What’s For The Plan, What’s Supplementary?

A blog post in two halves:

– the increasing risk that SPDs (supplementary planning documents) and other policy documents will be struck down by the court if their policies should in fact be in a local plan or other DPD (development plan document)

– in the wake of the draft London Plan, a reminder that it should only contain “strategic” policies, as well as another look at the affordable housing and viability SPG (supplementary planning guidance), now subject to a judicial review. 

Bottom drawer plans

It is tempting for local planning authorities to fill policy gaps or update their policies by way of an SPD given that there is only a consultation requirement and no independent examination, or indeed by more informal plans. But care is needed. There are stringent rules as to what is appropriate for inclusion in an SPD or other policy document and what needs to be in a DPD. 

There have been two examples this year of policies having been quashed by the High Court on this basis. 
On 23 November 2017 in William Davis Limited & Others v Charnwood Borough Council Gilbart J quashed a policy in Charnwood’s Housing SPD which specified the required size mix for market and affordable homes. 
On 20 March 2017 in R (Skipton Properties Limited) v Craven District Council Jay J quashed Craven’s entire Negotiating Affordable Housing Contributions 2016 interim policy document. 

The issues turn on interpreting the Town and Country Planning (Local Planning) (England) Regulations 2012 about which Jay J says:
“Frankly, those responsible for these regulations should consider redrafting them”. 

Gilbart J agrees “with Jay J that the drafting of these Regulations is very poor and can lead to confusion, or to lengthy arguments on interpretation with not much regard being had to the realities of development control“. 

You’ve been warned. 
Regulations 5 and 6 read as follows:
 “5. (1) For the purposes of section 17(7)(za)(1) of the Act the documents which are to be prepared as local development documents are—



(a) any document prepared by a local planning authority individually or in cooperation with one or more other local planning authorities, which contains statements regarding one or more of the following -



(i) the development and use of land which the local planning authority wish to encourage during any specified period;



(ii) the allocation of sites for a particular type of development or use;



(iii) any environmental, social, design and economic objectives which are relevant to the attainment of the development and use of land mentioned in paragraph (i); and



(iv) development management and site allocation policies, which are intended to guide the determination of applications for planning permission;

(b) ………………………………………………………………



(2) For the purposes of section 17(7)(za) of the Act the documents which, if prepared, are to be prepared as local development documents are—



(a) any document which—



(i) relates only to part of the area of the local planning authority;



(ii) identifies that area as an area of significant change or special conservation; and



(iii) contains the local planning authority’s policies in relation to the area; and



(b) any other document which includes a site allocation policy.



6. Any document of the description referred to in regulation 5(1)(a)(i), (ii) or (iv) or 5(2)(a) or (b) is a local plan.”
So if a policy document meets any of the criteria in Regulation (1) (a) (i), (ii) or (iv) or 5 (2) it is in reality a local plan and will be at risk of being quashed if the procedures stipulated for a local plan have not been followed. This means that there are huge consequences for authorities whose policy documents fall within any of these criteria – rightly so, in my view (albeit with sympathy for authorities in relation to the difficulties inherent in working out whether a policy falls for instance within Regulation 5 (1) (a) (iii) – ok – or (i), (ii) or (iv) – not ok!).
In the words of Gilbart J:
“It has always been the case since the original TCPA 1947 that the policies of a proposed development plan should be the subject of consultation, and where objection is made, independent examination. PCPA 2004 and the related LP Regs 2012 made considerable changes to the mechanics of the system for bringing forward policies, whether those which have the status of development plan policies for the purposes of the legislative code, or have a less significant role.
Albeit that the procedures for the adoption of a development plan have altered over the years, it is still a fundamental feature of the system that policies which form part of the development plan must be subjected to proper scrutiny, including independent scrutiny.”
In William Davis, Gilbart J held that the relevant housing mix policy “sought to prescribe different percentages for all house sizes, and as between market and affordable housing. It related to “the development and use of land which the local planning authority wish to encourage during any specified period” and therefore fell within Reg 5(1)(a)(i). But it also contained “development management and site allocation policies, which are intended to guide the determination of applications for planning permission” and therefore also engaged Reg 5(1)(a)(iv). On that basis it could only be promoted by way of a local plan as defined.” It was therefore quashed. 
In Skipton, Jay J noted:
Affordable housing policies are ordinarily located in local plans because they relate to the development and use of land“. 
He found that even if he was wrong about the affordable housing contributions interim policy document being in fact a DPD (and failing the procedural requirements of a DPD), nor was it an SPD – policies in an SPD must be supplementary to policies in a DPD. There were no affordable housing policies that has been saved in Craven’s local plan: “it cannot logically supplement a black hole“.
He concluded:
“In my judgment, the correct analysis is that the NAHC 2016 contains statements in the nature of policies which pertain to the development and use of land which the Defendant wishes to encourage, pending its adoption of a new local plan which will include an affordable housing policy. The development and use of land is either “residential development including affordable housing” or “affordable housing”. It is an interim policy in the nature of a DPD. It should have been consulted on; an SEA should have been carried out; it should have been submitted to the Secretary of State for independent examination.”
There is a final coda to Jay J’s judgment:
“…I am not oblivious to the practical difficulties facing local planning authorities assailed by constant changes in the legislative regime and national policy. However, a local planning authority is required to keep its local plans under review. The correct course is to press on with the timeous preparation of up-to-date local plans, and in the interregnum between draft and adoption, deploy these as material considerations for the purpose of the rights and duties conferred by the 2004 Act.”



