(How) Can Planning Speed Up Delivery? (part 2)

Part 1 of this blog considered the expectations and challenges around build out and some of the reforms proposed to address it. This part considers the implications of slow build out for local authorities and what they, and the planning system more broadly, can do to speed up delivery.

Accountability for delivery

Local authorities are at the sharp end of the slow build out problem. They have limited control over development once development is fully permitted but are increasingly going to be become accountable under the NPPF for delivery against their local housing requirements.  

According to the last Housing Delivery Test (HDT) results, 33% of LPAs have become subject to at least one of the NPPF ‘penalties’ arising from under-delivery. 19 further local authorities are likely to face another 20% buffer to their 5-year housing land supply in 2020 (Planning Magazine). If local authorities lack enough ‘deliverable’ sites to make up that level of supply, the ’tilted balance’ may kick in. Those authorities then, in theory, become more vulnerable to planning by appeal.  

So what can LPAs do?  

LPA tools

  • Restrict: Authorities can, in principle, impose conditions setting a timeframe for implementation that is shorter than the default statutory 3 years. Where an LPA considers that an implemented development is unlikely to be completed within a “reasonable period”, it can serve a ‘completion notice’ (s.94(2), TCPA 1990). This does not require completion; it is a notice that the permission will (subject to Secretary of State sign-off) expire. At the end of the period specified, the permission becomes invalid and the development can no longer proceed.

These are negative tools, however. They are more likely to frustrate development than encourage it. It is not surprising that they are seldom used.

  • Contract: Local authorities are likely to consider using contractual mechanisms. These would include an agreed trajectory for build out, including deadlines by which certain build out ‘milestones’ must be completed – e.g. numbers of storeys or residential units, a development phase.  Absolute delivery commitments may generate legal interest in whether they are enforceable or, more fundamentally, necessary (see Wavendon Properties, for example). Where agreed milestones are not achieved by the relevant deadlines, there could be:
  • changes to housing types and tenures – e.g. increased proportion of rented housing or affordable housing, a shift in the affordable tenure split towards social rent, etc.;
  • acceleration of triggers for the delivery of infrastructure items (schools, libraries, etc.);
  • a viability review;
  • theoretically, an option for the Council to acquire the land becoming exercisable.

The effectiveness and desirability of these mechanisms depend on factors such as the extent of any contractual get-outs for the developer, provisions for control over the quality of the development and monitoring, and the LPA’s monitoring capacity.

  • Deliver: More ambitiously, local authorities can themselves engage in delivery, either individually or with private sector partners, through ‘local housing companies’. Indeed the use of these vehicles has increased significantly in recent years.
  • Supply: politicians can chose to allocate more land than necessary to meet the NPPF’s minimum requirement for a 5YHLS + 5%, to better compensate for consent lapses, which local plan housing trajectories sometimes underestimate. Flipped the other way around, less exuberant delivery trajectories can be used (which more closely reflect the build out patterns covered in Part 1 of this blog) – more deliverable sites would need to be identified to compensate for the more realistic approach. 

Positive thinking

There is no single solution for speeding up delivery, and mere tinkering with the current system will not do. More work is needed to understand whether positive incentives can be devised to specifically target the rateof delivery, rather than delivery per se

In any event, any package of measures should include Government incentives that reward authorities, and perhaps investors, for planning for growth and delivering it in a timely manner. Putting in place a more meaningful alternative to the New Homes Bonus would be a start in creating incentives to facilitate speedy delivery once outline permissions have been granted without the burden on further planning regulation.

In the meantime, the tools identified above are likely to come more to the fore in debates about delivery.

(How) Can Planning Speed Up Delivery? (part 1)

Between 2011/12 and 2017/18, on average, 258,192 homes were consented each year but only 153,560 homes were completed each year.  This gap is a challenge given high housing demand and the slow ratchet of the Housing Delivery Test.

The issue has focused attention on the build out rate: how quickly new dwellings are completed once they are fully consented. The search for solutions to ‘slow’ build out has focused on the planning system (which restricts and permits development, but does not demand its completion). So what can the planning system do to increase the build out rate?

