Money’s Too Tight: The One About Viability

The Valentine Brothers original version obviously, rather than Simply Red.

In fact, pardon me if this post feels a little like the extended 12” remix, but I wanted to work out for myself some of the long-running arguments that are out there as to the role of financial viability testing in planning.

The subject has been made topical by the “viability in relation to green belt release” annex to the consultation draft revised National Planning Policy Framework, as well as Labour’s proposals in relation to “no hope value” CPOs (mentioned in my 21 July 2024 blog post Hope/No Hope). But the discussion is vital anyway in present circumstances where, in order to deliver and/or fund necessary housing development (and indeed many other forms of development), the state largely relies on the private sector, which is inevitably motivated by profit.

It’s difficult to have a sensible discussion without trying to establish some basic principles. So here goes…

We want an acceptable environment around us: sufficient social housing for those who need it, health and education facilities, biodiversity and open space, good public transport, footpaths and cycleways.

We no longer seem prepared to pay for this fully through direct taxation or indeed charitable benevolence.

Instead, over the last 25 years or so of my career, Government policy has increasingly supported the indirect taxation of development activity (primarily by way of section 106 agreement planning obligations and the community infrastructure levy) to help pay for all these good things, even where it is not the development itself that is leading to the need for the particular infrastructure or facilities (and before you raise it, regulation 122 of the Community Infrastructure Levy Regulations only provides cover against the most egregious of LPA “asks”).

Affordable housing is the classic example of what I mean by indirect taxation. As I set out in my 28 May 2017 blog post Affordable Housing Tax:

In requiring the developers of private housing schemes to contribute to the provision of affordable housing, the planning system has become a tax collection system, and an inefficient, opaque one at that.

[…]

“The provision of market housing does not in any way increase the need for affordable housing, indeed over time by increasing supply if anything it should decrease it. It may be said that mixed use communities can only be achieved by requiring the inclusion of affordable housing within market residential schemes, but that in itself does not justify the state putting the cost of the affordable housing at the door of the developer.”

[Think how odd it would be for car makers to be required to sell a large proportion of their product at below market rate, in fact at a loss – or indeed for supermarket chains to be so required – nice as that thought might be. Why is housing so different?]

Add to this the much-reduced availability of grant funding.

You see the same indirect taxation in the case, for instance, of schools: whether or not a particular housing scheme is built, children need schooling somewhere in the country. And yet the cost of delivery of new schools is regularly met in large part by way of contributions and obligations extracted via the planning system.

Most recently, the 10% biodiversity net gain requirement. Laudable – but another indirect tax on development via the planning system.

All of this appears to be implicitly accepted as in the public interest, presumably on the basis that:

  • It’s a victimless crime – assumed to be paid for out of (a) the receipts the land-owner receives for sale of the land, as long as the requirements are flagged sufficiently far in advance that they can be built into the contractual arrangements between the land owner and developer and can generally manage the land-owner’s expectations; and/or (2) the developer’s profit (for whom the return needs to outweigh the risk).
  • It sugars the pill for local communities, which is important given the general antipathy towards development (or maybe that’s just my village’s Facebook group….).
  • It would be politically impractical to meet these costs via the national public purse.

This is all fine if the numbers work out – if the contributions required by policy can be paid for, whilst leaving enough money in the project to ensure that it will still proceed i.e. that between them:

  • The land-owner receives enough money to persuade them to sell the land, rather than hold onto it or sell it for other purposes
  • The developer concludes that there is a sufficient slice of profit left to make it worthwhile as a business proposition to proceed to carry out the development, having regard to the availability, and likely cost over time, of development finance and/or of funding partners, and the range of development risks such as the costs of construction, other regulatory costs and uncertainties over time, unforeseen problems along the way and as to the financial return likely to be achieved at the end of it all
  • The purchaser or renter of the home is protected by operation of market forces against the cost simply being passed onto them.

What happens when the contributions requested in return for planning permission don’t work out? That is where the viability appraisal process comes in.

The Planning Practice Guidance https://www.gov.uk/guidance/viability advises that local plans “should set out the contributions expected from development. This should include setting out the levels and types of affordable housing provision required, along with other infrastructure (such as that needed for education, health, transport, flood and water management, green and digital infrastructure).

These policy requirements should be informed by evidence of infrastructure and affordable housing need, and a proportionate assessment of viability that takes into account all relevant policies, and local and national standards, including the cost implications of the Community Infrastructure Levy (CIL) and section 106. Policy requirements should be clear so that they can be accurately accounted for in the price paid for land.”

Obviously, it is sensible for local plans to give as much certainty as possible as to what contributions will be sought from developers and thereby to serve to dampen the expectations of land-owners. But the reality is that viability assessments at the local plan making stage are inevitably broad-brush, often based on typical development typologies. They become out of date. There is often insufficient push-back from developers – either because they do not yet have a relevant project in mind at the time the plan is being consulted upon and examined, or because they are nervous about losing the potential allocation of their site for development. And so policy aspirations are set high.

When an application for planning permission comes forward for development which is in accordance with the local plan or otherwise in the public interest, save that the full range of policy requirements cannot be met without rendering the project unachievable, what happens then?

To quote paragraph 58 of the current NPPF (which paragraph is not proposed to be amended in the consultation draft):

Where up-to-date policies have set out the contributions expected from development, planning applications that comply with them should be assumed to be viable. It is up to the applicant to demonstrate whether particular circumstances justify the need for a viability assessment at the application stage. The weight to be given to a viability assessment is a matter for the decision maker, having regard to all the circumstances in the case, including whether the plan and the viability evidence underpinning it is up to date, and any change in site circumstances since the plan was brought into force. All viability assessments, including any undertaken at the plan-making stage, should reflect the recommended approach in national planning guidance, including standardised inputs, and should be made publicly available.”

A decision-maker can decide to grant planning permission without commitments on the part of the developer to all of the contributions normally required by policy, if the developer has justified that the development would otherwise be unviable  demonstrating that by way of a viability assessment carried out in accordance with the methodology set out in the Government’s Planning Practice Guidance.

The guidance these days is tighter than it was, although there is still much room for debate and disagreement as between the developer’s surveyor and the surveyor engaged by the local planning authority (invariably at the developer’s cost). There is much public discussion about “benchmark land value” in this exercise, i.e. in estimating the costs of carrying out the development, what cost should be assumed for the land itself? But that is by no means the only factor when it comes to viability. In many situations, development may be unviable even assuming little or no land value, simply because of, for instance, the large infrastructure costs which would need to be met by the developer, financing costs and/or low value of the completed development – and this is all made more complicated in relation to longer-term projects, where an internal rate of return model may be more appropriate. But for I’m going to focus here on the land value issue.

It’s been clear for many years that the benchmark land value to be plugged into the viability appraisal is not the price that the developer has actually paid for the land – see for example Parkhurst Road Limited v Secretary of State (Holgate J, 27 April 2018). Instead, the usual approach, according to the Planning Practice Guidance, should be EUV+, i.e. to take the existing use value (ignoring, for example, any development potential) and then to apply a premium. Oh dear, one of the big questions is how big should that premium be? The guidance says this:

The premium should provide a reasonable incentive for a land owner to bring forward land for development while allowing a sufficient contribution to fully comply with policy requirements.

Plan makers should establish a reasonable premium to the landowner for the purpose of assessing the viability of their plan. This will be an iterative process informed by professional judgement and must be based upon the best available evidence informed by cross sector collaboration. Market evidence can include benchmark land values from other viability assessments. Land transactions can be used but only as a cross check to the other evidence. Any data used should reasonably identify any adjustments necessary to reflect the cost of policy compliance (including for affordable housing), or differences in the quality of land, site scale, market performance of different building use types and reasonable expectations of local landowners. Policy compliance means that the development complies fully with up to date plan policies including any policy requirements for contributions towards affordable housing requirements at the relevant levels set out in the plan. A decision maker can give appropriate weight to emerging policies. Local authorities can request data on the price paid for land (or the price expected to be paid through an option or promotion agreement).”

There are some examples of where a premium of many times the EUV has been found to be appropriate. For example:

  • Long Marston, Pebworth (APP/H1840/S/16/3158916, 16 May 2017): In the particular circumstances there, the inspector found that a premium of around 15 times the EUV was appropriate. (The appeal pre-dated the PPG but turned on a similar earlier concept of EUV+).
  • Parkhurst Road, Islington (APP/V5570/W/16/3151698, 19 June 2017): The appeal site was a former Territorial Army barracks in north London. The inspector found that the EUV was £2.4m but EUV+ was £6.75m (still less than the developer had paid for the site) . In the subsequent High Court challenge I refer to above, Holgate J the judge said this about EUV+: “Some adherents appear to be promoting a formulaic application of ‘EUV plus.’ But as the RICS advised its members in its 2012 Guidance Note, an uplift of between 10 and 40% on existing use value is an arbitrary number and the method does not reflect the workings of the market…”.
  • Old Oak and Park Royal local plan examination in public, Inspector’s Interim Finding on Viability (10 September 2019) : In relation to the Car Giant site forming most of the plan area, a very large brownfield site in north London, the inspector found the EUV to be £5.3m. The Old Oak and Park Royal Development Corporation’s surveyors suggested a premium of 20% would be appropriate. The inspector found that the characteristics of the site, including in particular Car Giant’s significant relocation costs, would justify a far larger premium, concluding that EUV+ was “clearly in excess of £240m”.

