Mind the gap – if Starter Homes survive, there will be blood

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The Starter Homes initiative now faces an uphill struggle onto the statute books following setbacks in the House of Lords. Critics should be careful not to write them off, though, because the Government is adopting a twin track approach that is likely to deliver changes this year either way which will disrupt and reshape planning debates.

Even if the radical Starter Homes Duty is unravelled successfully by the House of Lords, it seems very likely that the Government will modify the NPPF  to make Starter Homes a qualifying affordable housing tenure and, potentially, attempt to give it the primacy that the Housing and Planning Bill 2015/16 was aimed at until the Lords rebelled.

Either way, the changes will undoubtedly have a radical effect on Local Plan and application processes:

  • Local Plan snakes and ladders. Again.  More complication, more fuss and evidence base changes. Government is likely to change guidance on Housing Needs assessment, to identify first time buyers as in housing need. This will overturn the apple cart on existing SHMAs and Local Plans, which will immediately become out of date.
  • Starter Homes will be exempt from CIL. There is no detail in the Technical Consultation on how or when this will come into effect or how the clawback will work where homes are sold in breach of the protected period restrictions. Care is needed in swapping tenures ahead of the changes coming into effect.
  • Transitional measures. The current Starter Homes Technical Consultation is not clear how any Starter Homes requirement would be phased in.  The industry must have some headroom so that the changes do not delay schemes submitted before a sensible transitional date.
  • There will be winners – the new price caps should deliver better returns where there is a straight swap for Shared Ownership.  Authorities will seek an increase in overall affordable provision.  The changes may end up bolstering the case for a fixed percentage of affordable housing in London.  At Lower Graylingwell, the 30% affordable provision has increased to 50% Starter Homes, for example. Developers will need to plan for the demise of ‘golden brick’ payments by Registered Providers, though, and assess the cashflow implications of another 20% of product as sale tenure. Marginal sites, including previously developed green belt will be sold heavily on the back of Starter Home delivery and should expect kinder words on appeal as a result.
  • The allowance for commuted sums in ‘high value areas’ will perpetuate the existing difficulty of policies that surrender to landowner expectations and muddy the waters for developers bidding for land.
  • There will be blood. The changes will bypass conventional housing need. Reluctant and resistant authorities with backlogs of vulnerable and excluded people on the housing register who cannot access a £450k home will point to the fundamental jurisdiction in the Town and Country Planning Act 1990 to take local, democratic decisions in the interest of good planning.

They may weigh the breach of the Starter Homes duty against the duty to meet needs. The extent to which the Regulations can oust that, or any breach creates a ground for legal challenge, will come to the fore. Great care will also be needed on reporting the effects of the affordability sacrifice.

Non-starter? New homes proposals are going to shake things up, if they survive

The Government’s Starter Homes proposals have been around for a while – consultation in 2014 led to new policies in March 2015, backing the commitment to deliver 200,000 by 2020, freeing Starter Homes ‘exceptions sites’ from affordable housing requirements and encouraging authorities to search for sites. The Housing and Planning Bill 2015-16 measures intended to realise that commitment will go well beyond the existing policy, if they survive the House of Lords Report stage.

Big picture

cakeStarter Homes will be new homes [1] for purchase only (and only by first time buyers under 40) to be sold at the lesser of 80% of market value or £450,000 in London (and £250,000 elsewhere).

  • Authorities will be under a statutory ‘general duty’ to promote Starter Homes when considering planning applications
  • A power for the Government to specify the proportion of Starter Homes on specific types of sites, nationally
  • A power for the Secretary of State to issue ‘compliance directions’ requiring Local Plan policies to be disregarded. This is a hitherto unknown command power by central Government and is possible casualty of the House of Lords’ scrutiny.

The Government has already made clear that tenure changes should be accepted without changes to the overall amounts of provision in S106 renegotiations.  The HCA is already putting this into practice, tenure swapping a policy compliant affordable split to Starter Homes on its Lower Graylingwell scheme in West Sussex.