This blog is in two parts. Part 1 looks at the reasons for build out and some of the measures proposed to address it. Part 2 considers the implications of ‘slow’ build out for local authorities and the planning tools available to them to encourage faster build out.

Build out rate – market forces

On the face of it, large-scale housing development is an obvious way to deliver more homes quickly, especially given NPPF support and government funding for urban extensions / new settlements. However, the Letwin Review found that very large sites in high-demand areas are likely to complete only a small proportion of their units each year.

Lichfields’ research (first reported in 2016 and updated in 2018) found that sites of all sizes experience the same constraints. Sites of 500-999 units struggle to complete more than 100 homes a year. Although sites of 2000+ units can see higher build-out rates – i.e. over 300 completions a year – those higher rates tend to be short-lived within the overall build out period. 

Why? For Letwin, it was too much of the same. The market can only absorb so many of a limited range of products (i.e. 1- and 2-bed private sale flats) within a given period, unless prices come down.  

It is important to stand back when looking at the raw statistics and think about when the clock really starts to run for ‘consented’ schemes.  Achieving post-consent approval of details (including reserved matters) can take significant time, which means the gap is not necessarily what it seems nor simply a function of supply-demand economics.

Reform?

Several players have proposed reforms:

  • Tenure diversity: Letwin recommended introducing new planning rules for large sites, requiring more diversity of home types and tenures in line with demand.  These changes would include new legislation requiring ‘housing diversification’ to be a reserved matter in all outline planning permissions for large sites in high demand areas and a prod for authorities to “insist on levels of diversity that will tend to cap residual land values for these large sites at around ten times their existing use value”.

The Government’s response was lukewarm: supporting the principle of funding increased housing diversification through reductions in residual land values but moving on to the process elements of Accelerated Planning.  

  • Letwin also suggested that improved coordination between utilities, highways authorities and other agencies could help bring forward the start of build out. This is an area where real delays to build out occur and where Government should assist, including through the Infrastructure and Projects Authority.
  • The British Property Federation has launched its own Accelerated Planning Manifesto focussing on how plan-making and development management can drive delivery. Noting the “contradiction” between deep cuts to the English planning system while increasing housing targets by 50%, the first proposal is for Government to “invest heavily in local authority planning departments to address … funding cuts combined with more investment from the private sector.”
    The Queen’s Speech on 19 December indicated that the forthcoming planning White Paper (to be published soon) will contain measures to help with local authority resourcing. We will otherwise have to wait for the publication of the White Paper to see what appetite the new Government has for the above proposals.
  • A further change would be to recognise the limits of process engineering and regulatory interventions on supply economics and simply allocate more land. The current ‘Do Minimum Plus 20%’ approach would seem to create too small a pool of land.

Viability – Speed of Delivery Matters

Last year, the High Court in R (McCarthy and Stone Retirement Lifestyles Ltd) v Greater London Authority [2018] EWHC 1202 (Admin) found the Mayor of London’s 2017 Affordable Housing and Viability SPG unlawful in one respect: the SPG sought to require all planning applications that do not provide at least 35% affordable housing to be subject to early and late stage viability reviews (the ‘Viability Tested Route’). 

This, the Court found, is inconsistent with current London Plan Policy 3.12 which only requires further reviews on developments that are ‘likely to take many years to implement‘.  It was therefore not something that the SPG could, as guidance, properly cover.

So what?

Policy H6 of the Draft New London Plan now seeks to convert the SPG’s approach to viability into policy.  The Mayor has therefore been unruffled by the judgment. Although the Draft London Plan is not yet adopted, he has given full weight to the emerging policy. 

The McCarthy and Stone judgment was more circumspect about weight (paragraph 57), noting that only once representations had been considered and the DNLP amended would it have equal weight to guidance.  It would, it was held, be normal at that point for it to have “some” weight. 

London Plan Weightlessness

The Millharbour appeal decision in December bears out the limited weight that the draft policies deserve. The Inspector found that a late stage review was not necessary to make a proposal, offering 16% affordable housing, acceptable in planning terms.

This was a single-phase, mixed-use scheme including two tall buildings and 319 residential units in Tower Hamlets.