On the one hand, this sort of exercise may be seen as sensible in that it is seeking to get to the number that can be taken to be the tipping point at which a land-owner might rationally choose to sell rather than stay put. But of course, on the other, the potential range is so wide that the outcome of the process can be very unpredictable and result in high numbers – true but what is the alternative that enables or persuades land-owners (who are often in fact reluctant to sell in any event – their heads only turned by a financial offer they can’t refuse) actually to make their land available, unless there is a market intervention such as compulsory purchase (but (1) that obviously needs careful justification and (2) a careful look is needed at how the compulsory purchase compensation principles work), some targeted form of tax credits or in fact (never thought I’d say this and I still only think this works in theory rather than reality) community land auctions?

I’ll throw in another complication here: the figures in a viability appraisal are in part theoretical. We know that the actual price paid for the land isn’t plugged into the equation. The actual price may have been far higher, meaning that the developer is always going to be struggling to get the project off the ground. It may have been lower – the land may have been held for generations, with a very low current book value, or be held by a body that is prepared to make the land available at an under-value. Similarly as to the efficiencies in construction or financing that a particular developer may be able to bring to the process (versus the greater challenges in this respect an SME may have than a national housebuilder), or preparedness to take a reduced profit, or even a loss with this development, given wider objectives. If we want an objective scrutiny of the financial position, not tied to a particular developer who may of course in any event sell on, this is probably right. But it does mean that there may be two processes underway: (1) what is the objective agreed assessment as to the viability of the project and (2) is this developer for some reason prepared to offer more than what is objectively viable on the basis of that agreed assessment?

Can we at least agree that this subject is not easy, either in macro policy terms or in its detailed application? And that whilst it may be tempting for some to say “get rid of viability testing, development must simply meet all policy requirements”, can we agree that this is unrealistic without (1) up to date realistic local plan policies (unlikely) or (2) an acknowledgement that effect would less development coming forward, particularly in the areas where it is most needed?

At which point I turn to the Government’s proposals.

A new annex is included in its draft revised NPPF, headed “viability in relation to green belt release”, but one of the only two new elements of the proposed approach set out in that annex is what I have put in bold in the following paragraph:

“To determine land value for a viability assessment, a benchmark land value should be established on the basis of the existing use value (EUV) of the land, plus a reasonable and proportionate premium for the landowner. For the purposes of plan-making and decision- taking, it is considered that a benchmark land value of [xxxx] allows an appropriate premium for landowners. Local planning authorities should set benchmark land values informed by this, and by local material considerations.

These are the key associated paragraphs in the consultation document which explain the “[xxxx]“:

29. Approaches that government could take to ensure the appropriate use of viability include the following options.

a. Government sets benchmark land values to be used in viability assessments. When assessing whether a scheme is viable, it is necessary to make an allowance for the amount of money to be paid to the landowner. This should currently be set by the local planning authority. Government could set indicative benchmark land values for land released from the Green Belt through national policy, to inform the policies developed on benchmark land value by local planning authorities. These should be set at a fair level, allowing for a premium above the existing use, but reflecting the need for policy delivery against the golden rules. Different approaches to benchmark land value are likely to be appropriate for agricultural land, and for previously developed land.

b. Government sets policy parameters so that where land transacts at a price above benchmark land value, policy requirements should be assumed to be viable. As part of this approach, Government sets out that if land has been sold (or optioned) at a price which exceeds the nationally set benchmark land value, viability negotiation should not be undertaken. Under this approach, the planning authority should not be seeking higher contributions (e.g. 60 per cent affordable housing), but equally the developer should not be seeking lower contributions (e.g. 40 per cent affordable housing), as this would represent a transfer of value from the public to private landholders. Therefore, planning permissions would not generally be granted for proposed developments where land transacts above benchmark land value, and cannot comply with policy.

c. Government sets out that where development proposals comply with benchmark land value requirements, and a viability negotiation to reduce policy delivery occurs, a late-stage review should be undertaken. This would build on the approach to be taken by the Greater London Authority, and tests actual costs and revenues against the assumptions made in the initial viability assessment. If, for example, the development is more viable than initially assumed, due to a rise in house prices, then additional contributions can be secured, to bring the development closer to or up to policy compliance.

30. Benchmark land values are generally set as a multiple of agricultural use values, which are typically in the region of £20,000 – £25,000 per hectare, and as a percentage uplift on non-agricultural brownfield use values. We also note that views of appropriate premia above existing use values vary: for agricultural land, a recent academic paper[footnote 6 ] suggested BLVs of three times existing use value; the Letwin Review of Build Out [footnote 7] suggested ten times existing use value; Lichfields found that local planning authorities set BLVs of between 10- and 40-times existing use value [footnote 8 ]. These BLVs do not necessarily relate to Green Belt land, which is subject to severe restrictions on development, and Government is particularly interested in the impact of setting BLV at the lower end of this spectrum.

31. The Government considers that limited Green Belt release, prioritising grey belt, will provide an excellent opportunity for landowners to sell their land at a fair price, while supporting the development of affordable housing, infrastructure and access to nature. Where such land is not brought forward for development on a voluntary basis, the Government is considering how bodies such as local planning authorities, combined authorities, and Homes England could take a proactive role in the assembly of the land to help bring forward policy compliant schemes, supported where necessary by compulsory purchase powers, with compensation being assessed under the statutory no-scheme principle rules set out in Part 2 of the Land Compensation Act 1961.

32. In such cases, these rules would operate to exclude any increases or decreases in value of land caused by the compulsory purchase scheme, or by the prospect of it, and valuation of the prospect of planning permission (‘hope value’) for alternative development would reflect the golden rules outlined in the NPPF. Use of compulsory purchase powers may also include use of directions to secure ‘no hope value’ compensation where appropriate and justified in the public interest. A comprehensive justification for a no hope value direction (e.g., which includes a high proportion of vital affordable housing being delivered) will strengthen the argument that a direction is in the public interest. This would align with the Government’s aspiration for high levels of affordable housing to be delivered on these sites.”

That emboldening is in the document itself. So, we are looking at a potential approach where, for the purposes of viability appraisals on green belt sites (where there will be the policy requirement of “at least 50% affordable housing, with an appropriate proportion being Social Rent”) the Government caps the potential premium on existing use value more towards 3x than between 10 and 40x. That would provide some clarity, and would in the long term (beyond the gestation of current promotion agreements, option agreements and the like which will have baked in potentially higher figures) dampen land-owner expectations. However, the outcome may be that some potential sites are not released by land-owners because the resultant return is simply not worth it for them – they would prefer to hold the land for its current purposes, or make it available for non-residential development which may result in a higher premium, or wait for a more liberal policy climate to open up in future decades – and in the meantime battle against any threat of compulsory purchase. This is particularly the case at the moment where, as another risk to factor in, there is a dearth of registered providers even willing to build-out or take on the affordable housing element in some areas. The impacts of the approach will also particularly be felt in areas with weaker housing markets, where 50% affordable housing (including, importantly, an as yet unknown proportion of socially rented housing) will be a big drag on viability – and those areas are often the same areas where housing targets will be going up most steeply under the proposed revised standard method.

This proposal to set a blanket cap on existing use values really does need to be stress-tested during the current consultation period. I would particularly urge those with market knowledge to review those papers referred to in paragraph 30 quoted above – I have included the links. For instance, I couldn’t immediately see the workings for 3x EUV in that first paper.

The other change which that annex proposes is in its last line:

Where a viability negotiation to reduce policy delivery has been undertaken, a late-stage review should be conducted to assess whether further contributions are required.”

Remember, this annex only relates to development in the green belt, but its effect is to advise that where policy compliant development (eg 50% affordable housing), cannot be delivered due to lack of viability, a provision should be included in the section 106 agreement, providing for a review at a later stage, or at later stages, of the development to see whether that is still the position or whether the project is now able to afford to meet those policy commitments, in full or at least in part. Obviously, in London, this has been relatively standard for some time (see eg the Mayor’s May 2023 draft development viability London Plan Guidance), and is often used in negotiations across the country. But the negotiation is never straight-forward, even in London where the provisions are so standardised. What should be the triggers; what is opened up on the review (and is it just a review of what has been developed so far or is it also an updated estimate of what has not yet been built); what proportion of the surplus should be retained by the developer so as to provide any incentive; what should be the cap on what can be secured on review (vital, as all of this is very sensitive to funders and lenders); what should any surplus be applied towards and what say does the developer has in this?

The threat of compulsory purchase in the case of recalcitrant landowners? That takes us back to the issues I covered in that Hope/No Hope blog post. In some cases, perhaps so, but of course as I have mentioned above, even acquisition of land at existing use value (which obviously would lead to protracted wrangling in many cases) does not always guarantee project viability.

Apologies for all that. Something got me started.

Simon Ricketts, 18 August 2024

Personal views, et cetera

Plan-Making, Or, The Olympic Sport Of Trying To Hit A Slowly Moving Target

Imagine working for a local authority, trying to arrive at a strategy for bringing forward a local plan against a backdrop that is constantly uncertain and evolving in at least four dimensions:

  • National policy as to plan-making
  • National policy as to the assessment of local housing need (the so called “standard method”)
  • Legislative reform to the plan-making system
  • Politics

Given the shifting nature of the various transitional arrangements, deadlines and targets, the theme of this post isn’t so much the substantive policies and methodological nuances but rather the bigger “real world” question: How does the Government minimise the likelihood that local authority councillors will shrug their shoulders, when advised of the Government’s latest direction of travel and the potential difficulties which authorities without an adequate or up to date plan may face, and say “we’ve heard it all before and will believe it when we see it…”?