All is (nearly) revealed

The NPPF Review has not been clear about the extent to which Starter Homes will actually be treated as affordable housing (albeit that they will be exempt from providing it).  We understand that the significance of the Starter Homes Technical Consultation on the Regulations which will shape the regime is that:

  • There will be a fixed 20% requirement for most schemes of 10 units or above.  Viability testing will be permitted, but the threshold for exceptions is likely to be a higher bar than hitherto accepted in viability appeals.
  • Starter Homes will be affordable housing in policy terms. In re-opening the NPPF consultation on changes to the definition of affordable housing, the Government is signalling its intention to modify the NPPF to allow Starter Homes to qualify. We understand that they are meant to be a ‘top slice’ of viability, which is intended to ensure that Starter Homes always float to the top of the affordable tenure pile in appraisals.
  • The 8 year ‘restricted period’ during which first time buyers will have restricted selling rights will allow the percentage of market value to taper up (like staircasing Shared Ownership equity).  This responds to concerns by lenders about the effect of sudden pulses of de-restricted units hitting the market at the same time.  These periods are controversial and likely to be significantly amended following the cross-party rebellion in the House of Lords.
  • Units will not be able to be let. The attractiveness of this, alongside a period where the market for re-sales is narrowed to first time buyers under 40 remains to be seen.
  • PRS is likely to benefit from a blanket exemption but will be expected to yield a commuted sum. The Government is likely to require such sums to be calculated based on the gain in value to the developer (and to require authorities to deliver Starter Homes with it). How it will factor in the costs of assembling land to do so is moot.
  • Standard S106 wording is being prepared.

Rebel Alliance

The defeats suffered by the Government at the Third Reading stage in the House of Lords on 11 April 2016 now cast a shadow over how radical this new tenure is likely to be. Amendments backed by a cross-party alliance of peers would:

  • Extend the protected period to 20 years and force starter homes owners to repay any discount (tapering by 1/20 each year) where selling earlier
  • Return control to local authorities on how many starter homes should be delivered locally, and was backed by a majority of 86 peers.

Both amendments were back by majorities of at least 85 peers and the likelihood of the radical changes envisaged by the flagship policy announcements last year coming into effect in 2016 look limited.

[1] including those constructed but not yet occupied

Sun will go down on section 106BA/BC numbers game appeals

We have commented on the initial impact of the changes to the Section 106 regime made by the Growth and Infrastructure Act 2013 to allow developers to challenge affordable housing obligations on viability grounds.  The new Section 106BA gave developers a right to ask councils to review housing obligations.  Section 106BC gave a right to appeal against review outcomes.  Both came into force on 25 April 2013, subject to a ‘sunset clause’ killing off the changes after 30 April 2016 unless otherwise extended.  They will now die on 30 April but uncertainties remain about the transitional picture.

sunGovernment About Turn

The Spending Review and Autumn Statement 2015 committed to extending the sunset clause. The anticipated Order has not materialised and we understand that the Government has now decided not to do so.  This may simply be a reflection of the fact that we are no longer in recession and stalled schemes should be seen as bad planning rather than bad luck. It may also reflect the odd outcomes that have crept into the process.

Odd Outcomes

The appeal route has been widely used for schemes granted consent in the current market, on the basis of a policy compliant affordable offer or viability assumptions that have then been changed on appeal.  The ability to use the appeal route for schemes that are complete has also begun to be tested.   The recent Chatham Quays case concerned a large multi-phase mixed use scheme approved in 2007 and subject to S106 variations to push back affordable housing contributions to better times. The housing element of the scheme came forward and the commercial phase remained, as accepted by the Council, ‘largely complete’ but not fully complete.  The developer successfully stripped out the remaining payments on appeal and the Inspector’s approach was upheld in the High Court.

