whilst this situation might be taken to be an example of how viability matters can indeed in practice be taken into account at the plan-making stage, I do have concerns:
⁃ There is now a bigger onus on authorities to carry out proper viability work, including work to a sensible level of detail on strategic sites (albeit often with assistance from those promoting those sites for development), and is it actually going to be done?
⁃ Where it is not done, delays will occur in the examination process. At Old Oak, the necessary work had not been done and there was a significant hiatus whilst it was commissioned.
⁃ Development proposals are often not sufficiently worked up, at the stage that the plan is being prepared, so as to enable a sensible viability appraisal to be undertaken. And will developers be prepared always to come clean at the allocation stage as to the challenges they are facing in making the numbers stack up?
⁃ Will there always be participants in the local plan examination process with the motivation and resources to put authorities to proof on the work that has been carried out? If Cargiant hadn’t taken its stance (entailing lawyers and a team of consultants to challenge much of the inputs) I suspect the allocation would have been confirmed without challenge – and then proved over time to be undevelopable.
Lindblom LJ gave a short speech this week at drinks hosted by Cornerstone Barristers to mark the publication of Ashley Bowes’ A Practical Approach To Planning Law 14th edition. He made a nice joke about how many of the footnote references were to articles by one Dr Ashley Bowes.
The case is an important addition to the growing jurisprudence in relation to the relevance of air quality issues to decision making on planning applications and appeals – and indeed is of wider relevance.
In Gladman the developer had challenged an inspector’s decision letter which had dismissed its appeal in relation to a proposed residential and extra care development at Pond Farm, Newington, near Sittingbourne. The challenge was to the inspector’s conclusion as to the “effect of the appeal proposals, including any proposed mitigation measures, on air quality, particularly in the Newington and Rainham Air Quality Management Areas”.
The claim was rejected at first instance. The grounds of appeal raised “three broad issues: first, whether the inspector erred in failing to grasp the significance of Garnham J.’s decision in the ClientEarth proceedings, and the policy in paragraph 122 of the NPPF (grounds 1 and 2); second, whether he failed to deal properly with the proposed mitigation, whether he should have considered a condition preventing the development going ahead until effective mitigation had been secured, and whether his decision is vitiated by procedural unfairness (grounds 3, 4 and 5); and third, whether he failed properly to explain how Gladman’s approach to mitigation departed from the air quality action plans (ground 6).”
Or, perhaps, more plainly: was the inspector more sceptical than was legally permissible as to whether national air quality targets will be met and as to whether the developer’s proposed mitigation measures would be effective?
National air quality targets
Garnham J in the ClientEarth proceedings had ordered that the Secretary of State publish a modified air quality plan and aim to achieve compliance with the Air Quality Directive by the soonest date possible, must choose a route to that objective which reduces exposure to non-compliant air quality levels as quickly as possible and must take steps which mean that meeting the value limits is not just possible but is likely.
The inspector considered the air quality improvement objectives within Swale Borough Council’s action plans for the two relevant air quality management areas. He thought it “optimistic… to expect that NO2 concentrations will fall by the amount” predicted by Gladman in a “without development” scenario.
“The sensitivity scenarios are probably too pessimistic: as the appellants’ witness pointed out, tightening of emission standards for new vehicles should, over time, bring about substantial further reductions in NO2 emissions from traffic. But I was given no firm data on the rate at which this is likely to occur. In the absence of any conclusive evidence on this point, I consider it would be unsafe to rely on emission levels falling between 2015 and 2020 to the extent that informed the modelling of original Scenarios 2 to 5. My view is reinforced by the High Court’s finding on the excessive optimism of future emissions modelling. This means that original Scenarios 3 and 5 cannot be taken as reliable projections of the likely impacts of the appeal proposals on air quality.”
The judge at first instance did not accept Gladman’s submissions that this approach by the inspector was unlawful in that he did not take into account the extent of the duty on the Secretary of State to secure that air quality value limits were likely to be met as soon as possible. The inspector “was not required to assume that local air quality would improve by any particular amount within any particular timeframe”. The Court of Appeal agreed:
“It was not known what measures the new draft national air quality plan would contain, let alone what the final version would contain following public consultation. The inspector did not know how any new national measures would relate to local measures, nor what would be “the soonest date possible” by which the new national air quality plan would aim to achieve compliance. He could not reach any view on whether the measures in the new national air quality plan were likely to be effective in securing compliance by any particular date (paragraph 31 of the judgment). In the judge’s view, the inspector had “properly engaged with the ClientEarth (No.2) decision”; had “understood what the judgment required”; had “carefully analysed the evidence that was presented before him (DL 99-106)”; had “formed a judgment as to what the air quality is likely to be in the future on the basis of that evidence”; and was “entitled to consider the evidence and not simply assume that the UK will soon become compliant with [the Air Quality Directive]” (paragraph 32).
I can see no error in any of those conclusions of the judge. In my view, as was submitted to us by Mr Richard Moules on behalf of the Secretary of State and Dr Ashley Bowes for CPRE Kent, the inspector did see the true significance and effect of Garnham J.’s judgment in ClientEarth (No.2). In deciding Gladman’s appeals, he had to consider the evidence before him, in the particular circumstances of the local area, including local air quality. That is plainly what he did. He was not obliged to embark on predictive judgments about the timing and likely effectiveness of the Government’s response to the decision in ClientEarth (No.2), and the requirement to produce a national air quality plan compliant with the Air Quality Directive.”