The Council agreed with the developer that only 16% affordable housing could be provided, but nonetheless sought to justify a late stage review on two grounds:

  • first, the appellant’s earlier viability assessments suggested 35% and 40% affordable housing could be provided;
  • second, the Draft London Plan applies the Viability Tested Route where the relevant affordable housing threshold is not met.

Rejecting that, the Inspector had ‘no reason to quibble with the [agreed] 16% level‘ and found that:

  • the previous affordable housing offers carried no weight in justifying a late stage review. The Draft London Plan carried only ‘limited weight’;
  •  a late stage review would only be needed (citing McCarthy and Stone) where a scheme ‘took ‘many years’ to implement or build out‘. It was ‘very unlikely this scheme would be left unfinished for any length of time or that it would take many years to complete’. Hence, no late stage review was required.

This appeal decision shows that decision-takers may, at least in the short term, find it harder to rely on policy alone to justify further viability reviews for schemes offering sub-threshold levels of affordable housing. Where policy is being relied on, it is likely to focus minds on the ‘likely to take years to implement’ criterion, imprecise and evidentially problematic though it is.

The decision also suggests that a) speedy delivery (i.e. of smaller, more straightforward schemes) as a matter of policy has the potential to compromise affordable housing, and b) conversely, slower and longer/phased schemes may be subject to higher affordable housing requirements. The Mayor will be concerned that this does not create perverse incentives. In any event, all sides will be keenly watching the examination of Draft Policy H6.

A legitimate expectation to what, exactly?

The Court of Appeal has considered whether the Secretary of State is required to give reasons for deciding not to ‘call in’ a planning application. In R (on the application of Save Britain’s Heritage) v Secretary of State for Communities and Local Government [2018], Save Britain’s Heritage (Save) challenged the lawfulness of the Secretary of State’s (SoS’s) decision under s77 of the Town and Country Planning Act 1990 not to call in an application relating to the ‘Paddington Cube’ development. We consider the court’s findings and its implications.

Read the full article

This article was first published in Property Law Journal (December 2018/January 2019) and is also available at www.lawjournals.co.uk.

Legislation not the ‘agent of change’

Supporters of the Planning (Agent of Change) Bill 2018-19 had been looking forward to its second reading in the House of Commons on 26 October 2018. On 10 September, however, the Bill was withdrawn.

Parliamentary bale out

Music/ cultural venues and pubs in particular will be disappointed. There will be no legal planning protection for existing such uses, which are often threatened by nearby noise-sensitive (i.e. residential) development.

It is not clear why the Bill was withdrawn. The Bill itself was not published (or, if it was, it was withdrawn shortly afterwards), so we do not know what we are missing.

Planning policies fill the gap?

The agent of change principle is, however, included in Paragraph 182 of the new NPPF, which provides:

Where the operation of an existing business or community facility could have a significant adverse effect on new development (including changes of use) in its vicinity, the applicant (or ‘agent of change’) should be required to provide suitable mitigation before the development has been completed.

The Paragraph 182 provision that the new use ‘should be required’ to mitigate is in itself strong, but it is subject to there being a ‘significant adverse effect’ – a high threshold. It does not necessarily preclude complaints to councils or, worse, nuisance claims.

The NPPF is highly material but will need to be applied flexibly. In practice, the effectiveness of the principle is likely to depend on development plan policies, planning officers and council members upholding it. This in turn depends in some cases on communities demonstrating the importance of music venues and pubs in their area. It also requires decision-takers to recognise the wider nuisance-sensitive uses that should benefit from protection against parachuting in, for example retail operations. The Draft London Plan Policy D12 helpfully unpacks some of these elements but is also artificially narrow, protecting ‘venues’ rather than the wider range of uses that make up diverse and, increasingly, intensified, city spaces.

However, regardless of any planning policy mitigation measures, there will always be a risk of a statutory nuisance claim. Legislation will be needed to deal with that problem, ideally providing a partial immunity to both existing and new cultural and entertainment facilities.