The judgment confirms that:

  • developments which are largely complete can take advantage of the S106BA/BC process to eliminate affordable housing requirements even though the time for delivery or payment has long passed and there is no real relationship between the obligation and whether the scheme would be completed;
  • completion should be judged by looking at the whole of a mixed use scheme, not just the housing part. The Inspector failed to consider the Council’s argument that only the housing part should be considered in a mixed use scheme, not the whole. The Judge simply held that the argument was so poor that he could never have properly accepted it if he had considered it though.  It should also be considered on the basis of whether the development is in a state which could generate receipts or return, from the point of view of the developer. Wider claims about its significance should be taken with a pinch of salt;
  • the correct route of challenge to an Inspector’s S106BC decision is by Judicial Review, not S288 statutory challenge.   This point is less novel than assumed in the judgment – it arose in 2014 in the failed Mast Pond Wharf challenge.

The judgment leaves open the question of whether a viability appeal can be entertained after a scheme has been fully completed.  Common sense would suggest not, but the judgment notes that the Act is silent on the point.

Eye of the Needle for New Challenges

We understand that the Government will allow S106BC appeals made before the sun sets on 30 April to proceed. It is hard to see how there would be any jurisdiction to deal with ongoing applications or appeals without express transitional provisions in an order (which the Act allows for).  They are needed either way, not least to be clear about the effect of the sunset clause on modified obligations where the development as a whole has not yet been fully completed, to avoid  successes like Chatham becoming pyrrhic.

It will be interesting to see whether the Government’s viability test for Starter Homes, trailing in the consultation, sets a more rigorous test than that which local authorities have faced under the Sunshine Regime.

Authorities are increasingly using planning conditions as a work around, which are outside the S106BA regime. It would be nice if this willingness to slim down bloated planning agreements survived the sunset.

Housing and Planning Bill – an uncertain future for social housing (part 2)

VACANT HIGH VALUE LOCAL AUTHORITY HOUSING (CLAUSES 67-77)

What is proposed?

The Government will require a payment from Councils with housing stock each financial year. The payment will be equivalent to the deemed sale value of vacant ‘high value’ council homes, less any costs or deductions but regardless of whether they are in fact sold.

What are the issues?

The key to the success (or otherwise) of the voluntary RTB lies in its funding. Councils are set to pick up the slack, with these payments intended for grants to housing associations, compensating them for selling RTB stock at a discount. There remain unanswered questions about how this complex relationship will work in practice. In particular, the method of calculating the payment and the assumptions upon which is based may prove challenging. There are also uncertainties around:

  • Definitions – drafting Regulations that work will be difficult. The concept of ‘vacancy’ has proven notoriously difficult to define in other contexts and was recently sidestepped altogether by Government in its ill-fated Vacant Building Credit policy. Similarly, determining ‘high value’ will be critical with the valuation exercise being notoriously difficult. Which method(s) will be used? How will it take account of regional variations?
  • Shortfalls – who covers any shortfall in receipts to top up grants? Will persistent shortfalls undermine the long-term availability of grant funding, diminish confidence and threaten the effectiveness of the measure? What happens if sums raised from sales are insufficient to cover the costs of replacement?
  • ‘Social’ housing – if replacement proves ineffective and stock further declines, the concept of funding the sale of (housing association) housing stock through the sale of (council) housing stock reinforces a perceived ideological shift, moving away from traditional notions of state provision.
  • Changes to the Bill during the Committee stage would impose a duty on the Secretary of State, the Mayor of London and London housing authorities to achieve the provision of at least two new units of affordable housing for the disposal of each of high value housing.  How viable that is remains to be seen. The key issue would seem to be the challenges, particularly in London, of achieving ‘one for one’ (let alone two for one) replacements of stock that is sold.  Local authorities will take a closer interest than ever in receiving and delivering new stock and partnership approaches to new development should reflect that.

Housing and Planning Bill – an uncertain future for social housing

The Housing & Planning Bill completed the Committee stage in the House of Commons after the New Year with a marathon 2am finish. We consider the impact on social housing of Clauses 62-77 of the Bill.

VOLUNTARY RIGHT TO BUY (CLAUSES 62-66)

houseWhat is proposed?