I take from these two cases that we should be scrutinising carefully policies that authorities seek to rely on that have not been tested as DPD policies undergoing proper independent scrutiny. For example management policies, site allocation policies and policies encouraging the development and use of land should all be restricted to DPDs so that they can be properly examined as the legislation requires. 
London: another kettle of fish


The above analysis is relevant to London boroughs but the position of the London Mayor is different, given that his plan making powers are not set out in the 2012 Regulations but in the Greater London Authority Act 1999. As I set out in my 23 April 2017 blog post Make No Little Plans: The London Plan, policies in the London Plan can only deal with “matters which are of strategic importance to Greater London”.
The draft London Plan was of course published on 29 November 2017. As you read its 500 plus pages, ask yourself in relation to each policy whether it truly does meet that “strategic importance to Greater London” test or are we seeing a further boxing in of the policy making powers which should be left to the boroughs?
Partly to seek to bring about changes ahead of progress with this plan and partly to seek to set out his required approach to a level of detail that would be wholly inappropriate for a “strategic” document, the Mayor has set out his approach to affordable housing and viability in a detailed, non statutory, SPG (the Greater London Authority Act does not provide for statutory SPDs). I covered the document in my 20 August 2017 blog post 20 Changes In The Final Version Of The London Mayor’s Affordable Housing & Viability SPG.
A legal challenge to the validity of the SPG has been brought by four retirement living providers (McCarthy & Stone, Churchill Retirement Living, Pegasus Life and Renaissance Retirement), based on three grounds:
– that the SPG “unlawfully represents substantive new policy, without going through the independent examination process which should apply to policy changes of this kind“. 

– lack of strategic environmental assessment

– breach of the Equality Act 2010 and other legislative requirements “since it introduces an unjustified and disproportionate new regulatory hurdle which leads to differential treatment for the elderly and women seeking to have their housing needs met in London“. 

Whether through this litigation or through the examination process that lies ahead for the London Plan itself, some interesting analysis lies ahead as to (1) what are “matters of strategic importance to Greater London” and (2) the extent to which the Mayor can lawfully go faster, or into a greater level of detail, in supplementary planning guidance. 
The examination process for DPDs, and indeed for the London Plan, can sometimes appear superficial in relation to individual policy issues, but at least there is some independent scrutiny. On the other hand where planning applications are refused on the basis of policies that the decision-maker has itself both made and approved, the position can defy any common sense notion of gravity. The authority has simply pulled itself up by its own bootstraps. 
Simon Ricketts, 1 December 2017
Personal views, et cetera

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PSI-Apps

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

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



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

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

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

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

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

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

Everyone Knows This Is Nowhere: Devolution

The prospect of devolution can perhaps cause people to get too excited (Brexit; Catalonia) or perhaps not excited enough (the last Labour Government’s experiment with regional assemblies; the current roll-out of combined authorities). Predictably, this blog post focuses on the latter category. 
First of all, in order to understand planning in Great Britain you need to understand its post-devolution administrative structure, following the enormous changes of the last 20 years. 
It is now 20 years since referendums in Scotland and Wales led to the creation of the Scottish Parliament and National Assembly for Wales, with the Good Friday Agreement and Northern Ireland Act 1998 following a year later, leading to the creation of the Northern Ireland Assembly. 
Slowly but surely, four different planning systems have developed, summarised in a January 2016 House of Commons library briefing paper, Comparison of the planning systems in the four UK countries.
In relation to English devolution issues, perhaps dull is good, with arguments often focusing on worthy but dull questions of efficiency of administration and decision making, and the unlocking of funding streams. 

Directly elected regional administration of London was reintroduced in 2000 following a referendum in May 1998, in which there was a 72% majority vote (out of a 34% turnout) for the establishment of the Greater London Authority, to be led by an elected Mayor. Despite the low turnout, the size of the “yes” vote did seem to recognise the need for a unified voice for London that had been missing since the abolition of the Greater London Council in 1986. 
The Labour Government of the time attempted to use elements of the London model to introduce directly-elected regional assemblies across England. However, it became plain that there simply was not the public appetite. Voters rejected the proposal for a regional assembly for the North East 77.9% to 22.1%, on a turnout of 48% in November 2004 and other proposed referendums for the North West and for Yorkshire and the Humber were then dropped. Whilst there is still some nostalgic harking back to the regional planning of the time, the ridiculously complicated structure in the Planning and Compulsory Purchase Act 2004 took the form of regional spatial strategies, prepared by ‘regional planning bodies’, comprising regional assemblies of co-opted local authority members. The process was closely overseen by central Government and indeed each final regional spatial strategy was published by the Government. So, hardly devolution – and with regional boundaries that often had no historic or emotional basis – although a potentially helpful administrative structure for coordinating local authorities and determining local authority housing targets.
Regional spatial strategies, along with all mentions of the “r” word including the regional planning boards, regional assemblies and regional development agencies (save for the London Development Agency, which survived a little longer) were swept away following the coalition Government coming into power in 2010. The new mantra of localism dictated the removal of top-down targets in favour of the bottom-up idea that it would be more effective for local authorities to determine how to meet their and their neighbours’ housing needs via the Localism Act 2011’s “duty to cooperate”, a Cheshire cat’s smile if ever one there was. Coordinated investment into the regions, including application of EU structural funds, became more difficult following the abolition of the regional development agencies, a vacuum only partly filled by LEPs (voluntary local economic partnerships between local politicians and business people). 
But local politicians (the public? I’m not so sure) continued to press for greater devolution of powers to the regions, particularly against the background of the greater autonomy given to Scotland in particular in the run-up to the 2014 Scottish independence referendum (where there was a 55% vote against independence on an 85% turnout – that was clearly a vote that clearly did matter to its electorate). The Government embarked on negotiating a series of ‘devolution deals’ with groups of local authorities. The first deal, to create the Greater Manchester Combined Authority, was announced in November 2014. 
The Cities and Local Government Devolution Act 2016 was, as set out its explanatory notes, “intended to support delivery of the Government’s [2015] manifesto commitment to “devolve powers and budgets to boost local growth in England”, in particular to “devolve far-reaching powers over economic development, transport and social care to large cities which choose to have elected mayors” and “legislate to deliver the historic deal for Greater Manchester”. The Act takes forward a number of reforms which are intended to allow for the implementation of devolution agreements with combined authority areas and with other areas. It is enabling legislation which provides a legislative framework which can be applied flexibly to different areas by secondary legislation.” 