A reasoned approach

We look at a local planning authority’s duty to give reasons, in light of recent case.  In September 2016, the Court of Appeal ruled that Dover District Council had failed to give legally adequate reasons for its decision, against the advice of its planning officers, to grant planning permission for a controversial development partly in an area of outstanding natural beauty (AONB) (R (on the application of Campaign to Protect Rural England) v Dover District Council [2016]). This was one of several recent cases which have dealt with, and have generated some uncertainty about, the duty to give reasons.

Read the full article

This article was first published in Property Law Journal (March 2018) and is also available at http://www.lawjournals.co.uk/

Regulation change to allow LPAs to sell land with benefit of planning permission granted to themselves

From 23 February 2018, an LPA will be able to grant itself planning permission and sell the relevant land with the benefit of that planning permission. This small statutory change has the potential to significantly bolster LPAs’ role in facilitating development and ensuring that it is comprehensively planned.

The Town and Country Planning General (Amendment) (England) 2018 (the Amending Regulations) will remove Regulation 9  from Town and Country Planning General Regulations 1992 (the 1992 Regulations), with the effect that planning permissions granted by LPAs to themselves  will now run with the land.

Currently, Regulation 9 provides that a planning permission (where applied for by an LPA on its own land) will be personal to the LPA and where applied for jointly, only for the benefit of LPA and the named applicant. This has severely impeded the ability of an LPA, having secured planning permission to then sell the land on with the benefit of that planning permission. This has had cost implications requiring more complex land structures to be put in place before applications for development proposals could be made.

Oddly, the Regulations do not apply to any planning permissions granted before 23 February 2018. Given that future consents will run with the land it is strange that past consents have not been similarly “liberated”.

The removal of Regulation 9 was proposed in last year’s Housing White Paper on the basis that it will save time that developers would otherwise spend securing planning permission in relation to land which they purchase from LPAs.

It should achieve this. Now the Government needs to make sure that the best consideration requirements are changed so that land can be sold on for the best use for the area rather than just for the best price.

Deliverability vs Delivery – Court of Appeal confirms NPPF approach

The Court of Appeal has clarified the meaning of ‘deliverable sites’ in the key housing land supply provisions of Paragraph 47 NPPF (5YHLS).  As well as emphasising the need for pragmatism when applying the NPPF, the judgment confirms the need to get timing right if challenges are to be made to the assumed rate of housing delivery.

Supply test in question

In St Modwen v SoS CLG, the developer challenged the housing trajectory put forward by the authority to satisfy the NPPF 47 requirement to show specific deliverable sites sufficient to provide five years worth of housing against objectively assessed need. NPPF Footnote 11 confirms that ‘deliverable’ means available now, offer[ing] a suitable location for development now, and […] achievable with a realistic prospect that housing will be delivered on the site within five years and […] viable.

The Inspector disagreed that sites without permission should be excluded.  She accepted that the rate of consents was likely to increase in light of the draft plan.  She acknowledged a distinction between deliverability and likelihood of delivery: ‘…it may well turn out that not all allocations currently identified as deliverable will in fact be delivered’. The submitted HLS figures were robust, because ‘the assessment of supply is distinct from that for delivery’.

The Secretary of State accepted the Inspector’s finding that there was a 5 year HLS and dismissed the two linked appeals.

Courts insist on common sense

The High Court and the Court of Appeal dismissed the argument raised in seeking judicial review of the decision that the SoS had misunderstood and misapplied the concept of ‘deliverability’.  He should, it was claimed, have considered what would ‘probably be delivered’.

The Court of Appeal disagreed that Ouseley J’s judgment in the High Court suggested that assessment of ‘what probably would be delivered’ is part of, not separate from, the assessment of deliverability.

Ouseley’s judgment – that the assessment of “deliverability” … is an assessment of the likelihood that housing will be delivered. [It] does not require certainty that the housing sites will actually be delivered’ (emphasis added) – simply reflected the distinction between the HLS figure required under the first part of NPPF47 and the ‘expected rate of delivery’ required for the trajectory under the second part.