A non-statutory, voluntary, Right to Buy (“RTB”) for housing association tenants. Reflecting the Government’s mantra on home ownership, it falls short of the “dramatic extension” heralded in the Queen’s Speech, which had envisaged an extension to the statutory RTB. Instead, we have the result of a compromise struck with the National Housing Federation.

It will require the ‘one for one’ replacement of stock sold under the voluntary RTB scheme. A detailed operational document is expected following the conclusion of negotiations on detailed implementation.

So what for planning?

Key questions for planning include:

  • the proposed discretion for housing associations over whether to sell, including protection for properties in rural locations – how will this work in practice and could it blunt the teeth of the provision?
  • whether this scaling back from the original, mandatory proposal will meaningfully contribute to housing shortfall in the way Government intends and, fundamentally, whether there exists sufficient and appropriate supply in any event
  • will it lead to a further depletion of social housing stock –  is ‘one for one’ replacement realistic?
  • how the scheme plays out will affect how authorities plan to meet affordable needs and provide replacement stock in the Local Plans they will be ‘encouraged’ to prepare by early 2017?

CIL Review – can we fix it?

Part 1 of our CIL Review blog highlighted the Government’s appetite for retaining and reinforcing the Community Infrastructure Levy.  Our suggested reforms for this year are:

  1. Simplify regulation: The CIL Regulations are the product of a set of amendment instruments for each year since 2010, plus the changes made by the Localism Act.  These reforms – delivering phased charging, abatement, flexibility on offsets for existing floorspace and other improvements – have been welcome.  The resulting system is now mired in horrible complexity though.  The Review should explore how much regulation could be simplified or simply discarded.
  2. cilSimplify phasing: The introduction of phased charging in 2014 is a great tool for managing CIL liability. The process for defining and amending CIL phases should be significantly easier for investors though.  Breaking the link between planning phase and CIL phases is necessary to end what has become a time consuming exercise.  Likewise, the effect of S96A changes on phasing should be made absolutely clear to avoid CIL-bearing schemes being forced to use time consuming planning processes to achieve changes that are material to CIL but immaterial to planning.
  3. Delivery: Uncertainty over the way that CIL expenditure will be focussed on planned growth is unhelpful.  The Review will have to consider the balance between the discretionary use of CIL, against the need to avoid it being drained away from investment in new infrastructure to support Local Plans. A slightly more prescriptive framework for some of the really big ticket items used to justify CIL setting would be sensible.
  4. CIL Agreements: CIL breaks down for the largest schemes and is a drain on the system and general source of bafflement.  The Review will need to grapple with how much flexibility can be created for genuinely ‘Strategic Sites’. It is possible to contractualise CIL payments for major schemes so that much of the current regulatory fog is cleared, as long as:
    1. it is compatible with value capture, so that the overarching CIL burden itself cannot be reduced by the use of agreements;
    2. it is compatible with procurement law, which will mean that the point at which CIL liability arises will need careful thought, the powers to enforce under Part 9 of the regulations are applied and instalments continue to apply;
    3. the valuation assumptions for ‘works in kind’ are less dysfunctional.
  5. Pooling + Double Dipping: The law is regarded as confusing but could easily be left as it is, but furnished with proper guidance about how the R123 restrictions should be used to focus debate on the whether there is a real justification for planning obligations. The R123 list and R123(2) pooling restrictions should be recognised as a diversion, and binned.
  6. Look afresh at Affordable Housing investment. The Localism Act changes are widely seen as having successfully removed affordable housing from the realms of CIL ‘infrastructure’.  The merits of that political choice should be revisited – recycling a limited amount of CIL into innovative affordable tenures would make sense and address the viability debates that dominate housing.
  7. Create freedom: Allow authorities to forward fund infrastructure and repay debt from CIL. The rate at which they may do so is currently set at 0%, despite their access to preferential borrowing rates. Authorities with a Local Plan less than 3 years old should be empowered to do so, as long as the CIL repays only new infrastructure.
  8. Reduce choice: The Localism Act 2011 amendments to the Planning Act 2008 allowed CIL to be spent on existing, as well as new, infrastructure. That undermines the purpose and legitimacy of CIL. Take it back, or at least only allow it for authorities with a recent plan that meets needs in full without the need for future green belt reviews.
  9. Charge Setting: The Examination process is mercifully short and focussed. It is too rarely burdened with substantive objections. There is little that needs to change, other than the level of engagement with the process. The scope for abuse of differential rates and the application of residential charging rates to so-called ‘ancillary’ spaces should be reigned back in or made absolutely clear at the charge setting stage.
  10. Exemptions, distractions and diversions: There are too many developments that do not pay CIL and too much CIL is diverted away from local authorities who need it to provide the infrastructure to support development.  Good development should be supported by infrastructure, and that needs funding.  Let’s cut back on those who do not have to pay and let’s make sure the entirety of the money raised is available for new capital expenditure.

