CIL: the more it changes, the more it stays the same?

Read Roy Pinnock’s overview of the latest changes to the Community Infrastructure Levy regime (and what is still needed).

This article was first published in Estates Gazette on 9 June 2019.

Embrace Hard Choices As Well Modern Methods

The Housing, Communities and Local Government Committee has highlighted the need for Government to promote modern methods of construction to get anywhere near its target of 300,000 new homes a year by mid-2020s. There is a need for a wider exercise of political will to achieve the shift.

Recommendations

The Committee’s report recommends Government support for:

  • Increasing capacity in the supply chain and ensuring that the workforce is appropriately skilled, working with Homes England and training centres to develop skills programmes;
  • Improved data collection to demonstrate the long-term viability of the methods to both investors and consumers (and grant funding of MMC projects);
  • The application of MMC to social housing given that it often includes large numbers of similar homes, lowering costs and providing certainty of demand.

Turn up the volume

Discussion on MMC has been running for years and is not a new phenomenon; the Barker Review (2003) flagged it as an important lever for speed, quality and skills. The benefits for small, high density plots where modules can be slotted into a serviced core are clear and the resurgence of Build to Rent means that the economics of very quick delivery and releasing units onto the market at the same time stack up.

The picture for new settlements and urban extensions – where the majority of the extra 100,000 homes a year realistically needs to come from – is less clear.  Institutional players are investing in MMC and smaller players are developing compelling products for bigger sites. 

Political will

The constraints on delivery are complex, though.  As the Letwin Review noted, they do not relate solely to build out rates – absorption rates and the price/demand curve are key. 

That leads to the exercise of political will:

  • allocating more land for growth through Local Plans than the absolute minimum required –so creating a better pool of land, better pricing for it and more resilience in delivery;
  • facilitating greater direct delivery by the public sector, which is the historic factor behind the housing delivery rates in the two housebuilding surges after the First and Second World Wars;
  • acting on the Housing Delivery Test horror show by the time the numbers hit the wall in 2020.

With genuine political will, MMC will be able to make a greater contribution.

Dentons Planning & Public Law team advised Tide Construction on the world’s tallest modular scheme.

New new towns

We were immensely proud to win the Planning Law Firm of the Year Award a fortnight ago.  The award recognised both the contribution that we have made to the new legislative and policy framework that within which the next generation of New Towns will come forward, as well as our practical work on emerging new garden communities.

However, even if the foundations for good progress are in place, with public and private sector communities being proposed there are still several big issues that remain unresolved:

  • how do we make sure that proposals which are “best in class” when first proposed and commenced continue to meet those high standards over a decades long build out?
  • how do we encourage development and delivery throughout the economic cycle?  Any decently sized New Town will face two or three recessions as it evolves;
  • how do we make sure that the present and future communities play a full part in the creation of the new place?

The answer to these questions is work in progress and may be different in different places.  Whatever the answers we will all need to avoid the temptation to be too prescriptive.  Good communities will not emerge from within a legal straitjacket.  We need instead to develop a new form of partnership between land owners, developers, public bodies and communities that focuses on collaboration, quality, delivery and participation.  If Dentons can continue to contribute, and can help find a sensible and workable approach, that will be a further reward.

Call In Blitz Offers Black Hole for London Delivery

The Mayor of London and the Government are looking to London densification to avoid moving, extending and reshaping London’s Green Belt as part of a wider regional strategy. The draft London Plan rejects ‘growth at any cost’ and sets out to deliver a step change in quality, quantity, affordability and delivery. At the same time, London’s local political landscape has been through a painful evolution – in terms of stability, predictability and players.  Reimagining density beyond single plots and tall buildings is work in progress, particularly where so few Local Plans make tested, masterplanned, allocations. Debates rage around density, daylight/sunlight and the meaning of ‘tall’.

Event Horizon

London development is facing a tough time living up to all that.  Intervention by the Mayor of London to move local debates along has been slower than anticipated. Having picked up pace this year, delivery is now being sucked into the black hole of Call In by the Secretary of State. 