After all, given that plan-making is meant to be the very basis of the planning system, the system is in utter crisis. Lichfields’ research paper Timed Out? in July 2023 for the LPDF identified that without immediate action from the Government, over 75% of LPAs in England would have an out-of-date plan for housing delivery by the end of 2025.

The current December 2023 version of the NPPF took a year to be published by the last Government following a consultation draft in December 2022. Authorities, particularly green belt authorities, had every reason to delay their plan-making, whether to avoid abortive work or to take advantage of the flagged likelihood that their local housing targets would become (even more) advisory rather than mandatory. The final version was originally intended to be published in Spring 2023! The final version of the document included transitional arrangements whereby it would only apply to plans which had not reached regulation 19 pre-submission draft stage by 19 March 2024.

As an overlay to that uncertainty during 2023, there was of course the prospect of a whole new system for preparing local plans, the framework for which is set out in the Levelling-up and Regeneration Act 2023 which received Royal Assent in October 2023. The previous Government’s July 2023 consultation on the implementation of the new local plans system repeated a statement in an earlier December 2022 consultation document, that:

plan makers will have until 30 June 2025 to submit their local plans, neighbourhood plans, minerals and waste plans, and spatial development strategies for independent examination under the existing legal framework…[and]…all independent examinations of local plans, minerals and waste plans and spatial development strategies must be concluded, with plans adopted, by 31 December 2026. These plans will be examined under the current legislation.

we are setting this out now to provide planning authorities with as much notice as possible of these dates.

We confirm our intention to have in place the regulations, policy and guidance by autumn 2024 to enable the preparation of the first new-style local plans and minerals and waste plans. As set out above, this deadline is contingent upon Royal Assent of the Levelling Up and Regeneration Bill, as well as Parliamentary approval of the relevant regulations.”

And as an overlay to that overlay, there was the prospect of changes to the standard method for assessing housing need, which potentially would have significant implications for many authorities. The current method is still based on 2014-based household projections with, since 2020, the 35% uplift in the 20 largest urban areas. Ostensibly a technical exercise but in reality of course a massive political hot potato, those prospective changes have been continually delayed. The position of the previous Government was as per its 19 December 2023 statement:

We note the comments received around the continued use of 2014-based household projections within the standard method for assessing housing need, and the calls for more up-to-date projections to be used. Through the consultation we explained that the use of this data provides stability, consistency, and certainty to local planning authorities. Nevertheless, we committed to review the approach to assessing housing need once we have considered the implications of new 2021 Census based household projections, planned to be published by the Office for National Statistics in 2024. The Office for National Statistics recently confirmed that the next set of household projections are now planned for release in 2025. As with all policies we keep the standard method under review, and we intend to review the approach to assessing housing needs once this data is available.”

Clear as mud as to timescales.

So, imagine you’re a councillor with the objective of resisting additional housing in your area, with all this as the backdrop. What has been the incentive to bring forward your plan quickly? Yes you won’t have an up to date plan and may find that you’re facing applications for planning permission on unallocated sites, and subsequent appeals – with applicants relying on the NPPF’s tilted balance – but (1) appeal decisions have regularly demonstrated that the tilted balance is not particularly tilted, it’s certainly no cliff-edge, (2) hey you can always blame the Planning Inspectorate or the Secretary of State and (3) the risk of central Government intervention in your plan-making has always seemed somewhat of a bluff. Add in the large cost of preparing a plan and the flak you may receive. Hmm.

But new government, new direction. How likely is it that your thinking is now going to change in the light of last month’s announcements?

Looking at the draft revised NPPF, the local housing need figure determined via the standard method will no longer just be “an advisory starting point” and there will no longer be a get-out for green belt authorities: where “an authority cannot meet its identified need for housing, commercial or other development through other means….authorities should review green belt boundaries and propose alterations to meet those needs in full, unless the review provides clear evidence that such alterations would fundamentally undermine the function of the Green Belt across the area of the plan as a whole”. The draft replacement standard method would result in a higher local housing need figure for most authorities. In the absence of an up to date plan, there is a greater prospect of planning permission being secured on unallocated land, including on Green Belt sites that can be shown to fall within the “grey belt” definition.

There is a narrow window for authorities to make sufficient progress with their emerging plans so as to fall within the existing NPPF, with numbers guided by the current standard model. Within a month of the publication of the final version of the plan (so, let’s guess, by January 2025) either (1) the local plan must have been submitted for examination or (2) (if the emerging annual housing requirement is no more than 200 dwellings behind what the new policy figures would dictate) the plan must have at least reached Regulation 19 pre-submission consultation. In the case of (1), if the plan’s annual housing requirement is more than 200 dwellings behind what the new policy figures would dictate, the authoritywill be expected to commence plan-making in the new plan-making system at the earliest opportunity to address the shortfall in housing need”. In the case of (2) the plan will need to proceed to examination within a maximum of 18 months from the publication date of the revised NPPF, so by, let’s guess, June 2026.

The Secretary of State has made it clear in her 31 July 2024 letter to local authorities that “where there is a significant gap between the plan and the new local housing need figure, we will expect authorities to begin a plan immediately in the new system” and that “local authorities will be expected to make every effort to allocate land in line with their housing need as per the standard method, noting it is possible to justify a lower housing requirement than the figure the method sets on the basis of local constraints on land and delivery, such as flood risk. Any such justification will need to be evidenced and explained through consultation and examination, and local authorities that cannot meet their development needs will have to demonstrate how they have worked with other nearby authorities to share that unmet need.”

The Secretary of State’s letter is also interesting for the warning:

I will not hesitate to use my powers of intervention should it be necessary to drive progress – including taking over an authority’s plan making directly.”

I suspect she means it (and alternative options for revisions to the policy criteria for local plan intervention are set out in chapter 10 of the 30 July 2024 consultation document).

It will be interesting to see the extent to which all of this influences behaviour. Well-known local plans programme officer Helen Wilson subsequently suggested on LinkedIn that the Planning Inspectorate is “expecting over 120 plans to be submitted over the coming months”. That would be a surprisingly swift response to the emerging announcements.

Will many authorities really seek to proceed quickly to take advantage of the transitional arrangements? Unless they are already well-advanced, it may be challenging unless work is accelerated now during the consultation period itself and are many authorities going to risk that potentially abortive expenditure ahead of the outcome of the current consultation process? I suspect the temptation for many will be to wait it out. And the door has been smartly closed on ideas of rushing forward with a “quick and dirty” version to regulation 19 or submission, given the planning minister’s letter to the Planning Inspectorate, reversing the previous Government’s “expectation that Inspectors should operate “pragmatically” during local plan examinations to allow deficient plans to be ‘fixed’ at examination. This has gone too far and has perversely led to years of delays to local plan examinations without a guarantee that the plans will ever be found sound, or that the local authorities will take the decisions necessary to get them over the line. This has to end.

[…]

Pragmatism should be used only where it is likely a plan is capable of being found sound with limited additional work to address soundness issues. Any pauses to undertake additional work should usually take no more than six months overall. Pragmatism should not be used to address fundamental issues with the soundness of a plan, which would be likely to require pausing or delaying the examination process for more than six months overall. Local authorities should provide regular progress updates of their work to the Planning Inspector during any agreed pause.

Any extensions to the six-month pause should only be allowed at Inspectors’ discretion to deliver adopted local plans under the current system. In agreeing extensions, the Inspector should be confident that the local authority can complete any outstanding work in the agreed timeframe.

This new approach will apply to all plans with immediate effect. Existing pauses already agreed by an Inspector should remain in place unless the Inspector considers there is insufficient progress being made.

This will enable Inspectors to focus their valuable time and resources on those plans that are capable of being found sound and can be adopted quickly to provide certainty to local communities. Where a plan is unable to be found sound, the local authority will need to work in partnership with their local community to bring forward a new plan.”

The Planning Inspectorate’s chief executive responded in support but warned:

It is inescapable that this fresh approach will lead to an increase in local plans being recommended for withdrawal from examination or being found unsound. But that should not be seen as any sort of failure of pragmatism or of the system more generally.”

What about the new local plans system that had been proposed and those long-established transition deadlines – June 2025 for submission, December 2026 for adoption? Chapter 12 of the 30 July 2024 consultation document addresses this, in part, in that the submission deadline is now pushed back until December 2026. Whilst, as set out in the consultation document, this has “the potential to benefit plans which are at earlier stages of preparation, and providing more time for local planning authorities to reflect on the revised NPPF and progress positive plans that will stand up to scrutiny”, I do have some concern that for a cynic within local government it is just another reinforcement of existing assumptions that these sorts of deadlines always end up being pushed back!

In my view the delay was inevitable. We have seen nothing further yet in relation to the “regulations, policy and guidance” promised by the previous Government although no doubt before long we will have consultation on the proposed national development management policies which will replace at least some of what is currently the subject of local plan making, leaving them to focus on numbers (within the narrower constraints of the revised NPPF when it is finalised), spatial planning and allocating specific sites for development. Will some of the more formal procedural changes set out in LURA be brought into effect or on reflection can equivalent improvements (for instance the early checks as to likely soundness) be made simply by policy rather than secondary legislation? And will we ever see LURA’s environmental outcomes reports system refined and brought into effect to replace and perhaps streamline the current strategic environmental assessment of plans? I don’t know the answer to these questions.