The Court of Appeal once again went out of its way to criticise ‘unreal’ arguments on the meaning of NPPF policy, holding that:

  • there is a consistent and intentional distinction in the NPPF between ‘deliverability’ and the ‘expected rate of delivery’;
  • deliverability in footnote 11 concern sites’ capability of being delivered – not the certainty/ probability of delivery;
  • the appeal decision was being taken in light of NPPF49, engaging the question of demonstrable 5YHLS, not a question about the ‘the expected rate of housing delivery’.

So what?

The judgment serves to emphasise that:

  • there need only be a ‘realistic prospect’ of delivery for sites to be relied in within the 5YHLS;
  • challenges to the assumptions around the expected rate of delivery generally need to be taken up at the Local Plan examination stage;
  • Local planning authorities do not control the housing market. The NPPF recognises that.’

The last point underlines the fact that LPAs play a critical role, but are only one part of the housing delivery jigsaw. It is also illustrates how important the Housing Delivery Test will be, as a sense check on assumptions and progress, if it is introduced as promised in the Housing White Paper.

Update: When does a condition restricting use remove PD rights?

Last month we blogged on the High Court’s judgment in Dunnett, which refused to quash the Secretary of State decision not to grant a Certificate of Lawfulness in respect of the use of office to residential Permitted Development rights where a condition on the office consent was effective in excluding GPDO rights. The condition stated that “The use of this building shall be for purposes falling within Class B1 (Business) as defined in the Town and Country Planning (Use Classes) Order 1987, and for no other purpose whatsoever, without express planning consent from the Local Planning Authority first being obtained.”

The Court of Appeal has now upheld the High Court’s judgment.

The result? Uncertainty prevails.

Trump reigns

The Court of Appeal noted that there is no bar to (cautiously) implying terms into planning conditions: doing so is an objective, fact-dependent exercise in which the Court asks ‘what a reasonable reader would understand the words to mean when reading the condition in the context of the other conditions and of the consent as a whole’ (applying Trump International ([2015] UKSC 74).

Deconstructing the condition

Against that backdrop, the Court of Appeal held:

  1. The words ‘and for no other purpose whatsoever’ were, in this case, enough not only to control the B use of the property, but also to exclude future reliance on PD rights. The wording that followed – ‘without express planning consent from the Local Planning Authority first being obtained’ (the “Tail”) – just made the exclusion ‘the more abundantly clear’.
  2. The Tail cannot sensibly include a planning permission granted through the GPDO. The appellant argued that it was necessary to read into the Tail ‘or the Secretary of State’ because of the unavoidable possibility of the Secretary of State granting planning permission on appeal against a refusal by the LPA. Once that is read in, the Appellant submitted, it must include Secretary of State decisions through the GPDO as well as Secretary of State decisions on appeal as there is no basis for including one but not the other. The Court rejected this: it is not necessary to imply ‘or the Secretary of State’ at all because appeal rights do not depend on conditions; they are conferred automatically by statute.
  3. Further, if the Court were to accept the appellant’s argument, the Tail would include all means of granting permission and would therefore have no limiting effect at all. The LPA could not have intended to include useless wording.
  4. The reason for the condition and the site’s planning history reinforced the findings above by reflecting the council’s intention to maintain close control over the site.

Comment – it depends

Unhelpfully, given Trump, implied meaning will always depend on context. That said, as a result of this judgment:

  • It will be very hard to show that stating that uses are ‘limited to’ a particular use will, alone, be enough to exclude PD rights.
  • Words such as ‘for no other purpose whatsoever’ will likely do the job, but ‘for no other purpose’ alone may hang in the balance.

The difficulty will be for wording that is more emphatic than ‘limited to’ but less emphatic than ‘for no other purposes whatsoever’.

It is not a great outcome for investors, who will have to puzzle over the endless and often pointless variations and contortions in condition wording pumped out by decision makers to understand what price planning freedom. A set of standard conditions embedded in the Planning Practice Guidance which make clear how PD rights should be dealt with and provide a level playing field would be welcome.

When does a condition restricting use remove PD rights?

