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

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

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


Going through the proposals:

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

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Local Plan Interventions

As set out in his 16 November 2017 written ministerial statement, the Secretary of State for Communities and Local Government has written to 15 local planning authorities (Basildon, Brentwood, Bolsover, Calderdale, Castle Point, Eastleigh, Liverpool, Mansfield, North East Derbyshire, Northumberland, Runnymede, St Albans, Thanet, Wirral and York), indicating that they have “the opportunity to put forward any exceptional circumstances, by 31 January 2018, which, in their view, justify their failure to produce a Local Plan under the 2004 Act regime.” He will then make a formal decision as to whether formally to intervene in their plan-making. 
His Bristol speech on the same day says this:

“…today is the day that my patience has run out.

Those 15 authorities have left me with no choice but to start the formal process of intervention that we set out in the white paper.

By failing to plan, they have failed the people they are meant to serve.

The people of this country who are crying out for good quality, well-planned housing in the right places, supported by the right infrastructure.

They deserve better, and by stepping in now I’m doing all I can to ensure that they receive it.”

Will this be another empty threat or this time will we actually see some action? Back 20 July 2015 the then minister for housing and planning, Brandon Lewis, announced in a written ministerial statement:

In cases where no Local Plan has been produced by early 2017 – five years after the publication of the NPPF – we will intervene to arrange for the Plan to be written, in consultation with local people, to accelerate production of a Local Plan.”

There was then the February 2016 technical consultation on implementation of planning changes which included within its chapter 6 the Government’s proposed criteria for intervention, namely where:

* the least progress in plan-making had been made;

* policies in plans had not been kept up to date;

* there was higher housing pressure; and

* intervention would have the greatest impact in accelerating local plan production.

Decisions on intervention would be informed by the wider planning context in each area (specifically, the extent to which authorities are working co-operatively to put strategic plans in place, and the potential impact that not having a plan has on neighbourhood planning activity).

The Government confirmed in its February 2017 housing white paper that these criteria would indeed be adopted. 

The February 2016 technical consultation proposed that authorities identified for potential intervention would be given an opportunity to set out exceptional circumstances why that should not happen:

“What constitutes an ‘exceptional circumstance’ cannot, by its very nature, be defined fully in advance, but we think it would be helpful to set out the general tests that will be applied in considering such cases. We propose these should be: 

• whether the issue significantly affects the reasonableness of the conclusions that can be drawn from the data and criteria used to inform decisions on intervention; 

• whether the issue had a significant impact on the authority’s ability to produce a local plan, for reasons that were entirely beyond its control.”

We can assume that those 15 authorities will now be looking very carefully at this passage. 

A political decision to intervene is one thing but what would then be the legal process to be followed?

The Housing and Planning Act 2016 amended the default powers of the Secretary of State within section 27 of the Planning and Compulsory Purchase Act 2004, so that it read as follows:

Under section 9 of the Neighbourhood Planning Act 2017, the Secretary of State can now also order the preparation of joint development plans, giving him a further option in the case of interventions, particularly as he “may apportion liability for the expenditure arising on such basis as he thinks just between the local planning authorities for whom the document has been prepared.”
Of course the practicalities are quite another thing. How is the Government actually going to go about the intervention process? Preparing the document centrally, directing an adjoining authority to take the lead or parachuting in civil servants or consultants to carry out the work (all at the cost of the authority) is surely always going to be a last resort. The process is likely to be locally unpopular, prone to error and obviously liable to litigation. Authorities may also trip over themselves in their belated haste. However, surely after the end of January a few authorities are bound to be identified, pour encourager les autres. 
So how have these authorities found themselves in this position? Here’s just a flavour:
Basildon
Yellow Advertiser (20 April 2017):

“Tory chief Phil Turner has suggested calling in independent analysts to go over the plan, which allocates land for development across the borough until 2034. 

Cllr Turner said he hoped to ask experts to go over the plan’s policies on green belt and infrastructure. 

He said he hoped the move would help him cut the number of planned houses in the borough, which currently sits at 15,260.

He said: “We can’t review the whole plan but those two points are areas where we think there may be opportunities about reducing our housing numbers. 

“During the consultations, we’ve had a lot of feedback about how people don’t think we are working hard enough to to save the green belt. We don’t want to build on the green belt and we have avoided it as much as possible but I don’t think the public actually believes us.