 

Strange Tides – Courts And Tribunal Pull In Different Directions

Viability debates continue to shape planning. The frontline is shifting, from debates about key principles, towards the wider issue of transparency and participation.

The Information Commissioner’s Office (ICO) and, ultimately, the First Tier Tribunal (FTT) hear appeals under the Environmental Information regime, intended to give effect international commitments to participatory decision-making. In RB Greenwich v IC and Brownie (EA/2014/0122), the FTT required disclosure of pricing and profit assumptions, sales and costs forecasts.  Given the finding of limited commercial harm, the decision is unremarkable.  It is one example of disclosure being increasingly required either because there is little real harm or that real harm is outweighed by the public interest in understanding the reasons for particularly controversial decisions.

shellThe Courts’ approach is different. George Turner v SoS CLG and others [2015] EWHC 375), concerned a challenge to the Secretary of State’s decision to approve the Shell Centre redevelopment.  A financial appraisal was submitted with the application to explain the level of affordable housing provision (and reviewed by the local authority’s expert). It was not forwarded to the SoS. The expert’s summary report was reluctantly disclosed two days before the inquiry began. The claimant argued that it was impossible to properly determine the viability justification for the departure from plan policies without scrutiny of the full appraisal.

In rejecting the claim, the judge followed the Arsenal case (Bedford v LB Islington and Arsenal Football Club Plc [2002]) where a confidential consideration of viability, with a report giving only the “gist of” the findings, was allowed. He stressed that the law only requires the disclosure of the materials placed before the decision maker.

Two questions stand out.  Firstly, the judgment is silent on an authority’s duty to pass application materials to the Secretary of State (under s.77 TCPA 1990). The Call-In Direction required all application documents to be sent to the decision maker. That did not happen. The facts were therefore different to Bedford.  Secondly, inquiry evidence must be heard in public, unless the SoS makes a – rare – direction for a shielded procedure for scrutiny of sensitive information.  It may have made more sense to use that process, rather than limit the material provided.

The Court of Appeal will now consider these issues in deciding whether to hear the claimant’s appeal, in the context of real concerns recognised by the judge at first instance about the conduct of the Inquiry.

Housing needs a must

At last there is a political consensus that there is a massive housing shortage in this country.   Three-quarters of the British public now agree. Only a minority of MPs believe that the solution is out of the Government’s hands – credible solutions to the shortage may well win votes.  This is the first in a series of posts that looks at the housing policy platforms of each main party, starting with Labour.

Lyons Roar

The NPPG has been a convenient tool to grab headlines for the Government.  The general thrust of most recent changes has been that so-called “red-tape” is being cut to facilitate housing delivery.  A couple of weeks ago, as some Councils grappled with how to calculate Vacant Building Credit and lamented the loss of affordable housing contributions, we learned more about the Labour proposals to deliver housing floated in the Lyons Review.

Labour want to recapture the post-war spirit for building new homes, matching that renewed ambition with a drive to build high quality homes and great places for new communities.  This has been a consistent message from the Shadow Housing Minister since she stepped into her role.  Easy to say, more difficult to deliver.  NIMBYs have not disappeared. Nevertheless Labour propose the construction of 200,000 new homes each year by 2020.  They propose doing this by:

  • Making tackling the housing crisis a national priority;
  • Giving local communities stronger powers to build the homes needed in the places people want to live;
  • Giving first time buyers priority access rights in new Housing Growth Areas;
  • Creating a major new role for local government in commissioning and delivering housing developments;
  • Building more affordable homes;
  • Increasing competition in the housing market and boosting small builders; and
  • Building a new generation of New Towns and Garden Cities.