Finally, possibly beyond this round of local plans, we will of course be seeing the reintroduction of a formal strategic tier of plan-making but before that we have the proposed return of the duty to cooperate within the draft revised NPPF, and the announcement in chapter 3 of the consultation paper that the Government will “work in concert with Mayoral Combined Authorities to explore existing powers to develop [a spatial development strategy], which will not rely on primary legislation, and so allow us to get a head start. We intend to identify priority groupings of other authorities where strategic planning – and in particular the sharing of housing need requirements – would provide particular benefits, setting a clear expectation of cooperation that we would help to structure and support this, and to use powers of intervention where necessary”.

How can the Government seek to achieve the swift changes and “universal coverage” in plan making it is looking for, against all of this background? In my view only by keeping up the present pace, relentlessly emphasising the main themes in a way that is meaningful outside the technocratic world of planning professionals, providing local government with the necessary resources and tools (including advice where necessary) and continuing to make sure that all the detailed background preparation is in place.

Shame town and country planning isn’t any longer an Olympic sport isn’t it? It would be nice if we were in contention for that one.

Simon Ricketts, 11 August 2024

Personal views, et cetera

50 Shades Of Grey Belt

Q: How do you eat an elephant?

A: One bite at a time.

So as well with the Government’s proposed reforms to the planning system, announced on 30 and 31 July 2024.

I reckon the whole elephant looks like this:

Gulp.

Maybe even this will be more than you or I can chew but for this blog post I am only going to focus on the proposed changes to green belt policy. Much of the text which follows is by my Town Legal colleagues Susannah Herbert and Aline Hyde to whom much thanks…

Green Belt – Plan Making

Local planning authorities will be required “to undertake a review where an authority cannot meet its identified housing, commercial or other need without altering Green Belt boundaries.” (This is in addition to removing the December 2023 additions which set out the circumstances in which local planning authorities would not be required to undertake a Green Belt review).  The amendment defines “exceptional circumstances” to “include instances where an authority cannot meet its identified need for housing, commercial or other development through other means”.

A sequential test is proposed, to guide changes to Green Belt boundaries through local plans – “This will ask authorities to give first consideration to PDL [previously developed land] within the Green Belt, before moving on to other grey belt sites, and finally to higher performing Green Belt sites where these can be made sustainable. …, land that is safeguarded by existing environmental designations, for example National Parks, National Landscapes and Sites of Special Scientific Interest, will maintain its protections.

18. The aim of this approach is to ensure that low quality Green Belt is identified first, while not restricting development of specific opportunities which could be made more sustainable (for example, on land around train stations). This is in recognition that not all PDL or ‘Grey Belt’ will be in the most suitable or sustainable location for development. As such, it is right that local planning authorities are empowered to make decisions that best support the development needs and sustainability objectives of their area through the plan-making process. There is clear expectation that local planning authorities should seek to meet their development needs in full. However, we remain clear that the release of land should not be supported where doing so would fundamentally undermine the function of the Green Belt across the area of the plan as a whole. We propose changes to paragraph 147 of the NPPF to achieve this approach.”

The proposed wording is as follows:

142 (previously 144) (comparison to Sept 2023) Once established, Green Belt boundaries should only be altered where exceptional circumstances are fully evidenced and justified, through the preparation or updating of plans. Exceptional circumstances include, but are not limited to, instances where an authority cannot meet its identified need for housing, commercial or other development through other means. In these circumstances authorities should review Green Belt boundaries and propose alterations to meet these needs in full, unless the review provides clear evidence that such alterations would fundamentally undermine the function of the Green Belt across the area of the plan as a whole. Strategic policies should establish the need for any changes to Green Belt boundaries, having regard to their intended permanence in the long term, so they can endure beyond the plan period. Where a need for changes to Green Belt boundaries has been established through strategic policies, detailed amendments to those boundaries may be made through non- strategic policies, including neighbourhood plans.

144.(previously 146)  When drawing up or reviewing Green Belt boundaries, the need to promote sustainable patterns of development should be taken into account. Strategic policy- making authorities should consider the consequences for sustainable development of channelling development towards urban areas inside the Green Belt boundary, towards towns and villages inset within the Green Belt or towards locations beyond the outer Green Belt boundary. Where it has been concluded that it is necessary to release Green Belt land for development, plans should give first consideration to previously-developed land in sustainable locations, then consider grey belt land in sustainable locations which is not already previously-developed, and only then consider other sustainable Green Belt locations. They should also set out ways in which the impact of removing land from the Green Belt can be offset through compensatory improvements to the environmental quality and accessibility of remaining Green Belt land.

Grey belt

Grey belt will be defined (in the glossary at Annex 2 to the NPPF) as follows:

“Grey belt: For the purposes of Plan-making and decision-making, grey belt is defined as land in the Green Belt comprising Previously Developed Land and any other parcels and/or areas of Green Belt land that make a limited contribution to the five Green Belt purposes (as defined in para 140 of this Framework) but excluding those areas or assets of particular importance listed in footnote 7 of this Framework (other than land designated as Green Belt).”

The Government is  “interested in whether further support is needed to assist authorities in judging whether land makes a limited contribution to the Green Belt purposes. They propose incorporating the following into the glossary appended to the NPPF:

 Land which makes a limited contribution to the Green Belt purposes will:

  • Not strongly perform against any Green Belt purpose; and
  • Have at least one of the following features:
    i. Land containing substantial built development or which is fully enclosed by built form
    ii. Land which makes no or very little contribution to preventing neighbouring towns from merging into one another
    iii. Land which is dominated by urban land uses, including physical developments
    iv. Land which contributes little to preserving the setting and special character of historic towns

Many local planning authorities will have evidence base documents which assess the effectiveness of parcels of land against the purposes of designating land as Green Belt but these documents do not necessarily observe this draft methodology. The extent to which they will be useful in guiding decision-making, at least in the short term until they can be revisited, is then unclear.

[Comment from me – “limited contribution”: huge room for debate!]

Green Belt Decision Making

The definition of “inappropriate development” is to be significantly restricted. At present in order for development on previously developed land not to be “inappropriate development” (and therefore be subject to the “very special circumstances” test) then (unless it would contribute to meeting an identified affordable housing need) it “must not have a greater impact on the openness of the Green Belt than the existing development”. Draft revised paragraph 151 waters down this test to “would not cause substantial harm to the openness of the Green Belt”.

[Another comment from me – “substantial harm”: huge room for debate, as it is already in the case of proposed development that would contribute to meeting an identified affordable housing need.]

In terms of the Grey Belt concept, the Government proposes to insert a new paragraph in the NPPF which will make clear that, “in instances where a local planning authority cannot demonstrate a 5-year housing land supply or is delivering less than 75% against the Housing Delivery Test, or where there is unmet commercial or other need, development on the Green Belt will not be considered inappropriate when it is on sustainable ‘grey belt’ land, where golden rules for major development are satisfied, and where development would not fundamentally undermine the function of the Green Belt across the area of the plan as a whole.” 

{Comment from me: “unmet commercial or other need“, “fundamentally undermine” – yes you’re there before me.]

This is set out in the new paragraph 152:

“152. In addition to the above, housing, commercial and other development in the Green Belt should not be regarded as inappropriate where:

a. The development would utilise grey belt land in sustainable locations, the contributions set out in paragraph 155 below are provided, and the development would not fundamentally undermine the function of the Green Belt across the area of the plan as a whole; and

b. The local planning authority cannot demonstrate a five year supply of deliverable housing sites (with a buffer, if applicable, as set out in paragraph 76) or where the Housing Delivery Test indicates that the delivery of housing was below 75% of the housing requirement over the previous three years; or there is a demonstrable need for land to be released for development of local, regional or national importance.

c. Development is able to meet the planning policy requirements set out in paragraph 155.”

In terms of development on non-Grey-Belt-Green-Belt, the Government states “Our proposal limits release via this route to grey belt, including PDL — reaffirming our commitment to a plan-led system by maintaining restrictions on the release of wider Green Belt land. It would, as now, be possible for other Green Belt land to be released outside the plan-making process where ‘very special circumstances’ exist, but such cases would remain exceptional.” 

Therefore, in theory, the test of “very special circumstances” for Green Belt development remains unchanged but the existence of Grey Belt and the priority given in policy may make it harder to make the case for development on non-Grey-Belt-Green-Belt (although the emphasis on sustainable locations in the sequential test may also benefit some non-Grey-Belt-Green-Belt locations).

Golden Rules and Viability for Green Belt development

The proposed “Golden Rules” for Green Belt development are set out in a new paragraph 155:

“a. In the case of schemes involving the provision of housing, at least 50% affordable housing [with an appropriate proportion being Social Rent], subject to

viability;

b. Necessary improvements to local or national infrastructure; and

c. The provision of new, or improvements to existing, green spaces that are accessible to the public. Where residential development is involved, the objective should be for new residents to be able to access good quality green spaces within a short walk of their home, whether through onsite provision or through access to offsite spaces.

156. Regarding the provision of green space, development proposals should meet local standards where these exist in local plans, for example local planning policies on access to green space and / or urban greening factors. Where no locally specific  standards exist, development proposals should meet national standards relevant to the development. These include Natural England standards on accessible green space and urban greening factor and Green Flag criteria.”