Big Bang

Until 2019, the SoS had only Called In three London schemes in nine years.  An unprecedented surge leaves that at five in five months (Newcombe House, Citroen Garage, Albany Riverside, Vauxhall Gyratory * and Camberwell Industrial Estate* schemes).  Two of those were snatched from the Mayor of London’s own ‘called in’ jurisdiction.

That is all the more remarkable given that on average there were – nationally – only 10 Call Ins a year 2013-2018 (Rosewell Review) and 15 in 2017/18.

Escape Velocity

Call In statistics suggest that this will profoundly affect delivery:

  • 60% of Called In schemes tend to be approved (Rosewell Review) and 87% of SoS decisions since 2012 have followed the Inspector recommendation (according to Ministerial statements). 
    That is higher than the 47% approval rate for Recovered appeals, but bear in mind that the local authority was in each case going to locally approve every Call In scheme.
  • Call-Ins are taking between 8 to 35 months to determine. The average is 11.5 months (despite an average time from Inquiry start to Inspector recommendation of 3 months).
  • 30% of Called In schemes are withdrawn, but it is the 60% of that remainder where the ultimate grant of permission is therefore being significantly delayed.

Whether the market is rising or falling, that is a long time to wait. Unsurprising, then, that the Rosewell Review recommendation #17 seeks to “minimise the number of cases that need to be decided by the Secretary of State” by encouraging MHCLG to “keep their approach to the recovery of appeals and call-in applications under review“.  A step back would be progress.


* reportedly at the time of writing

Residential first for Neighbourhood Development Orders

Back in 2013, we highlighted the first Neighbourhood Development Order (NDO) – made to permit specified development without further permission – under the Localism Act 2011 regime, in Cockermouth.  In the five years since, however, only two other NDOs have been made (and the Cockermouth NDO expired in 2017).

Following that hiatus, the first NDO to authorise residential development has now been made. Kettering Borough Council made the Broughton Neighbourhood Development Order, along with the Broughton Neighbourhood Plan, on 17 October 2018. The NDO, approved by a 93% “yes” vote at the September 2018 referendum, permits the redevelopment of a BT exchange to provide between 5 and 7 dwellings, each with one or two bedrooms, aimed at younger people, single occupancy or older people downsizing.  The NDO identifies the site as a valuable strategic site, to deliver smaller properties to meet local needs, replacing a currently unattractive building adjacent to a conservation area.   

Previous NDOs permitted changes of use, and works to shop fronts and windows in Cockermouth, which has now expired, and the reinstatement and extension of a single dwelling in the Yorkshire Dales.

Brought forward alongside a Neighbourhood Plan, the Broughton NDO is a sensible step for the community in encouraging the type of development they wish to see when the site comes forward for redevelopment, alongside an allocation in the neighbourhood plan.  It remains to be seen whether this will prove to be a sufficient incentive for this development to come forward within the lifespan of the NDO.

It also highlights the very limited number of communities who have taken forward the opportunity to develop NDOs.  As with Neighbourhood Plans, the time and expertise involved in preparing an NDO is considerable – the Broughton neighbourhood group first applied for designation in 2013.  While the Localism Act has provided opportunities for communities to have a greater say in the development of their local area, the practical difficulties limit the opportunities for communities to take forward those opportunities.  Given limited Parliamentary time available, it seems unlikely that this will be resolved, notwithstanding the continuing political lipservice to localism.    

Assets of Community Value – no horseplay, for now

Back in 2016, we commented on the first  Asset of Community Value (ACV) case to reach the Upper Tribunal.  The case concerned green belt land included in the 2009 Strategic Housing Land Availability Assessment as suitable for 110 homes.  It had been used informally by the local community for 40 years, and was listed as an ACV in 2014.  As a result, the land became subject to the ‘Community Right to Bid’ restrictions and the ACV status became relevant to planning decisions.  Banner Homes requested a review of the listing decision and then appealed to the First Tier Tribunal and later the Upper Tribunal, all unsuccessfully. 