The devolution deals to date are listed on the Local Government Association’s website. The powers agreed to be devolved have been different in each case. The position is well summarised in a House of Commons library briefing paper, Devolution to local government in England (23 November 2016):


It will be seen that some deals include the power to create a spatial plan for the area, and/or the power to establish Mayoral Development Corporations. Some deals will also permit the combined authority to use compulsory purchase orders, with the consent of the local authority in which the land or property is located.

I looked specifically at the West Midlands Combined Authority in my blog post Devo West Mids (24 October 2016). 
So far we have had mayoral elections for six combined authorities, which all took place in May 2017. Turnouts were all very low indeed:

Whilst regional devolution may not capture the attention of voters (in fact I’m sure it is utterly confusing to most), undoubtedly it presently brings the promise of significant funding streams from Government. Professor Janice Morphet has also pointed in her 2016 book Infrastructure Delivery Planning to the work of economist Paul Krugman in showing the growth in national GDP that can result from investment decisions being made at a sub-national level. More practically, big personalities are important. That has been the experience in London – and Greater Manchester and the West Midlands both now have strong Mayors, in the shape of Andy Burnham and Andy Street respectively, who will undoubtedly drive those great city regions in an equivalent way. 

A further election, in the Sheffield City Region, is due to be held in May 2018. Why the delay in Sheffield? The city region, which will control additional spending of £30m a year over the next 30 years, was originally going to include Chesterfield and Bassetlaw (which authorities would thereby be able to participate in the significant government funding available). However, Derbyshire County Council (which would automatically thereby be drawn into the arrangement and which opposed “powers for key services in the town being handed to a Sheffield City Region Mayor”) successfully judicially reviewed the process, alleging consultation flaws in R (Derbyshire County Council) v Barnsley, Doncaster, Rotherham and Sheffield Combined Authority, Secretary of State and Chesterfield Borough Council (Ouseley J, 21 December 2016). Chesterfield is in the county of Derbyshire and Bassetlaw is in the county of Nottinghamshire. Ouseley J accepted that the views of the public should have been, but were not, specifically sought as to whether Chesterfield Borough Council should be a part of the combined authority. The case led first to the Sheffield City Region mayoral election being delayed by a year and then to Chesterfield and Bassetlaw withdrawing their applications for full membership (in the case of Chesterfield after Derbyshire had resolved in June 2017 to carry out a full referendum of all Chesterfield residents). 
The momentum generally appears to have paused. Section 1 of the Cities and Local Government Devolution Act 2016 places a duty on the Secretary of State to provide annual reports to Parliament setting out progress on devolution across England as soon as practicable after 31 March each year. The Local Government Association is concerned that this year’s report has not yet been published.   
We are at an interesting point. 

First, am I being too downbeat about the benefits of further devolution? I see that Lord Heseltine and Ben Rogers are speaking on Giving Power to the People: The Future of Devolution at the Future City Festival on 19 October 2017. Is there currently the political, or public, will?
Secondly, what now for London? In my view, the devolution of power to London (including reducing to an extent the powers of individual boroughs) has been a success. The moves towards greater powers for the Mayor of London have continued, which is welcome, but should there be more? Ben Rogers wrote an interesting FT piece Would more independence for London benefit the nation? on 3 October 2017.

Thirdly, and most importantly, what changes will Brexit bring? For a start we will see an end to EU structural funding, much of which was to be passed to local areas, although the Government has guaranteed any spending of these funds that is agreed before the UK leaves the EU. But more fundamentally, as again Professor Janice Morphet has pointed out, in her 2017 paper (not yet published) to the Oxford Joint Planning Law Conference we risk losing part of the drive towards devolution that arises from the EU’s principles of subsidiarity and fairness, which translate into for instance the application of structural funds and the development of the Trans European Networks which have been an impetus for transport infrastructure investment. 
Ultimately, might it be the case that some devolution is ruled by the heart and some by the head? English devolution may be in the latter category, described indeed this week in EG this week by Jackie Sadek as a “fragile flower”. Let’s hope it’s not trampled upon by politicians with only a March 2019 deadline in mind. 
Simon Ricketts, 6.10.17
Personal views, et cetera

Class Distinctions 2: Student Housing

Happy freshers’ week. 
I blogged recently about how the planning system struggles when it comes to housing for older people. But there are worse problems when it comes to student housing. Some recent press articles are at the end of this post, but first you need to get through some law I’m afraid (there may be an examination on it later). 
For a start, from a legal perspective there is a similarly poor fit with the Use Classes Order.
Shared student living in converted houses has since 2010 (in England, 2016 in Wales) been hived off from use class C3 (residential use) into use class C4, the HMO (“houses in multiple occupation”) use class: “small shared houses occupied by between three and six unrelated individuals, as their only or main residence, who share basic amenities such as a kitchen or bathroom”.
This definition excludes: 
– HMOs in blocks of flats (eg what seems to be the main model these days in relation to purpose built student accommodation blocks, with clusters of self-contained flats, each housing six students, sharing cooking and living accommodation) 

– Houses shared by more than six students.

The background to the creation of C4, which was not all about students, but in part a response to concerns about pressures being caused to communities by high concentrations of HMOs more generally, is well summarised in a House of Commons library briefing paper, Houses in multiple occupation & planning restrictions (14 July 2017). 
By virtue of Part L of the Town & Country Planning (General Permitted Development) (England) Order 2015, unless the relevant local planning authority has made an article 4 direction to contrary effect, planning permission isn’t needed to change from C4 to C3 (residential use), or vice versa. Many university towns and cities have made article 4 directions, requiring planning permission to change from C3 to C4 use, for example Sheffield, Leeds, Loughborough, Leicester, Nottingham, Southampton and Durham to name but a few. 
Against the background of almost universal university expansion, this constraint on supply of converted accommodation, denying much of the already (in most areas at least) expensive PRS market to students, has surely played its part both in further increasing student housing costs and in giving students fewer practical alternatives to living in purpose-built student accommodation, often now built and operated by large specialist student housing providers. 
As far as the planning system is concerned, purpose built student housing blocks are generally treated as “sui generis” (outside any use class) and therefore specific planning policies are required at an individual local planning authority level to control them (or to impose standards in terms of unit size, daylighting and sound insulation). In some ways they now often more closely resemble clusters (stacked high) of quasi C4 HMO style accommodation, with bedrooms in self-contained clusters of six, each with its own kitchen and communal area. 
Planning permission is required to make a material change from a sui generis use. Whether there is a material change in the character of the use is for the decision maker to judge. As long as conditions or section 106 agreement planning obligations aren’t breached, change to, say, co-living may not require planning permission. 
Ensuring that purpose built student accommodation is affordable is a big issue. In recent years we have seen student rent strikes, supported by the NUS. In London, we wait to see what further controls will be proposed in the draft London Plan, now expected on 29 November. In the meantime, there was nothing in the Mayor’s draft housing strategy published on 6 September 2017 (in 236 pages I could only find one passing reference to students). To what extent will the policies set out in the previous Mayor’s March 2016 housing SPG remain? The SPG takes the following approach in relation to purpose built student accommodation (PBSA):