According to paragraph 155, these will apply “Where major development takes place on land which has been released from the Green Belt through plan preparation or review, or on sites in the Green Belt permitted through development management”.  This refers to major development.  However, paragraph 152 in respect of Grey Belt appears to refer to all potential development on Grey Belt needing to meet these Golden Rules.

The Government considers that “Green Belt land can deliver more affordable housing, infrastructure and environmental contributions, as the value of the land in its existing use is generally low and the Green Belt designation reduces the hope value associated with the prospect of securing planning permission.”  However, it does acknowledge that contributions that can be secured will vary because of varied house prices, abnormal costs, CIL rates or higher existing use values and therefore, they believe that “it is necessary to allow the limited use of viability assessments, where negotiation is genuinely needed for development to come forward, particularly in relation to affordable housing requirements. However, this cannot be an excuse to inflate landowner or developer profits at the expense of the public good”.

Additional guidance on viability considerations for development in the Green Belt is provided in Annex 4.  This is headed “Viability in Relation to Green Belt release”.  It proposes to set a specific benchmark land value.

It also provides that:

“- if land released from Green Belt is transacted above the benchmark land value and cannot deliver policy-compliant development, then planning permission should not be granted, subject to other material considerations;

–  if policy compliant development can be delivered, viability assessment should not be undertaken, irrespective of the price at which land is transacted, and higher levels of affordable housing should not be sought on the grounds of viability;

-Where land is transacted below the benchmark land value but still cannot deliver policy- compliant development, it is up to the applicant to demonstrate whether particular circumstances justify the need for a viability assessment at the application stage. The weight to be given to a viability assessment is a matter for the decision maker, having regard to all the circumstances in the case, including whether the plan and the viability evidence underpinning it is up to date, and any change in site circumstances since the plan was brought into force. Where a viability negotiation to reduce policy delivery has been undertaken, a late-stage review should be conducted to assess whether further contributions are required.”

The consultation notes that there is a spectrum of views of appropriate premia above existing use value ranging between 3 times EUV to 10-40 times EUV.  The Government is “particularly interested in the impact of setting BLV at the lower end of this spectrum.”  

The consultation then immediately goes on to mention the potential for the use of compulsory purchase powers where such land is not brought forward on a voluntary basis.  In this case compensation would be assessed under the statutory no-scheme principle rules set out in Part 2 of the Land Compensation Act 1961 so that any increases or decreases in the value of land caused by the proposed scheme would be ruled out.  The “hope value” for alternative development would reflect the “Golden Rules” set out above.  However, the consultation also states that “Use of compulsory purchase powers may also include use of directions to secure ‘no hope value’ compensation where appropriate and justified in the public interest. A comprehensive justification for a no hope value direction (e.g., which includes a high proportion of vital affordable housing being delivered) will strengthen the argument that a direction is in the public interest. This would align with the Government’s aspiration for high levels of affordable housing to be delivered on these sites.”  

Question 43 asks “Do you have a view on whether the golden rules should apply only to ‘new’ Green Belt release, which occurs following these changes to the NPPF? Are there other transitional arrangements we should consider, including, for example, draft plans at the regulation 19 stage?”.  As drafted, it is not clear when the Golden Rules, or the provisions of Annex 4 will apply.  At present, when land is released from the Green Belt through the plan making system, Green Belt policies no longer apply.  However, the proposed provisions are drafted to apply to “land released from Green Belt” so it will be important to have clear transitional provisions.

The Government’s clear intention expressed through the consultation is that development on Green Belt land is to be held to a higher standard and cannot be permitted without delivering a public benefit in the form of affordable housing, mitigating its own infrastructure impacts, and not undermining the overall strategic function of the designation.

More anon.

Simon Ricketts, 2 August 2024

Personal views, et cetera

Courtesy Vincent van Zalinge via Unsplash

What To Look Out For With This Week’s Promised Draft Revised NPPF

As Zack Simons noted in his LinkedIn post this morning (27 July 2024), there was a detailed story in today’s Times as to what will be in the consultation draft revised NPPF. As Zack summarises:

“-  Tuesday’s the day. 

–   8 week consultation, new NPPF adopted late September. 

–   “Mandatory housing targets” going up by 50%. 

–   That’s a circa 100,000 home national increase to what we now call “local housing need”. Changes include: (i) “toughened” affordability ratios “to take account of how many people might move into an area if housing was cheaper”, and (ii) no use of “previous oversupply of housing to reduce future targets”

  Councils “must review protections for the green belt if they cannot meet their housing need on brownfield land”.”

It’s such a detailed story that depressingly the new Government is obviously continuing the previous Government’s routine practice of trailing imminent significant announcements in the weekend newspapers as unattributed news stories rather than first announcing them in Parliament. Easy spin, easy journalism.

However, the story is totally and deliberately useless as anything that can yet be relied upon.

Here are some of the things I’ll be looking to understand on Tuesday (no surprise it’s Tuesday: that’s when the House of Commons rises for the summer):

  • I assume that the consultation document will be accompanied by a ministerial statement setting out the Government’s policy objectives underlying the document. This is important because, subject to anything specified to the contrary, then the statement and at least the direction of travel demonstrated by the draft is capable of being a material consideration in the determination of planning applications and appeals, with the weight to be given to it a matter for the decision maker. Depending on its potential relevance to current applications and appeals, the decision maker may choose to invite representations as to the implications for the particular application or appeal of what has been published, and, indeed, in some circumstances decisions may be susceptible to legal challenge if such an announcement is “obviously material” and not taken into account. So as much as its content, what will be important will be the tone of the consultation (is the consultation just about detailed wording or is it more open-minded, testing alternative potential approaches?) and of the accompanying statement or statements (particularly, what is said about its immediate intended effect). (And incidentally what we don’t want is for decision-makers to conclude that they need to wait for the final version!)
  • What transitional arrangements, if any, are proposed in relation to emerging and adopted local plans before their policies are to be treated as out of date by virtue of the new policies and targets? After all, we still have a plan-led system.
  • To what extent will the requirement that councils “must review protections for the green belt if they cannot meet their housing need on brownfield land” simply be a peeling back of the December 2023 revision to the NPPF?
  • If local housing targets are going to be increased, does this mean that the consultation process will include (long awaited) proposed revisions to the standard method? If so, how extensive will the changes be? For instance will the 35% uplift remain for England’s 20 largest towns and cities?
  • Is this going to be a “big bang” set of NPPF changes delivering on all that has been previously trailed by Labour, for instance giving some reality to the “grey belt” notion, or (possibly more pragmatically) are we to expect a further set of revisions before long, possibly alongside a proposed initial set of national development management policies and/or alongside guidance to reflect the amended local plans system enabled by the Levelling-up and Regeneration Act?
  • What about anything other than housing?
  • When really will we see the final version? Eight weeks’ consultation takes us to the end of September. To avoid an obvious legal challenge, the Government will need to consider properly the representations received (and there will be many). My bet is that the final version will be October at the earliest (12 October is the 100th day after the election and they will be going very fast to publish by then…). 

Anyone else remember the annual Beaujolais Nouveau races? That used to be how the industry routinely did business development, for better or worse, before we all became amateur journalists. These days its more sober and less fun replacement is the “who can get their NPPF text mark-up up first on LinkedIn” game. But that’s a young person’s sport. I’ll be truffle-hunting instead for the answers to those seven questions. 

Simon Ricketts, 27 July 2024

Personal views, et cetera

Photo by Maja Petric courtesy Unsplash

Hope/No Hope

I know, it’s the hope that kills you. We still await any real detail as to the new government’s proposed reforms of the planning system, despite the King’s Speech and background briefing paper (17 July 2024) and despite newspaper headlines, TV news vox pops and much earnest speculation from many of us. But it’s early days and we should be patient.

In this post I just want to focus on the proposed reforms to compulsory purchase compensation which would in some cases remove the ability of landowners to recover “hope value”.

We know that there will be a Planning and Infrastructure Bill. We do not know anything more as to its likely contents than is set out on pages 17 to 19 of the background briefing document. It is intended to “accelerate housebuilding and infrastructure delivery” by:

  • streamlining the delivery process for critical infrastructure including accelerating upgrades to the national grid and boosting renewable energy, which will benefit local communities, unlock delivery of our 2030 clean power mission and net zero obligations, and secure domestic energy security. We will simplify the consenting process for major infrastructure projects and enable relevant, new and improved National Policy Statements to come forward, establishing a review process that provides the opportunity for them to be updated every five years, giving increased certainty to developers and communities.
  • further reforming compulsory purchase compensation rules to ensure that compensation paid to landowners is fair but not excessive where important social and physical infrastructure and affordable housing are being delivered. The reforms will help unlock more sites for development, enabling more effective land assembly, and in doing so speeding up housebuilding and delivering more affordable housing, supporting the public interest.
  • improving local planning decision making by modernising planning committees.
  • increasing local planning authorities’ capacity, to improve performance and decision making, providing a more predictable service to developers and investors.
  • using development to fund nature recovery where currently both are stalled, unlocking a win-win outcome for the economy and for nature, because we know we can do better than the status quo. Our commitment to the environment is unwavering, which is why the Government will work with nature delivery organisations, stakeholders and the sector over the summer to determine the best way forward. We will only act in legislation where we can confirm to Parliament that the steps we are taking will deliver positive environmental outcomes. Where we can demonstrate this, the Bill will deliver any necessary changes.”