Since then, planning permission has been refused twice (for a change of use to the keeping of a horse and for construction of a stable block), with those refusals upheld on appeal on both occasions.  Most recently, in January this year, St Albans City and District Council’s planning committee again refused an application for change of use to horse paddock, contrary to advice from officers.  However, the reason for refusal was that the site is located in the metropolitan green belt, and although “the impact on openness would be small, it is not demonstrated that very special circumstances exist”.  The Committee Report considered the land’s ACV status, but concluded that the development proposal was not inconsistent with that status, as local people could still use the footpaths, and would have the opportunity to make a bid to purchase the land in the event of a sale. This is rather different from the local intent behind the ACV listing – and the rationale for the Court of Appeal’s decision to uphold it – on the basis that the community use of the field beyond the footpaths could restart despite being fenced off (because the green belt status of the land made any alternative permission/ use unlikely).

The land is clearly very important to local people, but while its ACV status has prevented the land coming forward for development, it is worth noting that it has not been determinative in the planning decisions (nor more influential than the underlying green belt status).  The current position therefore perhaps demonstrates the impact of a well organised community group, and supportive planning committee members, alongside the ACV regime itself, in dealing with planning applications on ACV land.   

The land is being promoted for 160 homes (including 50% affordable homes) as part of the Local Plan process.  The expiry of the 2014 ACV listing later this year is likely to tigger a re-consideration of the question of whether there is a realistic prospect that the wider field could be used by the community in the near future.

CIL – Look both ways on Highways Obligations

Developers are often told that the CIL Regulations prevent ‘double dipping’ – where Community Infrastructure Levy (CIL) is spent on infrastructure for which financial contributions are also secured via Section 106 agreements (or, put the other way around, where S106 obligations are used for things the charging authority has said it will fund via CIL).

Not quite. In Oates v. Wealden District Council & Anor [2018] EWCA CIV 1304 the Court of Appeal confirmed that decision-makers may refuse planning permission for CIL-bearing schemes where highways impacts are sufficiently serious, even if the authority has previously said it will use CIL receipts for related highways works.

In Oates, the authority was considering an application for 390 homes on an unallocated, CIL-liable site which would have significant impacts on several junctions.

R123 Restrictions

Regulation 123 of the Community Infrastructure Levy Regulations 2010 does impose ‘double-dipping’ restrictions:

  • planning obligations may not be a “reason for granting” permission where they secure funding or provision or infrastructure on a published list (including in most cases through “requiring a highway agreement”) – regulation 123(2)
  • planning conditions are prohibited where they would require a highway agreement to fund or provide such infrastructure (or restrict development until a highways agreement is complete) – regulation 123(2A) also prohibits.

Be Wary

Developers should be very wary of the limitations of those controls. The authority’s R123 list in Oates identified highways works to the worst affected junctions as projects and types of infrastructure on which CIL would be spent.  The highway authority (County Council) objected to the application because critical improvement works were required to these junctions before development.  The impacts would be severe without guaranteed implementation and timing of the CIL-funded works. The  applicant resisted this on the basis that the R123 list meant that the necessary upgrades could “only be provided through the payment of a CIL contribution” and were not within the developer’s control or any proper restriction.  The County Council withdrew its objection on the strength of advice agreeing with that position. The LPA’s officer then reported this to committee.

The Claimant claimed that the misdirection on the effect of the CIL Regulations – wrongly assuming that a Grampian-type restriction on development until the upgrades were complete – rendered the consent unlawful.

No-Nonsense

The judgment is clear that the highway authority had failed to understand the “true scope of Regulation 123” – which does not “compel[…] the Local Authority to grant permission for a proposed development if, for whatever reason, that development is unacceptable in planning terms, or if it cannot be made acceptable either by a planning obligation, or by the imposition of conditions”.

The officer had directly ruled out a Grampian restriction on occupation until the mitigation works were complete, which would have been lawful.  Instead she had simply said nothing about it but had advised members the impact would be unlikely to be “severe” taking into account both build out rates and time for delivery of the infrastructure improvements funded by both CIL and other sources.  As such, that a restriction would be unjustified.

Look Both Ways

The judgment therefore underlines the need to:

  • understand the general development cost imposed by CIL
  • understand what is, genuinely, ‘necessary’ to make a scheme acceptable (bearing in mind the high bar set for the ‘severe’ impact threshold, for example, in relation to highways impact)
  • review what assumptions the planning authority and the CIL charging authority have made when assessing the viability of combined planning burdens for a particular site.