– “providers of PBSA are encouraged to develop models for delivery of PBSA in london which minimise rental costs, via its layout and location, for the majority of the bedrooms in the development and bring these rates nearer to the rate of a affordable student accommodation described below
– requirement for affordable student accommodation where a proposed provider does not have an undertaking with a specified academic institution(s) that specifies that the accommodation will be occupied by students of that institution(s)

– affordability determined by reference to a formula that equates to 55% of average student income. For the academic year 2016/2017 this equated to £5,886 or less and for a 38 week contract a weekly rent of £155. 

– the extent of affordable housing to be secured “should be the maximum reasonable amount subject to viability” (our old friend!)

– to enable PBSA providers to maximise the delivery of affordable student accommodation by increasing the profitability of the development, boroughs should consider allowing the temporary use of accommodation during vacation periods for ancillary uses and should consider setting nil CIL rates for affordable student accommodation. 

– eligibility for affordable student accommodation should be based on assessment of need. 

Now that reading list:

Oliver Wainwright, A new urban eyesore: Britain’s shamefully shoddy student housing (The Guardian, 11 September 2017)

Rhiannon Bury, Student housing may be a property bubble in waiting (Telegraph, 18 September 2017)

Could it be the end of the Newcastle student flat boom? Council set to vote on greater controls (Evening Chronicle? 15 January 2017)

Letter: Students vs Residents – this situation in Bath around housing is not students’ fault (Bath Chronicle, 5 September 2017)

Students in Wales taking out loans to afford ‘luxury’ flats (BBC website, 22 September 2017)

It seems to me that there are various issues to be unpacked here:
– the need for authorities properly to plan for the consequences of increases in student numbers

– competing needs as between between student and general needs housing

– often unjustified “there goes the neighbourhood” concerns about the impacts of students on an area. 

– affordability

– the extent to which universities should retain responsibility for housing their students, affordably and to appropriate quality standards.

Class, discuss. 
Simon Ricketts, 24.9.17
Personal views, et cetera

Policing The SPG: New Scotland Yard

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

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

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

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

– current affordable housing commitment well below 35% threshold

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

– land formerly in public ownership

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

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

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

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

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

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

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

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

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

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

20 Changes In The Final Version Of The London Mayor’s Affordable Housing & Viability SPG

The final version of Sadiq Khan’s supplementary planning guidance on affordable housing and viability was published on 16 August 2017. I had previously blogged on the November 2016 draft. 

For internal purposes at Town we have prepared a tracked version, showing the differences. There are many, mostly tightening up the language, but also with some material additions and changes of emphasis.

This blog post focuses on 20 of what appear to me to be material changes from the position I summarised last year: 
1. 50% affordable threshold for public land

The threshold for the ‘fast track route’, where viability information is not required, nor review mechanisms as long as an agreed level of progress is made following the grant of permission, remains at 35% for schemes on private sector owned land. However a higher threshold of 50% has been introduced for land “in public ownership or public use” where grants are not available.

“2.33  It is widely recognised that land in public ownership should make a significant contribution towards the supply of new affordable housing. Land that is surplus to public sector requirements typically has a low value in its current use, allowing higher levels of affordable housing to be delivered. For these reasons the Mayor has an expectation that residential proposals on public land should deliver at least 50 per cent affordable housing to benefit from the Fast Track Route. 


2.34  Where a public landowner has an agreement in place with the Mayor to provide 50 per cent affordable homes across a portfolio of sites, individual sites which meet or exceed the 35 per cent affordable housing threshold and required tenure split may be considered under the Fast Track Route. Where such an agreement is not in place, schemes that do not provide 50 per cent affordable housing will be considered under the Viability Tested Route. 


2.35  Where 50 per cent affordable housing is delivered on public land, the tenure of additional affordable homes above the 35 per cent is flexible and should take in to account the need to maximise affordable housing provision. 


2.36  This will apply to land that is owned or in use by a public sector organisation, or a company or organisation in public ownership, or land that has been released from public ownership and on which housing development is proposed.

Is the definition in paragraph 2.36 specific enough? What are companies or organisations in public ownership? What if the land was released from public ownership long ago?

2. Specific advice in relation to section 73 applications

2.14  For schemes that were approved under the Fast Track Route, any subsequent applications to vary the consent will not be required to submit viability information, provided that the resulting development continues to meet the 35 per cent threshold and required tenure split, and does not otherwise result in a reduction in affordable housing or housing affordability. 


2.15  For schemes where the original permission did not meet the 35 per cent threshold or required tenure split, or where a proposed amendment would cause it to no longer meet these criteria, viability information will be required where an application is submitted to vary the consent and this would alter the economic circumstances of the scheme (for example resulting in a higher development value or lower costs). Such schemes will be assessed under the Viability Tested Route to determine whether additional affordable housing can be provided.

2.16  Proposed amendments that result in a reduction in affordable housing, affordability or other obligations or requirements of the original permission should be rigorously assessed under the Viability Tested Route. In such instances a full viability review should be undertaken that reconsiders the value, costs, profit requirements and land value of the scheme. The Mayor should be consulted where a scheme amendment is proposed that changes the level of affordable housing from that which was secured through the original planning permission.”