All we are told so far about reform of compulsory purchase compensation is in that second bullet point. But of course, the Levelling-up and Regeneration Act 2023 already goes some way in this direction. Section 190 (“power to require prospects of planning permission to be ignored”) amended the Land Compensation Act 1961 to enable an acquiring authority, when submitting a compulsory purchase order for confirmation, to include a direction that the prospect of planning permission is to be ignored where the underlying project will deliver the provision of a specified number of affordable housing units. If the acquiring authority does not deliver the scheme it promised (including the provision of specific numbers of affordable housing units) within 10 years of the issuing of the original direction, or earlier where there is no realistic prospect that the scheme can be delivered within 10 years, affected landowners may ask the Secretary of State (or the Welsh Ministers for CPOs in Wales) to issue a direction that additional compensation may be paid to them by the local authority. The Act also provides for an equivalent mechanism in relation to some CPOs for NHS purposes or educational purposes. These provisions all came into force on 30 April 2024. (How did a Conservative government arrive at this incursion into the traditional compulsory purchase principle of “equivalence”? See eg my 11 June 2022 blog post Land Value Capture Via CPO which tracks the proposal back to at least the Conservative May 2017 manifesto and for a deeper historical dive into the vexed issue of land value capture I recommend Richard Harwood KC’s brilliant paper delivered to the Compulsory Purchase Association in April 2018, Land Value Capture).

So how might the new government go further? The Labour manifesto simply said “We will take steps to ensure that for specific types of development schemes, landowners are awarded fair compensation rather than inflated prices based on the prospect of planning permission”. It seems to me that the government has deliberately left itself the scope to widen the categories of CPO for which compensation can exclude any element of land value attributable to the prospect of “no scheme world” development. The Planning and Infrastructure Bill would be a straight-forward vehicle to achieve this, by amendment of section 190 of the 2023 Act.

Fairness” is of course a loaded word, going to the heart of the political as well as practical issues which land value capture inevitably gives rise to. To what extent should the state be able to take land without paying the owner what that land is worth in the open market? The nuanced answer to that question probably lies in the wording of the European Convention on Human Rights. The right to respect for private and family life and our home is qualified: “except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.” The right not to be deprived of our possessions is similarly qualified: “except in the public interest and subject to the conditions provided for by law and by the general principles of international law.” And the state has the right to “enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

I can see that the “public interest” argument can be made in relation to affordable housing, the NHS and schools (although of course it is still at root a political decision to fund these projects in part via land value capture rather than by way of public spending paid for by other taxation measures). It will be interesting to see how much further the new government looks to go. New towns? Green Belt? Shrugged shoulders emoji.

Aside from the politics (which are beyond my pay grade), there are the practical issues (which are well within it). How will the spectre of compulsory acquisition of land, for less than what in the real world it is worth, influence the strategies of the participants? Will developers look to work pro-actively with local authorities to explore the potential for using the mechanism to achieve viable projects? Will land owners and promoters be discouraged from early land promotion activity for fear that the value gains they achieve will not be realised by them? Will processes become even more contentious given even higher stakes, particularly where land owners can show that they can bring forward development without the need for exercise for exercise by the local authority of its compulsory purchase powers?

All should be clearer before too long – at least, here’s hoping.

Simon Ricketts, 21 July 2024

Personal views, et cetera

Extract, courtesy Wikipedia, from Shepard Fairey’s Barack Obama 2008 electoral campaign poster, featuring the word “hope“.

Back To Basics

No this isn’t back to basics in a John Major way.

As a sorbet course to be enjoyed as a palate cleanser between the excitement last week of the general election and associated announcements and the excitement of further announcements promised by MHCLG (RIP DLUHC) later this month (plus this Wednesday’s King’s Speech), I thought we might look at a couple of Planning Court rulings this month which provide reminders as to some development management procedural fundamentals.

R (Gurajena) v London Borough of Newham (Deputy High Court Judge Timothy Corner KC, 5 July 2024) – what is the extent of the duty on a local planning authority to (1) notify “adjoining” owners and occupiers of an application and (2) publicise changes made to an application after initial consultation has taken place?

This case concerned a planning permission for works to a terraced house at 5 Silver Birch Gardens, West Ham. The proposed works comprised the construction of a rear extension, rear garden decking and an outbuilding. The grant of permission was challenged by way of judicial review by the next door neighbour at no 6 and another neighbour two houses away at no 8. They had objected to the application on grounds of privacy, overlooking and effect on visual amenity (although no 8 had not been notified of the application by the council, despite having been consulted in 2022 in relation to a proposed dormer loft extension and associated works to the roof).

Once the permission had been issued the claimants had realised that amended drawings had been submitted after their objections had been received, changing the location of the stairs to the decking and replacing a close boarded timber fence between numbers 5 and 6 with the retention of a low picket fence. The claimants argued that there was (1) a breach of Article 15 (5) of the Town and Country Planning (Development Management Procedure) (England) Order 2015 (which requires that “adjoining” owners and occupier be notified) given that no 8 had not been notified (2) a breach of no 8’s legitimate expectation that they would be consulted (having been consulted over the 2022 application) and (3) procedural unfairness by way of the council’s failure to carry out any further consultation despite a material change to the application after the close of the consultation period.

The judge held:

  • “”adjoining” in Article 15 of the DMPO embraces not just properties which are contiguous, but also those which are “very near to” or “lying close to” the application site”…”Whether one site is “very near to” or “lying close to” another requires judgement, and that judgement is one for the local planning authority. The court will interfere with the authority’s judgement only if it is Wednesbury unreasonable, by reason of being a judgement that is so unreasonable that no reasonable authority could have reached it.” The council’s decision in this case could not be impugned as being unreasonable.
  • In my judgement the Second Claimant did not have a legitimate expectation that she would be consulted about the Application. The reality is that a judgement was reached in the case of the 2022 application as to whom to consult, based on the anticipated impact. The Application in the present case was different, being at ground floor level only. The fact that no. 8 was consulted once about a planning application different in nature from the Application does not amount to a practice of consultation sufficiently settled and uniform to amount to a clear, unambiguous and unqualified promise to consult the Second Claimant on a planning application having the nature of the Application.”
  • The application plans were confusing and there was clearly confusion as to what was shown on the original application plans and therefore as to the extent to which the revised plans amounted to changes to the proposals which had previously been consulted upon. The judge found that the first claimant had already made clear in her objections that even a close boarded fence in place of the existing low picket fence would not be acceptable so there was no requirement to re-consult her on that aspect. However, in relation to the stairway to the decking: “I accept that an assessment of whether the outcome for the First Claimant might have been different (i.e. refusal of the Application) had she had the chance to comment on the realignment of the stair must take account of the context, which is the Application as a whole. The Application comprised erection of an extension, with raised timber deck and a new outbuilding on the deck. The stair to the deck was only a part of the Application as a whole. However, in my judgment the position and orientation of the new stair is capable of having an important effect on the privacy of no. 6.”

The permission was quashed on that final ground. Lesson: local planning authorities (and applicants) should be careful to ensure that plans are accurate and comprehensible and that revisions which may have a material effect on potential objectors are adequately publicised.

Lidl Great Britain Limited v East Lindsey District Council & Aldi Stores Limited (Deputy High Court Judge Dan Kolinsky KC, 2 July 2024) – when should applications for planning permission for competing developments be considered at the same planning committee?

For the detail please see my colleague Sophie Bell’s Town Library summary but, very briefly, the case concerned competing planning applications for supermarkets in Horncastle. There would be a significant adverse impact on the town centre if both developments were to proceed. Lidl’s and Aldi’s applications were both due to go to the same committee meeting but there was a hold-up with Aldi’s application and so only Lidl’s application was taken to the committee, where it was approved. The judge held that the council was required to consider the competing merits of the two schemes but failed to do so properly by considering the applications separately: “the need for a comparison was “so obviously material” as to ” require direct consideration“.

This was certainly “store wars” nostalgia for some of us! It is a useful case to help guide what should be done where applications for competing developments have been submitted, although the judge does warn that his “decision is not based on accepting [the] proposition that there is a special category of cases which applies to rivals. I consider that this contention underplays the importance of the particular facts of the case. To make generalisations about categories of cases risks oversimplification. It fails to heed the warnings that there is no “one size fits all” approach (per Sullivan LJ in R (Langley Park School) v Bromley LBC [2010] 1 P&CR 10 at para 52) and that categorisation can be “dangerous” (per Oliver LJ in GLC)… the specific evidential circumstances of this case is one in which there are two proposals before the authority aiming to address what on the evidence has been found to be finite retail capacity (without causing significant adverse impact on the town centre). Those are the uncontentious facts which mean that in the specific circumstances of this case a comparison was necessary (and was not undertaken). Moreover, as I have found, the reason for declining to undertake it reveals a logical gap in the Defendant’s decision making.”

There, I hope you’re suitably refreshed. I’m sure something more substantial will be served up before too long.

Simon Ricketts, 13 July 2024

Personal views, et cetera

Courtesy Sebastian Coman Photography via Unsplash

Not Bad For A First Day At Work

That Rachel Reeves speech today (8 July 2024) is here in full. The key passages in relation to planning reform:

Nowhere is decisive reform needed more urgently than in the case of our planning system.

Planning reform has become a byword for political timidity in the face of vested interests and a graveyard of economic ambition.

Our antiquated planning system leaves too many important projects getting tied up in years and years of red tape before shovels ever get into the ground.

We promised to put planning reform at the centre of our political argument – and we did.

We said we would grasp the nettle of planning reform – and we are doing so.

Today I can tell you that work is underway.