If its CIL-stage or Local Plan stage assessments have assumed – in setting a high CIL rate or justifying planning burdens – that CIL will ‘replace’ some forms of scheme-specific mitigation costs then that will often create a legitimate starting point for avoiding the double dip.

If not, it is worth looking both ways on CIL.

Comparables That Glitter Are Not All Gold

The approach to land value and the application of planning policy were brought into sharp focus by an Inspector’s decision to dismiss the developer’s appeal against refusal of permission on the grounds that the ‘maximum reasonable level’ of affordable housing had not been secured. The developer had proposed residential redevelopment of a surplus military site where it was the successful bidder. Holgate, J’s judgment – dismissing the challenge to that decision under Section 288 of the Town and Country Planning Act 1990 – in Parkhurst Road Ltd v Secretary of State for Communities And Local Government & Anor [2018] EWHC 991 (Admin) confirms the importance of understanding how land value should reflect planning policy requirements.

The developer relied on nearby sales data to justify its land cost as at the market value for the site, limiting its affordable provision at ten percent. The Inspector accepted the authority’s approach, starting with the site’s low established use value (EUV) and applying a substantial premium (EUV Plus), to reach an overall benchmark value at which 34% provision was feasible.

In the previous (2015) appeal, an Inspector’s finding that the developer’s benchmark land value was broadly reasonable in light of ‘market signals’ (competing bids and comparables) resulted in a threat of legal challenge by the authority and a letter from the Government acknowledging that the Planning Practice Guidance “unambiguous policy position” is “in all cases land or site value should reflect policy requirements and planning obligations…”.

The developer ran its new appeal case on the basis that using EUV Plus was inappropriate where the EUV was negligible. The Inspector rejected its evidence on market values, on the basis of the weakness of the comparables used (being unadjusted for variations in policy compliance and EUV). He refused to accept “a market valuation which does not, in my view, adequately demonstrate proper consideration of, or give adequate effect to, the guidance in PPG or the requirements of the development plan“. In line with the authority’s case, he adopted EUV Plus as a starting point, then having regard to the market as a relevant, not determining factor.  The decision letter included a statement that the authority was promoting an EUV Plus method of valuation.

The developer challenged the decision under Section 288 on various grounds, including that the Inspector’s misunderstanding of the authority’s was partly responsible for rejecting the developer’s position that a purely market value approach was “the only reasonable means by which to establish the land value” given the low EUV. It also claimed that the Inspector’s decision was vitiated by accepting a (flawed) technical ‘fix’ for comparing land values relied on by the authority’s expert.

Holgate, J dismissed these two grounds: firstly, the Inspector had understood the authority’s approach correctly (establishing a site value and then re-expressing it as EUV plus a premium to cross-check the reasonableness of the site value indicated by comparables); secondly, the Inspector had erred on the technical fix but his “wholesale and robust rejection” of the appellant’s valuation case and interpretation of development plan policy did not rely on – “had nothing to do with”  – that point.

The judgment clearly explains the meaning of the PPG and the upholds the way the Inspector applied it. There is no wider or new principle, but it is nonetheless helpfully clear that in the current PPG regime:

(1) the PPG addresses the problem of ‘circularity’ – where residual land valuation using land price is based on downgrading policy expectations erode policy – by requiring site value to respect policy expectation, competitive return to willing owners and evidenced market value at the same time;

(2) comparable evidence is one helpful way to calibrate reasonable land value expectation, but may often require adjustment to be fit for purpose (including, for example, to deal with high existing or alternative use values and policy non-compliance).  The more adjustment needed – and the harder to do – the less the weight that may be applied (40);

(3) reasonable behaviour matters – proper due diligence and analysis of actual demand are key elements of the reasonable owner (citing Trocette Property Co Ltd v Greater London Council (1974) 28 P & CR and Inland Revenue Commissioners v Gray [1994] STC 360);