There is a risk that the inevitable minor amendments that come forward after grant of planning permission, with less than a material effect on the economic circumstances of a scheme, will lead to the need for updated viability information if paragraph 2.15 is to be applied strictly. This could lead to delays, or to scheme amendments not being pursued if the borough is not prepared to accept that they are non material amendments that can be secured under section 96A.

3. Greater emphasis on viability transparency

The draft guidance already indicated that viability information “should be available for public scrutiny and comment like all other elements of a planning application“. The new guidance ratchets this up a further level:

– “boroughs should implement procedures which promote greater transparency where not already in place”. 

– in submitting viability information, applicants “should also provide a summary of the financial viability assessment which outlines key findings, inputs, and conclusions to assist review by the LPA, Mayor, and members of the public.”

Applicants will still have the opportunity to “argue that limited elements should be confidential, but the onus is on the applicant to make this case“.

4. Habitable floorspace cross-check
Whilst the percentage of affordable housing should be measured in habitable rooms, there is this additional advice:

“Habitable rooms in affordable and market elements of the scheme should be of comparable size when averaged across the whole development. If this is not the case, then it may be more appropriate to measure the provision of affordable housing using habitable floorspace. Applicants should present affordable housing figures as a percentage of total residential provision by habitable rooms, by units, and by floorspace to enable comparison.”

5. Sensible flexibility regarding fast track approach

The draft guidance indicated that in order to follow the fast track approach, even if a scheme offered the threshold level of affordable housing, it was required to “meet all of the other relevant policy requirements and obligations”. The relevant passage now refers to meeting “other obligations and requirements to the satisfaction of the LPA and the Mayor where relevant”.  

6. Greater emphasis on exploring the opportunity for public subsidies

“All schemes are expected to determine whether grant and other forms of subsidy are available and to make the most efficient use of this to increase the level of affordable housing delivered. All applicants are expected to work with the LPA, the Mayor, and Registered Providers (RPs) to ensure affordable housing from all sources is maximised.”

The guidance is intended to be “integrated with the approach to funding set out in the Mayor’s guidance to his Affordable Homes Programme 2016-2021 .

Funding is said to be available on a fixed grant-per-unit basis:

2.24  Where developer-led schemes can provide or exceed 40 per cent affordable housing (with grant) then the fixed grant per unit will be available on all affordable housing units in the scheme. 


2.25  Where developer-led schemes are delivering less than 40 per cent, grant will only be available for the additional affordable homes over and above
the baseline level of affordable housing shown as being viable on a nil-grant basis.”

“2.28  Where public subsidy is available to increase the level of affordable housing on a scheme the tenure of additional affordable homes above the 35 per cent is flexible but should take into account the need to maximise affordable housing provision through the available public subsidy.”


7. Build To Rent

The final version of the guidance retains the Mayor’s support for build to rent. Some additional elements have been spelt out in his “build to rent” definition. As well as being a development of at least 50 units, with a build to rent covenant of at least 15 years, with self-contained units, operated under unified ownership and management, the development must:

” • offer longer tenancies (three years or more) to all tenants, with break clauses that allow the tenant to end the tenancy with a month’s notice any time after the first six months; 


* offer rent certainty for the period of the tenancy, the basis of which should be made clear to the tenant before a tenancy agreement is signed, including any annual increases which should always be formula-linked; 


* include on-site management, which does not necessarily mean full-time dedicated on-site staff, but must offer systems for prompt resolution of issues and some daily on-site presence; 


* be operated by providers who have a complaints procedure in place and are a member of a recognised ombudsman scheme; and 


* not charge up-front fees of any kind to tenants or prospective tenants, other than deposits and rent-in-advance.

There is more detailed guidance about the clawback arrangement if units in the scheme cease to be available as BTR:

“4.14  In line with the Mayor’s approach to affordable housing on Build to Rent schemes, and to ensure that there is no financial incentive to break a covenant, planning permission should only be granted where the scheme is subject to a clawback agreement. The appropriate clawback amount will be the difference between the total value of the market rent units based on the viability assessment at application stage, and those units valued on a ‘for sale’ basis at the point of sale. The LPA should be notified of the sale price of units that are sold and this should inform the market value of remaining units to determine the clawback. The clawback amount must demonstrate a sufficient difference in the value of units between rented and for sale tenures, consistent with the ‘distinct economics’ of build to rent, for the scheme to qualify for the Build to Rent pathway.

4.15  The clawback amount will be payable to the LPA for the provision of affordable housing in the event that market rented units are sold within
the covenant period, which would break the covenant. For larger phased schemes the LPA should consider whether the clawback amount should be disaggregated to the relevant block in which units are sold. The clawback amount should not reduce over time to ensure that the covenant remains effective for the full period. 


4.16  In the event that a share of rented units are sold, and the remaining units are retained within the rental market, an LPA may determine that the clawback 
is calculated based on the units sold. The other units will remain under covenant and the clawback will apply at the point of sale if disposed of within the covenant period. 


4.17  The clawback does not relate to any affordable units provided as part of the scheme. Affordable units are not subject to a minimum covenant period and must always be secured in perpetuity. Additionally, overall ownership of the building(s) in which the units are located may change during the covenanted period without triggering ‘clawback’ if the units remain in single ownership and management as Build to Rent.

Encouragingly, the guidance indicates that, as the sector develops, “the Mayor will keep under review whether it may be possible to set out a Fast Track Route specifically for developments following a Build to Rent pathway through the planning system.”


8. The “early review”

This is the review that the draft guidance stated was to be carried out when an agreed level of progress on implementing the scheme has not been achieved within two years of the permission being granted. The early review is also in the final version of the guidance, although with a little more flexibility: “within two years of the permission being granted or as agreed with the LPA”. 

Plans in the section 106 agreement “should identify which homes would switch to affordable accommodation in the event of an improvement in viability at this early stage”. 

All review mechanisms should generally set a cap on the amount of additional provision to be sought, which should be 50% affordable housing. Suggested formulae are set out in the guidance. 