Larger than local – mind the gap

No return to regional planning is proposed. In fact Labour see an increasing role for local government in assembling land, delivering infrastructure and commissioning housing development, with powers to prevent land banking.  Labour propose addressing the fall in housing delivery by small and medium size builders by providing access to low cost loans. Delivery of designated housing growth areas “at pace” and a new generation of new towns and garden cities are seen as the proposals most likely to deliver the significant housing numbers required.  Much of this builds on the Lyons Review, the most comprehensive recent review of the housing crisis and how to solve it.

Something still to give

Unfortunately, the announcements to date do not fully embrace all of the Lyons recommendations and it remains to be seen whether, for example, the measures on CPO and land value will be taken forward.  We will find out in May if Labour will get the opportunity to implement their plans.

With thanks to Janine Shaw for assistance with this blog

Credit Check: muddles in the mire

The introduction of new policy on section 106 tariffs and affordable housing has generated significant interest and concern. The policy simply states that:

“A financial credit, equivalent to the existing gross floorspace of any vacant buildings brought back into any lawful use or demolished for re-development, should be deducted from the calculation of any affordable housing contributions sought from relevant development schemes.”

specialThe statement is clearly policy, albeit the weight to attach to it is a matter of debate.  Where local plans have been adopted in accordance with the NPPF, taking account of viability and vacant floor space, should the new policy override that?  The additional supporting paragraphs in the NPPG are not policy, but there is a risk that they will be treated as if they are, given the poor and skeletal nature of the policy itself.

This shock and awe approach to policy making has led to mixed reactions.  It is estimated that it will cost Westminster City Council alone £1bn in lost funding.  Westminster, Southwark and the City of London are looking for ways to reshape their policies to cope.  Reading and other boroughs have brought a legal challenge. The Westminster Property Association has said it rejects the windfalls the changes would bring.  There have to be question marks about how long it will last.  However, for as long as the policy survives in its current form, the opportunities are offset by some uncertainties.

Opportunity cost

Although there is an argument that the policy only applies to financial contributions it is likely that the  offset applies to both financial contributions and on-site provision. The policy therefore opens up the scope for greater profits.  It also creates a perverse incentive for further running down the stock of commercial floorspace and replacing it with residential uses in some areas.

The policy is not binding on local planning authorities – who may see good planning reasons for not giving it overriding weight.  The likelihood of it being given overriding weight on appeal means that many authorities will feel unable to continue their previous approach though.

The furore highlights how so much reliance has come to be placed on financial contributions and raises a question of whether local Plans that relied on affordable housing provision from vacant buildings remain sound.  Unless there is alternative provision (or finance) or an increase in greenfield site allocations, it is hard to see how they can be – the local plan will not meet the objectively assessed need for affordable housing.  For plans to be sound, they will need to be amended to identify how they will fund affordable provision in urban areas without developer contributions (or how significantly increased site allocations outside urban areas will enable the slack to be taken up, albeit that it will be in less sustainable locations).

Credit check

The policy itself is limited to the 28 November 2014 Ministerial Statement.  The guidance on how to apply the credit is sparse. Several practical difficulties are already apparent:

  • How much credit? The basis of calculation is open to debate. Correspondence with CLG suggests that obligations should be reduced to the same proportion as the net increase bears to the total residential floorspace.  Developers should not assume that the space will be offset on this ‘straight line’ basis – authorities such as Norwich are considering a more nuanced approach where average unit sizes are factored in, with potentially significant effects. Some authorities will apply a GEA basis, not GIA.
  • Vacancy: The NPPG refers to ‘relevant’ vacant buildings providing a credit.  That will mean different things to different people.  Does it mean all of a building or part?  Does it mean at the date of application, of permission or later?  Developers will need to be careful to avoid a definition or period of vacancy that could cut across existing floorspace offsets for CIL. Will authorities seek to back-date rates claims where vacancy is relied on but was not obvious before?
  • Abandonment: The credit will not apply where buildings have been abandoned. This is a high threshold, but also a strange test to choose, being an area of law ill-suited to planning permissions and requiring a mixed objective and subjective test. Unless buildings have become so dilapidated that they are effectively beyond any resumption of a previously authorised use, it will rarely apply.