“So what we are thinking is we should call in some independent people to scrutinise the plan and tell us where we can maybe use the evidence to put up an argument to challenge the housing numbers.”

Cllr Turner was due to present the proposal to all councillors in a secret meeting last night. 

If approved, he said the process could cost a six-figure sum and take up to six months.

Brentwood
Largely green belt authority. Prolonged delays.  

Bolsover

Local Plan withdrawn after it failed examination in 2014. Failure to co-operate with North East Derbyshire District Council and Chesterfield Borough Council with regard to a strategic development site. 
Calderdale

Brighouse Echo (17 November 2017):

 “Councillor Scott Benton, Leader of the Calderdale Conservatives, said: “‘The draft Local Plan published by the Labour Council administration has caused great concern throughout the different communities of Calderdale.

“The Labour Party have clearly been taken aback by the scale of the opposition to their plans and instead of meeting their target of producing a Final Plan in December, they have announced that they are now kicking the issue down the road again until after the elections next summer.

“‘Labour’s first attempt at producing a draft Plan was a disaster. Instead of working with residents and other Councillors to produce a Plan that is fit for purpose they have delayed the process until after elections. This makes a mockery of our local democracy and demonstrates why Calderdale requires fresh leadership.”

Castle Point

Local Plan failed examination in April 2017 – failure adequately to assess housing need, and failure to cooperate with neighbouring councils.
Eastleigh
Eastleigh News (16 November 2017):
“In February 2015, Eastleigh had to go back to the drawing board after its first Local Plan was rejected by the planning inspector because, he said, it didn’t plan for enough new homes – in particular new affordable ones.

On December 11 the council will meet for a crunch vote on their new Local Plan and the council’s preferred options of housing development on land North of Bishopstoke and Fair Oak (Options B and C).

There has been fierce local opposition – not just from the residents most likely to be affected by the development of 5,000 new homes but also from residents close to the route of a proposed M3 link road that will stretch across countryside from Upham to Allbrook.

So far this year three councillors have stood down from the ruling Liberal Democrat group to sit as Independents because of their concerns over the direction of the local plan.

It is likely they will join the opposition Conservative group on December 11 in voting against the council’s favoured options – though this is unlikely to prevent their adoption.”

Liverpool
Prolonged delays. 
 Mansfield

Mansfield 103.2 (17 November 2017):

Hayley Barsby, Interim Chief Executive at Mansfield District Council, said: “We are disappointed to have been named as one of the 15 local authorities.

“We are confident that while we don’t have an up-to-date Local Plan that this hasn’t affected development in the district.

“Mansfield District Council is committed to bringing forward house building – this is demonstrated by the council supporting the Berry Hill development (formerly known as the Lindhurst development) which will create 1,700 new houses for the district.

“Of the 9,024 new homes we need to provide by 2033, planning permission already exists for 4,147.

“Over the past 12 months we have worked hard to bring forward the Local Plan and during this time we have been mindful to undertake feasibility and consultation to ensure it reflects not only the needs of the district but also the views of our communities.

Following an initial consultation in early 2016 on the draft Local Plan, we received 1,477 comments which were then reviewed to ensure the plan is fit for purpose up to 2033.

The council reviewed its position and prepared a new vision and objectives. These have been used to create alternative options for the delivery of sustainable housing and employment to meet future requirements. 

A Preferred Options consultation took place in October and November 2017.”

North East Derbyshire
Derbyshire Times (18 October 2017) quotes the Labour leader of the council in response to criticisms from the local (Conservative) MP:
“We are well aware of the need to protect the character of our area and have done all we can to do this, however the Government’s expectations and targets for housing place significant pressure on our ability to continue this.” 

He added: “As such we’d welcome any moves by the MP to seek a revision to Government policy so that the expectations for north east Derbyshire are realistic and in keeping with those of our residents.”
Northumberland

Northumberland Gazette (16 November 2017):

 “Northumberland’s Local Plan, a key document which details where development should take place, is not likely to be adopted until 2020. In the summer, the county council’s new Conservative administration withdrew the Local Plan Core Strategy – put together by the council’s Labour group before losing the county election in May – to review a number of aspects of the document, primarily due to concerns that numbers for the proposed level of new housing were too high.”