9. Mid-term review

For applications that do not meet the 35%/50% threshold, as well as the early stage review there is the late stage review at the point at which 75% of units are sold or let (the review generating payments in lieu rather than an additional requirement for affordable housing in the scheme, and with the surplus split 60/40 between the borough and the developer). However, the final version of the guidance introduces the possibility of mid-term reviews for some schemes:

“For longer-term phased schemes it may also be appropriate to secure mid-term reviews prior to implementation of later phases and an updated Early Stage Review in the event that a scheme stalls for a period of 12 or more months following an Early Stage Review.”

10. Targets for registered providers

2.30  Generally the Mayor expects RP-led schemes to seek to deliver as much affordable housing as possible within the context of the requirements of London Plan policy 3.12. RPs with agreements with the Mayor have to deliver at least 50 per cent affordable housing across their programmes, and in the case of strategic partners 60 per cent. 


2.31  The approach to grant funding for approved provider-led schemes is set out in Mayor’s Homes for Londoners: Affordable Homes Programme 2016-21. 


2.32  RP-led schemes are likely to benefit from programme grant as set out in 2.30. Individual schemes which are led by RPs with an agreed programme with the Mayor can follow the Fast Track Route if they can commit to delivering a minimum of 35 per cent without grant. This should be set out in the Section 106 agreement along with the proportion of affordable housing which can be delivered with grant.”


11. Density opportunities

“2.37  Where a scheme meets the 35 per cent affordable housing threshold it may also be appropriate to explore the potential to increase densities on a case- by-case basis to enable the delivery of additional affordable homes where this meets exemplary design standards. It is for LPAs, and the Mayor where relevant, to consider the weight to be given to the benefit of additional affordable housing above the threshold, where this arises through increased densities or scale.”

12. Incentivising largely or entirely affordable housing schemes


2.42  To incentivise schemes that are largely or entirely affordable, those that propose 75 per cent affordable housing or more as defined by the NPPF may be considered under the Fast Track Route whatever their tenure mix, as long as the tenure and other relevant standards are supported by the LPA.”

13. Affordable housing requirements for co-living and student accommodation

As did the draft, the final version of the guidance sets out that”new types of non-self contained accommodation [the final version adds: “such as purpose-built shared accommodation“] can play a role in meeting housing need where they are of high quality and well designed.” These should not be classed as affordable provision (and nor should hostels). The final version of the guidance states:

“2.51…Affordable housing contributions on these schemes will be assessed through the Viability Tested Route, and should be provided as separate or off-site self- contained provision, or cash in lieu payments. 


2.52  Student accommodation developments will also be assessed under the Viability Tested Route. Affordable student accommodation should be provided onsite in line with the Mayor’s Housing SPG.”


14. More detailed guidance on off-site affordable housing and cash-in lieu contributions

The guidance stresses that “[v]iability alone is insufficient justification for off-site affordable housing provision or a cash in lieu payment” and goes on to set out in more detail than previously how off-site provision and cash-in-lieu payments are to be calculated:

2.61  Off-site affordable housing requirements will be calculated by reference to the total housing provision on the main development site and any linked sites providing off-site affordable housing. For the purposes of the initial assessment and viability reviews the policy target would equate to 50 per cent affordable housing provided across the main site and any linked sites providing affordable housing when considered as a whole. 


2.62  The starting point for determining in-lieu contributions should be the maximum reasonable amount of affordable housing that could be provided on-site as assessed through the Viability Tested Route. The value of the in- lieu contribution should be based on the difference in Gross Development Value arising when the affordable units are changed to market units within the appraisal. This is to ensure that where the on-site component of
market housing is increased as a result of the affordable contribution being provided as a cash in-lieu payment, this does not result in a higher assumed profit level for the market homes within the assessment which would have the effect of reducing the affordable housing contribution. 


2.63  The maximum value of any in-lieu contribution, for the purposes of the
initial assessment and viability reviews (the policy cap), will be based on
the equivalent of 50 per cent affordable housing provision. As with off-site affordable housing provision (see above), the target will be a percentage of the on-site market housing taken together with additional affordable housing provided off-site. 


2.64  Where an LPA has established a locally based approach for determining in-lieu contributions, such as a tariff based approach, this may be applied where this would result in a higher level of affordable housing provision (or higher policy cap).”

15. More detailed advice on estate regeneration schemes

Existing affordable housing that would be lost in an estate regeneration scheme should be replaced on a like-for-like basis. The guidance clarifies that this means “that, for example, homes at social rent levels should be replaced with homes at the same or similar rent levels, or that specialist types of affordable housing should be replaced with the same type of housing. The Fast Track Route does not apply in these circumstances, and all estate regeneration schemes should follow the Viability Tested Route to deliver the re-provision of the existing affordable floorspace on a like-for-like basis and maximise additional affordable housing.”


There is also this new passage

“2.67  Where a borough is redeveloping an estate as part of a wider programme then it may be possible to re-provide a different mix of affordable housing
on the estate, taking account of the wishes of people who want to return to the estate, if the affordable housing is re-provided like-for-like or increased across the programme as a whole. This must also take account of the affordable housing requirements on the linked sites (i.e. it must be in addition to what the linked site would have delivered on its own). Further information on Estate Regeneration can be found in the Mayor’s Good Practice Guide.

16. Scheme delivery


There are these new passages:

3.10  Applicants should demonstrate that their proposal is deliverable and that their approach to viability is realistic. As such appraisals would normally be expected to indicate that the scheme does not generate a deficit, and that the target profit and benchmark land value can be achieved with the level of planning obligations provided. If an appraisal shows a deficit position the applicant should demonstrate how the scheme is deliverable. 


3.11  Where an applicant is seeking to rely on assumptions of growth in values these should be provided. For shorter-term non-phased schemes which are based on current day values and costs, growth assumptions should be included as a scenario test. 


3.12  For phased or longer-term schemes, it may be appropriate to include growth assumptions within the appraisal to ensure that this is realistic and that affordable housing is maximised. These should be informed by recognised market sources for the relevant area. Where this is the case viability review mechanisms will be required as set out in this guidance given the uncertainty in determining viability at the application stage. Higher profit targets should not be assumed which offset the benefits of this approach.”