Article 3(4) of the GPDO 2015 provides that permitted development (PD) rights will not apply if they are ‘contrary to any condition imposed by any planning permission granted or deemed to be granted under Part 3 of the [TCPA 1990] otherwise than by this Order.’  Must such conditions refer explicitly to the GPDO? If not, what is enough?

Backstory

The Courts have held in some cases that conditions that do not expressly exclude PD rights do not implicitly restrict them (Carpet Décor (Guildford) Limited v Secretary of State for the Environment and Another (1981) 261 EG 56 and Dunoon Developments v Secretary of State and Poole Borough Council (1993) 65 P. & C.R. 101). The cases fall short of establishing that conditions cannot, legally, implicitly exclude PD rights:

  • In Carpet Décor, the High Court held that a condition excluding PD rights had to be ‘in unequivocal terms’. This suggests a strict approach, though arguably it does not definitively rule out the possibility of implicit restrictions.
  • In Dunoon, the Court of Appeal made several statements – some strict, some looser.  Indicating the strict approach, Farquharson LJ said: ‘The purpose of the General Development Order is to give a general planning consent unless such a consent is specifically excluded by the words of the condition.’ Indicating the looser approach, Farquharson LJ specifically addressed whether a preclusion of the GDO was ‘…to be implied from the words themselves, in the context in which they are used…’. He went on to consider whether the non-explicit wording of the condition was sufficiently ‘emphatic’, ‘conclusive’ or ‘wide’ to preclude the GDO. Sir Donald Nicholls VC, agreeing with Farquharson LJ , concluded that in this case there was ‘no explicit or implicit intention to negative development pursuant to any existing or future [GDO].’ These passages only make sense if implicit exclusion of PD rights is actually possible.

Who Dunnett?

In the first opportunity to revisit this in 2 decades, the High Court decision in Dunnett Investments Limited v SSCLG [2016] EWHC 534 (Admin) suggests that implicit exclusion of PD rights can work.

  • The claimant relied on PD rights to change from Class B1(a) offices to Class C3 dwelling houses. Its existing permission included a restrictive condition:

“1. This use of this building shall be for purposes falling within Class B1 (Business) as defined in the Town and Country Planning (Use Classes) Order 1987, and for no other purpose whatsoever, without express planning consent from the Local Planning Authority first being obtained.

REASON: “In order that the Council may be satisfied about the details of proposal due to the particular character and location of this proposal.”

  • The LPA failed to determine the claimant’s PD prior approval application and the claimant applied for a Certificate of Lawfulness (which the LPA refused, based on the condition).
  • The claimant challenged the decision, relying on Carpet Décor and Dunoon as requiring the strict approach (i.e. that the language must be explicit and unequivocal to exclude PD rights).

The Court rejected this, on the basis that:

  1. The second part of the condition serves no other purpose than to prevent the operation of the GPDO. “Without that meaning the second part is irrelevant to the condition”.
  2. The words ‘for no other purpose’ prohibit any other purpose including any other purpose otherwise permitted by the GPDO.
  3. The word ‘whatsoever’ is “emphatic and, in context, refers to any other use, howsoever arising or under any power. Read together, and considering the plain and ordinary meaning of the words used, in my judgment, it is clear that the GPDO is excluded”.
  4. The words “without express planning consent from the local planning authority first being obtained” have no sensible meaning unless they remove GPDO rights.
  5. The reason for the condition confirmed that, due to the particular character and location of the site, any other use would need to be the subject of an express application.

The judgment treats the loose approach as ‘entirely consistent with the cases of Dunoon and Carpet Décor’.

Clear as mud

For the time being, the outcome reflects the prevailing uncertainty for landowners, developers and LPAs, because:

  • it is unclear which elements of the reasons at 1-5 above were decisive,
  • the outcome was said to be fact sensitive.

Dunnett has been appealed to the Court of Appeal and will be heard this month (March 2017). The Court of Appeal could reject the loose approach altogether. If, however, the Court confirms the principle of implicit exclusion of rights, it would be helpful if it clarifies:

  • the forms of wording which will do the job (and those that will not); or
  • whether the effect of the condition entirely depends on the wording read in the context of the reason and the condition as a whole.

In a period where PD rights are increasingly valuable, the outcome will be important.