“It was not within the inspector’s duty as decision-maker to resolve the “tension”, as Mr Kimblin put it, between the Government’s responsibility to comply swiftly with the limit values for air pollutants and the remaining uncertainty over the means by which, and when, the relevant targets would be met. In different circumstances, and on different evidence, an inspector might be able to assess the impact of a particular development on local air quality by taking into account the content of a national air quality plan, compliant with the Air Quality Directive, which puts specific measures in place and thus enables a clear conclusion to be reached on the effect of those measures. But that was not so here.”
The Court of Appeal also held that Supperstone J at first instance was right to reject the submission that “the inspector failed to apply the principle that the planning system assumes other schemes of regulatory control will operate effectively. This policy, in his view, was directed at a situation where there is a parallel system of control…, the essential principle being that the planning system should not duplicate those other regulatory controls, but should generally assume they will operate effectively. As the judge saw it, the Air Quality Directive was “not a parallel consenting regime to which paragraph 122 is directed”. There was “no separate licensing or permitting decision that will address the specific air quality impacts of [Gladman’s] proposed development.”
“As Mr Moules and Dr Bowes submitted, the Air Quality Directive and the 2010 regulations are not a licensing or permitting regime of that kind. The Air Quality Directive is “programmatic in nature”. It imposes obligations on the state to comply with the relevant limit values within the shortest possible time, and by the means chosen to achieve compliance. In the United Kingdom the approach adopted by the Government is to promulgate an air quality plan for the relevant zones or agglomerations. Paragraph 122 of the NPPF, properly understood, did not contemplate any assumption being made about that process. It does not require a planning decision-maker to assume that the Government will have acted expeditiously to take the action required to discharge its own responsibilities under the legislative scheme for air quality.”
Proposed mitigation measures
Gladman submitted that “the inspector, in finding Gladman’s financial contribution to mitigation was unlikely to be effective, failed to grapple properly with its approach to mitigation, which was based on DEFRA’s “damage cost analysis”.”
The first instance judgment goes into more detail as to the mitigation measures. They amounted to a financial contribution of £311,018.80. There was no detail as to how the money was to be effectively spent.
The judge at first instance referred to Gladman’s expert witness’s own acknowledgement as to “the difficulty in predicting the effectiveness of the mitigation. The likely effectiveness of that mitigation was a “live issue” at the inquiry. The inspector had to reach his own conclusion on the matter, exercising his planning judgment – as did the Secretary of State in Shirley and the inspector in Secretary of State for Communities and Local Government v Wealden District Council  EWCA Civ 39 (paragraph 50 of the judgment). In paragraphs 104 to 106 of his decision letter he had reached a conclusion on the evidence that he was entitled to reach, and he had explained what was wrong with the proposed mitigation. As the judge put it, the “contributions had not been shown to translate into actual measures likely to reduce the use of private petrol and diesel vehicles and hence reduce the forecast NO2 emissions …””
The Court of Appeal agreed:
“It was not the methodology that was in contention. It was the likely effectiveness of the financial contributions themselves when translated into practical measures. The thrust of the objection by CPRE Kent, which the inspector accepted, was that it could not be demonstrated that the financial contributions would produce practical mitigation sufficient to overcome the likely effects of the development on local air quality.
This was a classic matter of planning judgment. The inspector did not have to accept that because an appropriate arithmetical method had been used in calculating the level of financial contributions, the mitigation measures themselves would be effective. It was for him to consider, in the exercise of his planning judgment, whether the mitigation would be effective. He was not confident that it would. Disagreement with this conclusion is not a proper basis for complaint in proceedings such as these.”
Lastly, should the inspector have imposed a Grampian-style condition of his own volition, to address his concerns, rather than simply dismiss the appeal?
The Court of Appeal disagreed:
“There is no statutory requirement, or principle of law, to the effect that in determining an appeal under section 78 of the 1990 Act, the Secretary of State, or his inspector, must always – and even if entirely unprompted by any of the parties – seek to make an unacceptable proposal acceptable by imposing a planning condition in “Grampian” form to prevent the development going ahead until a particular objection to it is overcome.
Nor is there any statement of national planning policy creating such a requirement.”
An interesting case, the relevance of which goes beyond air quality matters:
⁃ a decision maker, in determining what is the baseline position, is not required to assume that targets in Government policy will actually be met.
⁃ a decision maker can of course decide not to have regard to proposed mitigation measures if the decision maker is not confident that they will achieve their intended objective.
Finally, a procedural point. CPRE Kent had been a rule 6 party at the inquiry. They chose to become an interested party in the litigation, given their particular interest in the issues and, quite possibly, a concern that the Secretary of State might not hold the position in terms of validity of the inspector’s approach (after all, the local planning authority was not represented at either stage of the proceedings). It’s a brave step for an NGO – unlikely to recover its costs for participating and indeed at risk of an adverse costs award in some circumstances – but no doubt here vindicated.