Over the weekend, I met with the Prime Minister and the Deputy Prime Minister to agree the urgent action needed to fix our planning system.

Today, alongside the Deputy Prime Minister, I am taking immediate action to deliver this [political content removed] government’s mission to kickstart economic growth;

And to take the urgent steps necessary to build the infrastructure that we need, including one and a half million homes over the next five years.

The system needs a new signal. This is that signal.

First, we will reform the National Planning Policy Framework, consulting on a new growth-focused approach to the planning system before the end of the month, including restoring mandatory housing targets.

And, as of today, we are ending the absurd ban on new onshore wind in England. We will also go further and consult on bringing onshore wind back into the Nationally Significant Infrastructure Projects regime, meaning decisions on large developments will be taken nationally not locally.

Second, we will give priority to energy projects in the system to ensure they make swift progress…

… and we will build on the spatial plan for Energy by expanding this to other infrastructure sectors. 

Third, we will create a new taskforce to accelerate stalled housing sites in our country…

…beginning with Liverpool Central Docks, Worcester Parkway, Northstowe and Langley Sutton Coldfield, representing more than 14,000 homes.

Fourth, we will also support local authorities with 300 additional planning officers across the country.

Fifth, if we are to put growth at the centre of our planning system, that means changes not only to the system itself, but to the way that ministers use our powers for direct intervention.

The Deputy Prime Minister has said that when she intervenes in the economic planning system, the benefit of development will be a central consideration and that she will not hesitate to review an application where the potential gain for the regional and national economies warrant it.

… and I welcome her decision to recover two planning appeals already, for data centres in Buckinghamshire and in Hertfordshire.

To facilitate this new approach, the Deputy Prime Minister will also write to local mayors and the Office for Investment to ensure that any investment opportunity with important planning considerations that comes across their desks is brought to her attention and also to mine.

The Deputy Prime Minister will also write to Local Planning Authorities alongside the National Planning Policy Framework consultation, making clear what will now be expected of them…

…including universal coverage of local plans, and reviews of greenbelt boundaries. These will prioritise Brownfield and grey belt land for development to meet housing targets where needed.

And our golden rules will make sure the development this frees up will allow us to deliver thousands of the affordable homes too, including more for social rent.

Sixth, as well as unlocking new housing, we will also reform the planning system to deliver the infrastructure that our country needs.

Together, [political content removed] we will ask the Secretaries of State for Transport and Energy Security and Net Zero to prioritise decisions on infrastructure projects that have been sitting unresolved for far too long.

And finally, we will set out new policy intentions for critical infrastructure in the coming months, ahead of updating relevant National Policy Statements within the year.

I know that there will be opposition to this.

I’m not naïve to that;

And we must acknowledge that trade offs always exist: any development may have environmental consequences, place pressure on services, and rouse voices of local opposition.

But we will not succumb to a status quo which responds to the existence of trade-offs by always saying no, and relegates the national interest below other priorities.”

That reference to “ending the absurd ban on new onshore wind in England” has been given effect by a DLUHC policy statement on onshore wind (8 July 2024), removing – with immediate effect – the additional tests that have applied to on-shore wind as opposed to other energy proposals, namely that the proposal has policy and community support.

Simon Ricketts, 8 July 2024

Personal views, et cetera

Courtesy Nik via Unsplash

Neutrality Rules – CG Fry

Five years ago today (five years!) I was one of the first to blog about nutrient neutrality – the de facto veto on house building in some areas – in Another Green World: The South Coast Nitrate Crisis  (29 June 2019)

Since then the current Government has achieved nothing by way of legislation to unlock the issue. Instead the public and private sectors have gradually had to work up bespoke or locally strategic solutions and work-arounds.

What now are the two main parties promising in their manifestos?

The Conservative party proposes “abolishing the legacy EU ‘nutrient neutrality’ rules to immediately unlock the building of 100,000 new homes with local consent, with developers required in law to pay a one-off mitigation fee so there is no net additional pollution.”

The Labour party promises to “implement solutions to unlock the building of homes affected by nutrient neutrality without weakening environmental protections.”

In the interests of political neutrality I would describe these as two equally empty promises. No legislative solution will be both fast and environmentally robust. The Conservative attempt to shoehorn a provision into the then Levelling-up and Regeneration Bill last year of course flopped – see my 16 September 2023 blog post NN No. And five years on from Brexit (five years!) it is rather weak still to be pinning this problem on the EU!!

As well as delaying housebuilding, the issue has of course been grossly unfair for many developers and landowners who had obtained planning permission before Natural England had raised nutrient concerns and then find that they cannot achieve reserved matters approval or discharge pre-commencement conditions.

It was hoped by some that the courts might provide a solution to that particular position, by way of the litigation commenced by CG Fry. Unhappily their case was unsuccessful in the High Court – see my 30 June 2023 blog post CG Fry: AA Post PP. Even more unhappily, that ruling has now been upheld in the Court of Appeal (28 June 2024). 

The Court of Appeal held that “the inspector was right to conclude, and the judge to accept, that on their true interpretation regulations 63 and 70 of the Habitats Regulations could require an appropriate assessment to be undertaken at the stage when the discharge of conditions was being considered. This conclusion not only reflects the proper construction of the Habitats Regulations but also accords with the case law, both European and domestic, bearing on this question.”

“What, then, is the correct interpretation of the provisions of the Habitats Regulations with which we are concerned? We must begin with the domestic legislation as it is drafted. Applying normal principles of statutory interpretation, there is nothing in the relevant provisions to exclude the requirement for an appropriate assessment to be undertaken either when reserved matters are being approved or when conditions are being discharged, if the “authorisation” in question is necessary to enable the project to be lawfully implemented.

Given their natural and ordinary meaning, the words of regulation 63 clearly admit that possibility. The obligation imposed on a competent authority by regulation 63 is framed in broad terms. It makes necessary the carrying-out of an “appropriate assessment” before the authority decides to give “any consent, permission or other authorisation” for a plan or project. This formulation is clearly designed to capture a wide range of “authorisations”, of differing kinds; hence the use of the expression “or other authorisation”. It displays the essential purpose of the assessment provisions, which is to avoid any risk of harm to the integrity of a protected site. On a straightforward reading of the language used, having regard to that legislative purpose and to the underlying precautionary principle, the range of authorisations embraced in the provision extends, in our view, beyond the initial stage in the relevant process of decision-making. Any other interpretation would, we think, be incompatible with the words of the provision, inconsistent with the legislative purpose, and inimical to the precautionary principle.

Understood in this way, regulation 63 allows an appropriate assessment to be undertaken when the authority is making the final decision in a sequence authorising the development to proceed. Where that process involves the granting of outline planning permission for the proposed development and the subsequent submission and approval of reserved matters or the discharge of conditions, regulation 63 does not prevent the appropriate assessment of the project being carried out at that later stage as an exercise required before the decision is taken. In principle, it is not too late for such an assessment to be undertaken either when an approval of reserved matters is applied for or when the authority is called upon to discharge “pre-commencement” conditions, whose effect is that development carried out in breach would not be authorised by the planning permission.”

Nor in determining the relevant pre-commencement condition application or application for reserved matters is the decision-maker restricted to considering only the subject matter of the applications themselves, rather than the wider ecological issues.

And the principle applies equally to Ramsar sites as to other sites protected under the Conservation of Habitats Regulations.

I have no insight as to whether CG Fry will apply for permission to appeal to the Supreme Court but, regardless, it is clear that the courts will not be providing even a partial solution to the current crisis any time soon. My eyes turn to the incoming Government – where will we be in another five years I wonder?

Simon Ricketts, 29 June 2024

Personal views, et cetera

I know that some people only read this blog in the hope of references to old music (they regularly tell me that) so obviously here is an extract from the sleeve to Brian Eno’s wonderful 1975 album and everyone of a certain age will remember the theme music to the BBC’s Arena programme taken from it. Repeated references to Five Years in this post will also lead many back to David Bowie’s Ziggy Stardust album. Finally, in the interests of musical neutrality, I would like to point out that I also thought that Dua Lipa was quite good at Glastonbury last night.

It Took The Supreme Court A Year To Hand Down Finch So Do Give Me At Least Another Week Or So To Collect My Thoughts

If you thought Hillside was an enigma wrapped in a mystery…

There is much to unpack in R (Finch) v Surrey County Council (Supreme Court, 20 June 2024) as to what it means for those carrying out environmental impact assessment; determining applications and appeals which have been subject to environmental impact assessment, or indeed objecting to such projects. To what extent should “downstream” (and indeed “upstream”) effects of the development applied for be assessed – whether those effects be by way of carbon emissions or otherwise?

Let’s not jump to simplistic conclusions. So far I have only read the case once, armed with a highlighter pen, two cups of Nespresso black coffee, on-line dictionary and a Wispa bar. That was not enough. Reinforcements hopefully by next week. Watch this space.

What you have is two diametrically opposed judgments – the majority judgment by Lord Leggatt, with which Lord Kitchen and Lady Rose agree (and which is now the binding statement of the law) and a dissenting judgment by Lord Sales, with which Lord Richards agrees. 3 – 2. And to quote from Matthew Fraser (who acted in the case for the developer, led by David Elvin KC): “Interesting to think that this claim for judicial review was originally found to be “unarguable” on the papers, and also “unarguable” at the oral renewal hearing, by two different High Court Judges. Permission to bring the claim for judicial review was then granted by the Court of Appeal, but then both the High Court and the Court of Appeal rejected the Claimant’s case (for different reasons).” (NB well done, including for what must have been incredible persistence in the face of judicial adversity in the courts below, to Estelle Dehon KC, Marc Willers KC and Ruchi Parekh, acting for the ultimately successful claimant).