(4) policy requirements (depending on how they are expressed) may put the onus of proof on the applicant. An Inspector may reject that party’s case as lacking sufficient cogency to satisfy the policy (paragraph 54, applying Vicarage Gate Limited v First Secretary of State [2007] EWHC 768 (Admin));

(5) planning by numbers is tempting but dangerous – “the NPPG recognises that it may not be proper” to “compromise policy requirements” even where there is a viability constraint;

(6) authorities need to be careful too: using EUV Plus as a rule rather than part of an analysis “disregards levels of market value arrived at quite properly in arm’s length transactions and consistent with the correct application of planning policies and sound valuation principles” (146).  “Local policy statements” may cross the line in this way “especially where the document has not been subjected to independent statutory examination prior to adoption“. This is rife in practice, with Supplementary Guidance masquerading as development plan policy;

(7) planning appeal decisions should be taken with a pinch of salt – they are fact specific, cannot establish or change policy, consume “a disproportionate amount of time and may distract parties” from actually getting their own evidence right.

Both the appeal decision and the judgment underline the need to avoid land value expectation becoming self-referential. The decision is a reminder of the need to critically examine evidence of comparable values to weed out those which failed to comply with policy in the first place (i.e. are not truly comparable) and of the risks when bidding for land with low existing value of being too led by future scheme, rather than underlying use, value.

The judgment also underlines the critical importance of properly testing the effect of policies at examination in public if they are to be legitimately treated as the irreducible starting point. Practitioners should take heed on both fronts and hope that the Government does not sweep away too much of the current Guidance, on which there is now judicial clarity.

(This article was originally published in Estates Gazette on 14 May 2018)

ECJ Ruling on Habitats Regulations Assessments is Straight Bananas

ECJ’s preliminary ruling in the People Over Wind/ Sweetman case means that ‘mitigation measures’ should not longer be taken into account when screening for ‘any significant effects’ on SAC/ SPA for plans and projects (for the purpose of deciding whether Appropriate Assessment is needed to establish if the effects would be likely to have an adverse effect on the integrity of the designated asset).

On the face of it, it means, for applications where significant effects on SAC/SPA are likely (i.e. applying the Waddenzee precautionary approach, the risk cannot be definitively ruled out) that Appropriate Assessment will be required so that mitigation measures are evaluated in more detail.

An End To Sense?

The People Over Wind ruling is that “it is not appropriate, at the screening stage, to take account of the measures intended to avoid or reduce the harmful effects of the plan or project on that site” (emphasis added).

This cuts across the domestic approach adopted in the Hart District Council case in 2008, which has provided a sensible basis for addressing effects on Natura 2k sites.  Having regard to mitigation measures in screening out Appropriate Assessment for planning applications and plans has been commonplace common sense, treating the Habitats Directive as a “aid to effective environmental decision making, not a legal obstacle course” (Sullivan, J as he was in Hart).

The reasoning in the ruling (paragraphs 35 and 36) does not withstand much scrutiny and is really Law Over Sense.  To make things worse, it is unclear about what “mitigating measures” are for these purposes. It simply refers to them as measures “intended to avoid or reduce the harmful effects of the envisaged project on the site concerned“.

Planning Inspectorate View

In-built mitigation by design is surely not within its ambit? The Planning Inspectorate’s Note 05/2018 takes a more hardline view: “Competent authorities cannot take account of any integrated or additional avoidance or reduction measures when considering at the HRA screening stage whether the plan or project is likely to have an adverse effect on a European Site.  The screening stage must be undertaken on a precautionary basis without regard to any proposed integrated or additional avoidance or reduction measures“.

This is gold plating – the ECJ ruling does not provide any express basis for the underlined element. The benefit of the environmental assessment process, noted in Hart, is to get thinking about reducing effects at the outset of scheme design.  Trying to split out anything that is ‘integrated’ into the scheme design, for example, is horribly artificial and a terrible waste of time.

The effects of this are being felt as LPAs suspend development management decisions and Local Plans are suspended.

Let’s Be Sensible

Outcomes: Where the finding based on mitigation would previously have been a negative screening (because of no likelihood of any significant effect at all, with that mitigation), the lesser threshold of no adverse effect on the integrity of the SPA at the full AA stage should be satisfied.  The additional process will probably yield more information about mitigation measures but no change of outcome (subject to the point noted below).