Runnymede
Local plan failed examination in 2014 due to failure to meet housing needs and failure of duty to co-operate. 
 St Albans

Local Plan failed examination in 2016 due to failure of duty to co-operate, council’s subsequent challenge to that decision failed.
Thanet

Prolonged delays but Regulation 19 consultation anticipated in January 2018. 
 Wirral

Wirral Globe (16 February 2017):

Wirral Council’s leader is preparing for battle with Whitehall over plans that could force the authority to turn green belt land into a housebuilding free for all.

The Government has ruled Wirral must produce a blueprint demonstrating how it will hit a target of building nearly 1,000 new homes each year over the next five years.

That’s 500 more than the present annual number.

Councillor Phil Davies says he is adamant that he will not sanction the release of green belt land – and has written to communities secretary Sajid Javid urging him to reconsider.”

York
Prolonged delays. 
York Press (16 November 2017):
City of York Council’s Conservative and Liberal Democrat leaders have pointed to delays caused by the announcement of barracks closures in York, and insisted they are on course to deliver a sound plan by May.

Leader Cllr David Carr said: “We’re making very good progress to deliver a Local Plan which is right for York – one which provides the homes and employment opportunities we need while protecting our city’s greenbelt and special character.

“We rightly reviewed the plan after the Ministry of Defence’s announcement over the future of three very large sites, and consulted once again listen to views from across York.”

However the announcement has brought criticism from Labour councillors, who say they warned this could happen.”
Themes
Tell me if I am over-simplifying but it seems to me that there are some common, unsurprising, themes within this list:
– Uncertainties as to the calculation of objectively assessed needs and the extent to which authorities can justify not meeting that need to due to green belt issues (nearly all these authorities have areas of green belt within their boundaries). 
– Uncertainties as to the extent to which it may be appropriate for authorities to assist in meeting other authorities’ needs, the duty to co-operate being far too loose a mechanism (which is not necessarily to suggest that a return to regional planning and “top down” numbers is the answer – these are authorities who didn’t manage to adopt a plan even under that regime, which of course had built into it inherent delays at the regional tier). 

– As a result of this wriggle room, housing numbers becoming a political battleground, with members often not accepting officers’ advice or with changes in approach arising from changes in political control. 

– Delays due to plans having been found unsound at the end of, or a long way into, a long process (usually as a result of these factors). 

– Plainly, these authorities haven’t been sufficiently spurred on by the application of the “tilted balance” leading to development taking place in unplanned, unwanted locations – perhaps due to that policy lever being less effective in relation to green belt – or other Government threats to date. 

– Many of the authorities being, on paper at least (their websites tell a good story to their constituents), now close to being able to submit a plan for examination, after (usually) a series of Regulation 18 consultation processes. 

Is slow plan-making the fault of local politicians or of the planning system itself? I would say both. The lack of prescription as to numbers and methodology has inevitably given room for protracted, unending, debate as to different approaches and outcomes. Debate and local choice is surely to be welcomed but the system has been so loose that in some areas this has slowed progress to an extent that anyone would surely say was unacceptable. Accordingly, the proposed tightening of the OAN methodology (see my 20 September 2017 blog post) and of the duty to co-operate is surely welcome, as is this clear threat by Javid of intervention. 

However, if formal intervention is actually required, the outcome will surely be a political, administrative and legal mess. 
…………………..

Meanwhile, it is perhaps unfortunate timing that in the same week the Secretary of State has made a holding direction in relation to the Stevenage local plan, at the request of local Conservative MP Stephen McPartland, despite a favourable Inspector’s report having been received last month. The issue appears to result from a continuing fault line both in Stevenage and more widely: whether to provide homes by way of town centre redevelopment (as per the plan) or outside the town in a new settlement (as per Mr McPartland). 

Whatever the rights and wrongs of the Stevenage position, why allow such political interventions if the plan has been found sound?
Simon Ricketts, 18 November 2017
Personal views, et cetera

(With thanks to Town Legal colleague Rebecca Craig for some background research. Mistakes and opinions all mine). 

Green Belt Policy: Will It Change?