Local Plan changes

There is a nudge, perhaps unintended, to review Local Plans.  CLG have suggested that the measure is intended to be impact based. If authorities review the impacts and adopt policies that reflect it, the development plan should trump the credit policy.  Authorities in urban areas – particularly London – are now fast tracking this kind of review.  In some areas, a Neighbourhood Plan might be a quicker and easier vehicle in which to do this, given that such plans only need to be prepared ‘having regard to’ national policy.  According to recent Secretary of State appeal decisions, they can be adopted inconsistently with the NPPF, become immediately out of date (or sit in draft) and still be given determinative weight on appeal.

There is also a nudge to CIL. The new policy can, and should, be reflected in CIL viability modelling for all types of sites.  It may increase the charging rates significantly for strategic sites with material levels of vacant building.  As local authorities look for alternative sources of funding the changes may also lead to more scrutiny of whether the Government’s changes to the CIL regime under the Localism Act 2011 did, really, kill off the ability to spend CIL on affordable housing.

Affordable housing contribution reduced on appeal

We have previously reported on successful appeals by developers to reduce affordable housing contributions under the Section 106BC appeal mechanism.  Shortly before Christmas a further developer, Bloor Homes Limited (“Bloor”), succeeded in its appeal to reduce its affordable housing contribution on a scheme in Shepshed on viability grounds.

Bloor entered into a planning obligation in November 2012 which required the provision of 30% affordable housing with 70% in the form of rented units and 30% being intermediate housing.  Charnwood Borough Council subsequently refused Bloor’s application to modify the affordable housing contribution.

With the appeal documentation Bloor submitted appraisals for the provision of 30% and 14% affordable housing on the appeal site.  Bloor  also carried out a Market Research Report which identified values achieved on a residential site under construction on Anson Road in another area of Shepshed. 

In reaching his decision the Inspector, Stephen Roscoe, drew heavily on the values achieved from sales at Anson Road. Based on these figures the Inspector concluded that there was an additional £211,000 to add to the 14% appraisal value.  He accepted that the affordable housing obligation of 30% made the scheme unviable in current market conditions.  However, when looking at the 14% appraisal scheme he concluded that, based on an affordable unit price of £110,000, the value increase justified two additional affordable units.  The Inspector decided that the required number of affordable units should be increased to 12, equivalent to 17.1% with 66.6% being rented units and 33.3% being affordable units.

hsgThis appeal highlights three issues.  First, the significance of meaningful benchmarks.  Good local evidence will be persuasive.  Second,  the Section 106BC appeal process offers some real flexibility.  Whilst Bloor did not succeed in securing the 14% affordable housing provision they wanted, they did secure a 13% reduction on the original contribution requirement.  Bloor did not carry out any viability appraisal prior to entering into section 106 agreement.  The process from submission of the Section 106BC application to the Inspector’s decision took only 6 months.  That is less than it may have taken had such work been carried out at the application stage.  The relative speed of the process is likely to pose a risk for local planning authorities where section 106 agreements do not have any in-built viability review.  Thirdly and finally, the Council suggested a market review mechanism so that, if sales values increased, further affordable housing would be provided.  The Inspector noted that since a Section 106BC modification only lasts three years, this was not practicable for a large scheme likely to take longer than that to deliver.  This is a more contentious point since it potentially limits the options open to both developers and to local planning authorities.  It is more a reflection of a lack of imagination about the potential modifications than an issue of principle.  A sensible review clause could be developed and should have been considered.