Government will need to provide leadership to ensure we do not simply end up with a deluge of AA reports concluding that there is no significant effect with mitigation. That would be a truly pointless exercise.

Steps: It would be sensible for PINS and Government to be clear, ASAP, that:

  • Things authorised by the development consent should be regarded as integral components of the scheme and so not mitigation for its effects for the purposes of the ECJ ruling.
  • Where AA is now unavoidable, a standardised toolkit will be available to allow very short AA reports to be prepared that allow, for example, the analysis of the effect of off-site SANG contributions to be fully standardised (using the AA analysis conducted when justifying the SANG contributions in the first place).  This is crucial to avoid the ruling becoming another source of time-soak, cost and distraction in the already bloated world of planning assessments.
  • The current block (in NPPF119) on applying the NPPF14 ’tilted balance’ is going to be revisited in the soon-to-be-revised NPPF to avoid an unintended outcome.  If AA concludes that there is no likely significant effect with mitigation (as distinct from concluding that there will be a significant effect short of adversely effecting the integrity of the SPA), the presumption in favour should apply.

Mind the Gap – Letwin Review should take care to avoid policy overload

The Letwin Review is considering why there is a significant gap between the number of planning permissions being granted and the number of homes built.

Initial findings are due to be published with the Chancellor’s Spring Statement 2018 in March (with the final report in the Autumn Budget).  There are a few things to think about before engaging in another orgy of Plan-Shaming and policy overload.

Apples and Pears

There is a need to be careful about how sites are looked at in the first phase of the Review:

  • Treating outline consents as if they are, or should be, immediately implementable is wrong. Outline consents can require significant work to reach detailed approval, let alone readiness for mobilisation and delivery.
  • Care is needed too, on what is treated as ‘delivery’.  Site mobilisation (for example enabling infrastructure) takes time and pre-dates construction of homes.

Defining what delivery and success look like is therefore important to avoid categorising sites that are being invested in – but have not yet yielded homes – as dormant. This will be significant in the context of the emerging Housing Delivery Test, which should be a fundamental part of the Local Plan system.

90% of percentages are wrong…

Various figures are bandied around on how many consents are ‘unimplemented’. Even adopting the higher level figure of 423,000 unimplemented homes with consent:

  • that is a tiny proportion of total supply – roughly 12-14 months of planning approvals
  • it illustrates the need for a deeper stock of permissions to achieve the heroic build out rates the Government is now committed to.

A Local Plan system which made more (and more detailed) site allocations, with clarity about infrastructure requirements, would make a big contribution to closing the gap between in principle approval for development and the detail needed for delivery. Likewise, a Local Plan system that sniffed and snuffed out unrealistic assumptions on delivery rates when trajectories are being examined would help ensure the right number of consents are granted in the first place to create the stock needed.

Diversification

Businesses will generally develop at the rate they are best able to achieve and which reflects the overarching price/demand relationship.  Rather than blaming the private sector for the speed it can – prudently –  build at, it would be more productive to look at how to achieve an increase in direct delivery (or directed delivery) by public bodies which have historically made up at least 100,000 of the gap to the Government’s 300,000 homes per year commitment.

In some cases that will involve more assertive use of land assembly and policy tools in a way that creates greater certainty about land values up front so that builders can build and sell more quickly.

Planning blame-fest?

Evidence from the sector on the non-Planning constraints to delivery is important.  Is there a skills gap, what will Brexit do to it and if Government is sponsoring Brexit how will it sponsor the solution?

From the frontline, a few of the  Planning matters that do slow things down are:

  • Length of time taken to deal with highways works agreements. The absence of a standard template agreement is a real blight on the development process.
    Constant reinvention of the wheel and imposition of poorly drafted and unreasonable requirements does have a real impact on the site mobilisation process. Government could sponsor a standard form and issue guidance recommending its use.
  • The bloat and general time-soak associated with unnecessary use of planning obligations. Our ‘speeding tickets’ blog flagged ways to speed things up without scarce Parliamentary time being needed.