In all the noise and spin ahead of the Autumn budget on 22 November, I would be wary of reading anything substantive into stories such as these:
Telegraph 4 November 2017 Philip Hammond risks Tory backlash with gamble on opening up the green belt 

Times 30 October 2017 Hammond rebuffed over budget plan for green belt housing
 I don’t believe that there will be anything to change the current policy direction. This Government surely does not have the strength, the resolve or the thinking space. The existing tests in the NPPF for reviewing green belt boundaries and for determining applications for planning permission in the green belt will be retained, with the minor changes that have previously been announced. In my view the real action isn’t around what the policies say, but how they are applied. 

Local plans
At present, green belt boundaries may be reviewed as part of local plan processes. Established green belt boundaries should only be changed in “exceptional circumstances”. Boundaries are intended to be long term, capable of enduring beyond the plan period. 
The Government’s February 2017 Housing White Paper proposes, at paragraph 1.39, embellishing that “exceptional circumstances” test:
“Therefore we propose to amend and add to national policy to make clear that: 

* authorities should amend Green Belt boundaries only when they can demonstrate that they have examined fully all other reasonable options for meeting their identified development requirements, including: 

    * making effective use of suitable brownfield sites and the opportunities offered by estate regeneration; 


    * the potential offered by land which is currently underused, including surplus public sector land where appropriate; 


    * optimising the proposed density of development; and 


    * exploring whether other authorities can help to meet some of the identified development requirement.”


* and where land is removed from the Green Belt, local policies should require the impact to be offset by compensatory improvements to the environmental quality or accessibility of remaining Green Belt land. We will also explore whether higher contributions can be collected from development as a consequence of land being released from the Green Belt. ”

Wording along these lines is likely to be added to the draft revised NPPF, promised early in 2018, but will make no material difference in practice – the additional guidance may look like tough talk but is largely a statement of the present position. 
Statistics can be used in various ways. At one end of the spectrum there is concerted lobbying by CPRE (see for instance their paper Green Belt Under Siege 2017). But the Government’s own figures DCLG statistical release Local Planning Authority Green Belt: England 2016/17 7 September 2017 sets the issue in context:
Overall there was a decrease of 790 hectares (less than 0.05%) in the area of Green Belt between 31 March 2016 and 31 March 2017. In 2016/17, eight local planning authorities adopted new plans which resulted in a decrease in the overall area of Green Belt compared to 31 March 2016.”


Regardless of how “exceptional circumstances” are defined, it is presently too easy either for local planning authorities to delay their plan making or to seek to justify not meeting their objectively assessed housing needs on the basis of green belt constraints. Threats of intervention on the part of the DCLG have come to nothing and the duty to cooperate (even when elevated to a duty to provide statements of common ground) is still too far too uncertain as to its effect, allowing local politicians to justify to themselves not assisting with adjoining authorities’ unmet requirements. Furthermore, the Government’s previous politically driven interventions such as in delaying for some time the Birmingham Development Plan at the request of local Conservative MP Andrew Mitchell hardly promote a positive approach. 
The problem isn’t so much specifically about green belt policy but more generally about how effectively to penalising authorities that do not properly plan – and surely about how positively to encourage authorities on every local plan review to consider whether boundaries should be reviewed – possibly even ahead of looking outside their boundaries where adjoining authorities are not readily in a position to pick up their unmet needs? The prolonged delays to plan making in green belt areas such as parts of Hertfordshire and Bedfordshire are a serious indictment of the present system. 
If the imminent draft London Plan as expected fails to encourage the boroughs to review their green belt boundaries, will that not be an opportunity missed? By all means require exceptional circumstances, but rigid adherence to the status quo for political reasons has social, environmental and economic costs. 

(map from LSE paper A 21st Century Metropolitan Green Belt 2016)

Planning applications and appeals
Green belt designation has never been an absolute bar to development. There are two main routes to consent:
First, is the proposal not “inappropriate development” within the meaning of paragraph 89 and 90 of the NPPF? For residential and commercial development the most main potential exemptions are:
* “the extension or alteration of a building provided that it does not result in disproportionate additions over and above the size of the original building;

* the replacement of a building, provided the new building is in the same use and not materially larger than the one it replaces; 


* limited infilling in villages, and limited affordable housing for local community needs under policies set out in the Local Plan; 


* limited infilling or the partial or complete redevelopment of previously developed sites (brownfield land), whether redundant or in continuing use (excluding temporary buildings), which would not have a greater impact on the openness of the Green Belt and the purpose of including land within it than the existing development.