17. Greater examination of costs information

Appraisals should set out the gross to net floorspace ratio of the proposed development. 

There are these additional passages as well:

3.23… Applicants should submit elemental cost plans that are consistent with the level of detail provided in the drawings in support of planning applications (i.e. RIBA Plan of Works Stage C). Wherever possible such assessments should be benchmarked against other similar projects. Where an appraisal is based on current day values, costs should not include build cost inflation. 

3.24  LPAs are strongly encouraged to use cost consultants to rigorously assess scheme proposals and verify whether costs are appropriate taking into account pricing, quantities, specification, and assumed development values. Consideration should also be given to scheme design and whether development costs could be reduced as part of a cost/ value assessment.”

“3.26  Professional and marketing fees should be justified taking account of the complexity of the development and development values. Costs applied on a percentage basis should be realistic when considering the monetary value of the assumed cost.”
17. Additional passages in relation to developer profit

“3.32 In line with PPG a rigid approach to assumed profit levels should be avoided and applicants cannot rely on typically quoted levels. 


3.33  Factors that may be relevant when assessing scheme-specific target profit levels include the scheme’s development programme, and whether it is speculative or provides pre-sold/ pre-let accommodation. Market forecasts and stock market trends may also provide an indication of perceived market-wide risk”. 

18. Greater flexibility as to the use of internal rate of return

The draft guidance set out an expectation that the IRR measure of return would not be used for schemes providing fewer than 1,000 units. This is gone, although where IRR is used, profit must also now be considered as a factor of gross development costs or gross development value.

19. Defining EUV and any premium 

The guidance clarifies that where “a proposed EUV is based on a refurbishment scenario, or a redevelopment of the current use, this is an alternative development scenario and the guidance relating to Alternative Use Value (AUV) will apply.”


There is this additional passage in relation to the quantification of any premium:

“The level of premium can be informed by benchmark land values that have been accepted for planning purposes on other comparable sites where determined on a basis that is consistent with this guidance.”
20. Advice on the use of market value

In the limited circumstances where a non EUV+ approach is acceptable, there is more detailed guidance on the use of transactional evidence to establish market value:

3.49  In the very limited circumstances where this approach may be justified,
an applicant must demonstrate that the site value fully reflects policy requirements, planning obligations, and CIL charges, and takes account of site-specific circumstances. Market land transactions used must be fully evidenced and justified as being genuinely comparable and consistent with the methodology applied in the viability assessment. These should also be used to determine whether the residual value of the scheme and cost and value inputs are realistic. The applicant should also consider the: 


- EUV; 

– the Residual Land Value assuming a policy compliant affordable housing offer; 

– the Residual Land Value based on an assumption of no affordable housing; and

– the Residual Land Value based on evidence from recent comparable market transactions. 


3.50  Land is valued on a current day basis; changes in circumstances since a site has been purchased are a factor of development risk. Land transactions may also be based on unrealistic assumptions regarding development density, changes of use, or planning obligations. Where site value does not take full account of the Development Plan or CIL charges, where market land transactions are not fully evidenced and genuinely comparable, or where transactions are based on a different methodology and have not been appropriately adjusted, reliance on market transactions will not be supported. 


3.51  If an applicant seeks to use an ‘alternative use value’ (AUV) approach it must fully reflect policy requirements. Generally the Mayor will only accept the use of AUV where there is an existing implementable permission for that use. Where there is no existing implementable permission, the approach should only be used if the alternative use would fully comply with development 
plan polices, and if it can be demonstrated that the alternative use could be implemented on the site in question and there is market demand for that use. 


3.52  In order to demonstrate the value of a policy compliant alternative that does not benefit from an implementable permission but does have a realistic prospect of achieving planning permission, the applicant should provide a detailed alternative proposal, incorporating current day costs and values. The applicant should also explain why the alternative use has not been pursued.”


In short, there’s a lot for us all to get our heads around. If I have missed anything, no doubt you will let me know…

Simon Ricketts, 20 August 2017

Personal views, et cetera

[Thank you, Rebecca Craig at Town Legal for rising to my initial “spot the difference” challenge].

First World Problems 2: Amalgamations And Deconversions

Securing planning permission for your proposed super-basement is definitely a first world problem (see my previous 5 December 2016 blog post). 
As is seeking to knock two or more flats or houses into one.
There’s that scene in Help! where John, Paul, George and Ringo each open their separate front doors in a terraced street, which all open into one enormous Beatle mansion. (Illusions shattered: in reality Ailsa Road, St Margarets followed by a set at Twickenham Film Studios.).

Until 2000, the general view was that amalgamations like this, as well as deconversions of flats back into single dwellinghouses, probably didn’t amount to development requiring planning permission. The statutory definition of development specifically includes sub-division of dwellings (“the use as two or more separate dwellinghouses of any building previously used as a single dwellinghouse involves a material change in the use of the building and of each part of it which is so used“, section 55(3)(a), Town and Country Planning Act 1990) but is silent as to amalgamation. 
The way in which that position has changed, without any change in legislation is an interesting example of the way in which the scope of planning law and of relevant planning considerations can change over time to reflect social priorities and concerns.
The judgment of Christopher Lockhart-Mummery QC sitting as a deputy High Court judge in London Borough of Richmond v Secretary of State (28 March 2000) was a significant turning point. “It is undoubtedly the law that material considerations are not confined to strict questions of amenity or environmental impact and that the need for housing in a particular area is a material consideration…” The case involved a conversion from seven flats to one dwelling. 
It was then thought that this case could often be distinguished in terms of the number of units that were to be lost in that case and that LPAs would face an uphill struggle where they did not have policies in place restricting amalgamations resulting in the loss of dwellings. 
For instance, Kensington and Chelsea’s consolidated local plan currently states that the council will “resist development which results in the net loss of five or more residential units”. Until August 2014, the council took the view that this constrained its ability to argue that amalgamations leading to the loss of less than five units did not amount to development requiring planning permission. In R (Royal Borough of Kensington and Chelsea) v Secretary of State (Holgate J, 15 June 2016), Christopher Lockhart-Mummery QC was representing the owners of two flats in Stanhope Gardens SW7 seeking to defend a certificate of lawfulness of proposed use which they had won on appeal. The inspector had considered that without a formal change in policy, the loss of a unit by way of amalgamation could not be relevant, even though the inspector accepted that “the scale of amalgamation in the Borough may be having a material effect on the number of dwellings in the Borough“. Holgate J held that this approach was wrong – whilst the nature of the policy would be relevant to whether planning permission should be granted, this did not mean that the housing need concerns raised by the council were not significant “for the threshold purpose of deciding whether planning permission even applied“. All was not however lost for the owners – the inspector had also granted planning permission for the amalgamation and the council’s challenge to that decision was rejected. 
RBKC’s local plan partial review, which is currently under examination, proposes a more restrictive policy that would only allow any amalgamation where the resulting dwelling is less than 170 sq m. Westminster City Council takes a different approach. Policy S14 of its city plan indicates that:
“Proposals that would result in a reduction in the number of residential units will not be acceptable, except where: 