The bare conclusion from the beginning of Lord Legatt’s judgment:

It is agreed that the project under consideration involves the extraction of oil for commercial purposes for a period estimated at 20 years in quantities sufficient to make an EIA mandatory. It is also agreed that it is not merely likely, but inevitable, that the oil extracted will be sent to refineries and that the refined oil will eventually undergo combustion, which will produce GHG emissions. It is not disputed that these emissions, which can easily be quantified, will have a significant impact on climate. The only issue is whether the combustion emissions are effects of the project at all. It seems to me plain that they are.”

There is the clear dichotomy between the wider role for environmental impact assessment according to the majority judgment, potentially encompassing scope 3 activities (using the GHG Protocol categorisation) – consequences of the activities of the entity occurring from sources not owned or controlled by the entity (and in the case of carbon, usually controlled at a national level) – and the narrower role according to the judgments in the lower courts and according to Lord Sales’ dissenting judgment (“These are all “big picture” issues which a local planning authority such as the Council is simply not in a position to address in any sensible way… Further, it would be constitutionally inappropriate for a local planning authority to assume practical decision-making authority based on its own views regarding scope 3 or downstream emissions and how these should be addressed in a manner which would potentially be in conflict with central Government decision-making and its ability to set national policy.”)

What indeed is the development? Easy question for us planners and planning lawyers? Wait, here comes Lord Leggatt:

Holgate J also said, at para 110, that “indirect effects” of the proposed development cover “consequences which are less immediate, but they must, nevertheless, be effects which the development itself has on the environment” (emphasis in original). Outside the realms of Kantian metaphysics, there is no such thing as “the development itself” which enjoys some sort of separate noumenal existence. There are only the human activities which constitute the physical development (or “project”, to use the terminology of the EIA Directive).”

(This was the on-line dictionary moment for me I confess).

Lord Sales’ dissenting judgment makes the case for caution (I’m two coffees down at this point so am ready):

“In relation to … the present case to enlist the EIA Directive in the worthy cause of combating climate change, by seeking to press it into service in relation to requiring EIA in respect of downstream or scope 3 greenhouse gas emissions, it is relevant to bear in mind the cautionary words of Lord Bingham of Cornhill in Brown v Stott [2003] 1 AC 681, 703, quoting from Hamlet in relation to the European Convention on Human Rights:

“The Convention is concerned with rights and freedoms which are of real importance in a modern democracy governed by the rule of law. It does not, as is sometimes mistakenly thought, offer relief from ‘The heart-ache and the thousand natural shocks That flesh is heir to.’”.

As Lord Bingham pointed out, that Convention had to be interpreted according to its terms, not in an effort to produce a remedy for every problem which might be identified in a particular situation. So, in the present context, the EIA Directive, interpreted according to its terms, has a valuable role to play in relation to mitigating greenhouse gas emissions associated with projects for which planning permission is sought, but it should not be given an artificially wide interpretation to bring all downstream and scope 3 emissions within its ambit as well. That has not been stipulated in the text of the EIA Directive, is not in line with its purpose and would distort its intended scheme.”

But these two quotes do set up the issues nicely. I would draw out these key questions:

  • What now is the necessary scope for a lawful environmental impact assessment process and does Finch have any material bearing on development projects more generally as opposed to those relating to, for instance, the extraction of fossil foils where there is an inevitability as to  “downstream” effects (and where can a decision maker draw the line as to likelihood of downstream effects)?
  • What now is the breadth of the evaluative role of the decision-maker, with which the courts should not interfere?
  • What are the implications of the judgment for the formulation of the “environmental output report” process, which may one day replace environmental impact assessment?

There are already at least three camps with loud voices:

  • Great judgment, far-reaching effect, being the need for climate change to form a more central backdrop to decision-making in relation to particular applications and appeals; or
  • This is a judgment which calls for assessments to cover issues which the decision maker is not in a position to address in a sensible way (according to Lord Sales) and which are properly addressed at a national level; or
  • This is a judgment with narrower implications than people are assuming and which can be addressed in a straight-forward way within environmental impact assessment work where needed.

By next week perhaps I’ll have some tentative answers to those questions. If you are already in one of those three camps, I shall assume you are well ahead of me in your thinking. Respect.

Finally, I have mentioned him already: Mr Justice Holgate. Congratulations on his well-deserved appointment to the Court of Appeal.

Simon Ricketts, 22 June 2024

Personal views, et cetera

10 Reasons Why Planning Lawyers Are So Busy (And Maybe Shouldn’t Be)

The statistics are clearly going in the wrong direction: fewer public sector planning officers (see eg Labour’s pledge to hire 300 planning officers fails to make up for staff exits (FT, 2 June 2024, paywall or free registration) and an increasing number of private sector planning solicitors (The biggest planning law firms 2024 , Planning Resource, June 2024, paywall).

There you have it as to the two overwhelming problems with the current planning system:

  • Stretched public sector resources.
  • An increasingly complex and legalistic regulatory framework.

 I was reflecting on that second element this week at a really great “Planning Question Time” event in Exeter arranged by Carney Sweeney.

I’ve never been one to label all regulation as “red tape”. It’s not “red tape” if it serves a necessary purpose which is justified in the public interest. But this country is increasingly drowning in bureaucracy, and I stand before you as the living embodiment of it.

Town Legal has 12 partners, 28 qualified solicitors in total specialising in planning – and we are not the largest.

When I started as a lawyer in the 1980s I’m not sure there were too many more planning solicitors than that in the whole of the City! I don’t have 1980s figures, but going back just to say 2000-2001 the position in London is set out in the Chambers Directory table below. The largest team by far at that time was Berwin Leighton (now part of BCLP): 4 partners, 16 planning lawyers in total, followed by Denton Wilde Sapte (now Dentons): 3 partners, 13 planning lawyers in total – the bulwark of those firms’ practices at the time being work for their respective clients Tesco and Sainsbury’s. No other firms were in double figures. Now there are 25 firms with more than 10 planning solicitors!

Chambers Directory 2000-2001

Extract from Planning Resource survey, June 2024

According to the Planning Resource survey, the number of private sector planning solicitors increased by 8% just last year! This is not a good thing. 

What on earth is keeping so many planning lawyers busy, even in an environment when the number of planning applications has been falling, and does it have to be this way?

These are some of the issues that keep me constantly busy, most of simply did not exist 20 or 30 years ago:

  1. Advising on the procedural hurdles to amending schemes and the work-arounds to all that case law – Finney, Hillside, Dennis, Fiske and so on.
  2. Advising as to how to keep permissions alive by way of token implementation works, partly a factor of constant issues in relation to viability.
  3. Every aspect of the community infrastructure levy.
  4. Procedurally rigid appeals, many of which could have been avoided, often generated either by members’ refusals against officers’ advice or by unacceptable delays in the application process (see the point as to stretched public sector resources above – including at statutory consultees such as the Environment Agency and Natural England as well as at local authorities).
  5. Resisting (and sometimes promoting) judicial reviews that often turn out to be unsuccessful, partly fuelled by objectors’ expectation that rights have been infringed for which litigation will provide an adequate remedy – and the consequent now increasingly usual and time-consuming task, on more complex or contentious proposals, of carrying out a legal audit of draft application documents and committee reports to minimise legal challenge risk. 
  6. Unnecessarily repetitive negotiations in relation to section 106 agreements through the lack of national standard templates, alongside the widened scope of planning obligations and drafting sophistication that has arisen hand in hand with both item 10 below; the sheer scale of financial commitments now at play, and yes that public sector resourcing issue again, meaning that many authorities are simply not equipped to progress negotiations in a timely way, particularly in relation to more complex projects.
  7. The increasingly labyrinthine complexities of the permitted development rights system. 
  8. Constantly changing legislation and policy and the case law arising from inherent ambiguities in how statutory and/or policy tests are to be applied.
  9. Localism: neighbourhood plans, assets of community value and so on.
  10. Topics that have been shoe-horned into the planning system to deliver on other government objectives eg
  • Embodied carbon – demolition versus refit (no clear national policy yet)
  • Biodiversity net gain (the latest over-engineered statutory regime)
  • The neutralities (nutrients, water, recreational pressure)
  • Building safety and the widening increasingly unclear overlap between the Building Regulations and the planning system.
  • (whispers it) Affordable housing requirements (building market homes doesn’t lead to an additional need for affordable housing – it’s just politically convenient government policy to require it) and contributions to other public services (which successive governments have increasingly chosen to fund in part via developers rather than by way of direct taxation). 

Much of this of course is in the public interest and has value. Most schemes which come forward are far more considered and of higher quality than back when I started.

But I do wonder at what cost. 

Here’s an idea for Planning Resource: How about publishing an annual metric, being the ratio of homes and square metres of floorspace delivered in England over the relevant year divided by the number of practising planning solicitors in the private sector? I’m not wanting to do us out of a job. It would just be nice to be more productive…

Lastly, nostalgia for some of us: commentary from the 1994/1995 Chambers Directory. The scary new thing that was direct professional access to the bar! And some names to conjure with – all those names were, and in some cases still are, bright stars in our once little planning law world.

Chambers Directory 1994-1995

Simon Ricketts, 15 June 2024

Personal views, et cetera