Secondly, even if the proposal is for “inappropriate development”, can the applicant demonstrate “very special circumstances”? The guidance is unspecific as to what will amount to very special circumstances: “Very special circumstances’ will not exist unless the potential harm to the Green Belt by reason of inappropriateness, and any other harm, is clearly outweighed by other considerations.” The balancing of considerations is left to the decision maker. 

By way of recent example, the Secretary of State allowed an appeal on 1 November 2017 for a proposed development by Oaklands College and Taylor Wimpey comprising “new and refurbished college buildings, enabling residential development of 348 dwellings, car parking, associated access and landscaping.” His decision letter concluded as follows:
“35. The Secretary of State agrees with the Inspector (IR 248) that the proposal is inappropriate development in the Green Belt, which is harmful by definition. He further agrees there would be additional harm by reason of a reduction in openness and by virtue of encroachment into the countryside. Therefore he attributes substantial weight to the harm to the Green Belt caused by the proposed development. 

36. The Secretary of State agrees with the Inspector that there would be some limited harm to the character and appearance of the area (IR249) and he gives limited weight to this harm. 

37. The Secretary of State agrees with the Inspector that the delivery of significant improvements to the College weighs very heavily in favour of the proposal (IR 251). The Secretary of State gives the educational benefits significant weight in favour of the proposal. He also agrees with the Inspector that in light of the lack of a five year housing land supply, the proposed market and affordable housing is a significant benefit (IR 252) that carries significant weight in favour of the proposal. Additionally, the Secretary of State agrees that the enhancement of beneficial Green Belt uses carry moderate weight in favour of the proposal. The Secretary of State gives limited weight to improvements to the non- designated heritage assets (IR 253). 

38. The Secretary of State shares the Inspector’s view that the effect on protected trees in Beaumont Wood, the relationship with the policies related to the Watling Chase Community Forest, and the effect on traffic and flooding in the Sandpit Lane area are neutral factors in the planning balance (IR 254). 
39. Overall, the Secretary of State agrees with the Inspector that the considerations summarised above clearly outweigh the harm to the Green Belt, justifying the proposal on the basis of very special circumstances (IR 255). He therefore concludes that relevant policies relating to development in the Green Belt do not indicate that the proposed development should be restricted. The Secretary of State also concludes that the adverse impacts of the proposed development would not significantly and demonstrably outweigh the benefits.

40. Overall, the Secretary of State agrees with the Inspector that there are persuasive material considerations which warrant a decision other than in accordance with the development plan (IR255).”
The application of the NPPF’s tests in relation to plan making and decision taking inevitably gives rise to disputes both as to interpretation (see the many court rulings listed by Landmark Chambers in relation to each of the relevant paragraphs of the NPPF) and as to the weight to be applied to the various material considerations (meaning unpredictability, together with many speculative applications). But with even greater inflexibility (after all the policy hurdles are already extremely high) there would be another set of problems. 

Any politician is going to be cautious about a major policy shift. It is an open question as to whether the public understands the policy basis for green belt – the way in which, often vast, swathes of land around our cities have been identified as an ad hoc series of urban containment zones:
“- to check the unrestricted sprawl of large built-up areas;

– to prevent neighbouring towns merging into one another; 


– to assist in safeguarding the countryside from encroachment; 


– to preserve the setting and special character of historic towns; and 


– to assist in urban regeneration, by encouraging the recycling of derelict and other urban land

However, free market solutions advocated by the likes of the IEA and the Adam Smith Institute are wide of the mark. The idea of the green belt, albeit largely abstract, albeit largely restrictive and not driven by specific landscape, environmental or conservation attributions, has captured the public imagination like no other planning invention – perhaps, in a very British way, because it simply carries the expectation of being left alone. The challenge is how, without watering down existing green belt principles, to prevent the designation being used for local political purposes as an argument that increases inequality, renders housing unaffordable, increases commuting distances and drives urban development to unacceptable densities or sensitive non green belt locations? 
In the same way as in its early years the objective of green belt designation moved away from providing open space for recreation and towards a more restrictive role, over time can it move again towards a positive role more closely aligned with other landscape, land use or nature conservation designations?
Another eighty years or so should crack it. 
Simon Ricketts, 11 November 2017
Personal views, et cetera

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

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

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

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

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


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

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

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

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

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

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

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

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

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


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

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