* the council considers that reconfiguration or redevelopment of affordable housing would better meet affordable housing need; 


* a converted house is being returned to a family-sized dwelling or dwellings; or 


* 2 flats are being joined to create a family-sized dwelling.”

Amalgamations are a drag on net housing supply in both boroughs. Housing in London 2015: The evidence base for the Mayor’s Housing Strategy (Mayor of London, September 2015) reports:

“Between 2011/12 and 2013/14 a net 5,010 homes were created through conversions and a net 1,160 homes were lost through de-conversions.

Conversions were most common in accessible Inner London locations, and de-conversions in high price areas. The ward with the most conversions in this period was St. Leonard’s in Lambeth with 74 followed by Childs Hill in Barnet with 65. The three wards with the highest numbers of de- conversions were all in Westminster – Hyde Park (with 42), Knightsbridge and Belgravia (27) and Bayswater (26).


Planning Resource briefly reported (subscriber only content) a ruling by Lang J on 27 July 2017 in Royal Borough of Kensington and Chelsea v Secretary of State, where she apparently quashed the decision of a planning inspector, who had allowed an appeal against refusal of planning permission partly on the basis of a certificate of lawfulness of proposed use or development for a proposed amalgamation that had been issued before the council’s August 2014 change in stance. Presumably she considered that circumstances had materially changed such that the certificate could no longer be relied upon. 

The battle has moved now to whether planning permission should be granted, rather than whether it is necessary. On 13 July 2017, in Royal Borough of Kensington and Chelsea v Secretary of State and Noell and Royal Borough of Kensington and Chelsea v Secretary of State and Lahham Deputy High Court Judge Neil Cameron QC quashed two decisions where separate inspectors had granted permission on appeal. The inspector had made a mistake of fact in both decisions when calculating housing land supply as he deducted vacant units returning to use from the requirement whilst including those units in the supply and by stating that the housing land supply would be boosted further by recent deliverable planning permissions when those planning permissions were already accounted for in the calculated supply. The Secretary of State did not defend either claim. Christopher Lockhart-Mummery QC acted for the owners (if there’s a golden thread that runs through the case-law on amalgamation, it’s Christopher). 
Pending a tighter policy being in place, Inspectors have indeed still been allowing appeals in Kensington and Chelsea. For instance:
Warwick Gardens, Kensington, 17 May 2017:
“In regards to the development plan, whilst I find conflict with Local Plan Policy CH3 and London Plan Policy 3.14 in that a unit of residential accommodation would be lost, and saved UDP Policy H17, the appeal proposal would not prejudice the Council’s ability to meet its housing supply targets or give rise to unacceptable harm in regards to housing choice. Indeed, it would assist to address the imbalance in the housing stock in regards to 3 bedroom dwellings. Consequently, I do not consider that the appeal proposal conflicts with the development plan when taken as a whole.”

15 Cheyne Place, Kensington, 10 April 2017:

“The proposal would conflict with Policy CH3 of the CLP and 3.14 of the LP, which seek to ensure that that there is a sufficient supply and choice of housing. Notwithstanding this conflict, I do not find that, in this instance, the proposal would undermine the Council’s ability to achieve its housing targets. In addition, it would also make a contribution towards an identified need for three bedroomed units. Moreover, the emerging Local Plan Partial Review indicates that the Council intend to accept amalgamation development of this scale. Therefore, in culmination, I attribute significant weight to these matters which outweighs the moderate conflict the proposal has with the CLP and LP.”
28 Victoria Road, Kensington, 11 January 2017:
“I saw at the site visit that the garden arrangement as existing is not ideal. There are presently no separate areas that 2 individual units could use and, if shared, residents of the upper floors would be able to gain views into the bedroom window of the ground floor flat whilst using the garden. To restrict the use of the garden to the ground floor occupants would leave the larger unit with no outdoor amenity space apart from a small terrace at first floor level.

77 Drayton Gardens, Kensington, 4 November 2016:

“As part of its Local Plan Partial Review, the Council is about to consult on a policy which would permit the amalgamation of two residential units to one, if the gross floorspace of the resulting unit would not exceed 170 sqm. Mr Burroughs’ unchallenged evidence is that the resulting unit in this case is 99 sqm. ”

“The amalgamation of two residential units (second and third floor flats) into a single residential unit conflicts with CLP Policy CH3, saved UDP Policy H17 and LP Policy 3.14B, which aim to ensure an adequate supply and choice of housing to meet identified needs. The Framework also requires Council to boost significantly the supply of housing. However, on the evidence before me, the amalgamation will not, on the balance of probability, affect the Council’s ability to meet its housing targets. Furthermore, it will contribute to meeting a current identified need for larger dwellings in the borough, whilst improving the quality of accommodation, in accordance with LP 3.14A. Furthermore, in the light of the terms of a policy now being proposed as part of the Local Plan Partial Review, the Council appears to consider that amalgamations of this kind could be acceptable. On balance, these are material considerations which indicate that I should allow the appeal on ground (a) and grant planning permission, notwithstanding the conflict with the development plan.”

Simon Ricketts, 6 August 2017
Personal views, et cetera