(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.

General Election 2019: Vote Planning

The 2019 General Election is taking place against a backdrop of real controversy about the nature and the role of Government. The fault lines in the main parties’ Manifestos on Planning show some interesting shared ground and stark fault lines. Examples of common themes across the three leading parties include a 300,000 homes a year housebuilding target, a push for building green, and a scepticism of foreign homebuyers. All three parties propose reforms with implications for the Private Rented Sector and Build to Rent development. Only Labour proposes clear value capture measures designed to assemble land more cheaply.

Here is our summary of the main parties’ manifesto commitments in planning:

With thanks to Kendal Youngblood for preparing this blog.

Where next for stewardship?

The delivery of new homes has for some time now been a key priority for the current government, previous governments and inevitably will remain so for future governments. With the scale of housing needed to begin to make a dent in the housing shortage, comes also the need to provide infrastructure, new public realm, community and recreational facilities and green space. While the focus is on identifying strategic sites to help deliver the housing needed, greater consideration must be given to the legacy arrangements required to ensure that once residents are living in the delivered houses, they are embedded within a community which offers the recreational facilities and greenspace to sustain and enrich what is simply ‘living’. Stewardship is key to that enrichment and should be addressed early in the development management process. Creating communities requires more than just bricks and mortar.

Read the full article

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

Embrace Hard Choices As Well As 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 planning guidance for housing for older and disabled people

The new chapter to the NPPG helpfully states that LPAs:

  • should set clear policies to address the housing needs of older people and ensure that their Plans provide for specialist housing for older people where a need exists;
  • need to count housing provided for older people against their housing requirement;
  • should take a positive approach to schemes that propose to address an identified unmet need for specialist housing.

However, it leaves a lot to the discretion of a LPA, including what use class this type of specialist housing falls into and whether affordable housing may be required alongside housing for the elderly, subject to viability. 

Despite including a summary of four different types of specialist housing for older people, the guidance purposely shies away from answering the often contentious and critical question, because of policy wording, of whether a development for specialist housing for older people falls within C2 (Residential Institutions) or C3 (Dwellinghouse) of the Use Classes Order.  Instead of stating that a LPA should look to current precedents for guidance, the new NPPG chapter acts to undermine it by stating that:

  • the use class a particular development falls within may depend on the level of care and scale of communal facilities provided (at paragraph 14); and
  • extra care housing usually has “a medium to high level of care available if required” (at paragraph 10).

Some other weaknesses in the guidance are that it says LPAs could (as opposed to should):

  • provide indicative figures for the number of units of specialist housing needed for the plan period, but makes clear (paragraph 12) that Plans need to provide for specialist housing for older people where a need exists;
  • monitor the provision of housing for older people;
  • allocate sites for specialist housing for older people.

Overall, the guidance is a step in the right direction but is an opportunity lost.   

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.

Self-build series Part 4: Further reform still needed

This Series has explored the common CIL risks for self-builders and the proposed amendments that should help to protect future self-builders from themselves. These changes are summarised in Part 3 of this series. 

Whilst the changes have addressed most of the potential future pitfalls with the self build exemption, they do not address or undo any previous injustice that has resulted in many self-builders incurring unexpected CIL in the tens of thousands. 

We do not accept the Government’s explanation that retrospective amendments to the Planning Act 2008 are not possible, we will continue to lobby for retrospective amendments to rectify the unfairness that has experienced by so many self-builders to date, as well as further amendments to:

  1. introduce an appeals process against the refusal of SBE application and other reliefs;
  2. the wording in regulation 54(C)(3) and/or the Self Build Part 2 Form (form 7) to make clear that the information or evidence that is to be submitted to verify the use of the home by the self builder is not limited to the three things listed on the form. Other types of evidence could satisfy the requirement and the requirement to ‘include the particulars specified or referred to in the form’ does not provide the Collecting Authority with a discretion to accept evidence beyond the three things listed on the form[1].

Watch this [blog]space.


[1] We are aware of a situation where a home was purpose built for a disabled child and due to the build being funded by the child’s trustees it was not possible for one of three supporting documents required under the Self Build Part 2 Form (form 7) to be supplied and this resulted in the SBE being withdrawn

Self-build series Part 3: Self-build pitfalls fixed, but will not remedy existing injustices

The earlier blogs in this Series have explored the pitfalls in the CIL regulations in connection with the self-build exemption (SBE). 

After much lobbying the Government appears finally to have listened.  The Government’s response on the Developer Contributions consultation confirms that the proposed amendments to the CIL regulations (that were announced as part of the Government’s Developer Contributions reform consultation) will be taken forward to make the SBE process a little easier, fairer and more forgiving. 

The draft regulations (laid before the House of Commons to come into force on 1 September 2019) ensure the penalties that result from a self-builder failing to submit a commencement notice before starting development will be softened. Instead of losing the SBE entirely, the developer will only be required to pay a mandatory surcharge equal to the lesser of £2,500 or 20% of the CIL that would apply to the development if not for the exemption (i.e. the penalty is capped at £2,500)[1], and confirm that the SBE to be carried over to an amended permission (i.e. a s73 permission), even if the development has commenced under the original permission[2].

This will not apply to wholly new applications, so careful thought still needs to be given to the potential CIL consequences if a new application is made after works have commenced under the original permission.

In addition to the changes for self-builders, the proposed amendments will also help to correct many of the pitfalls that plague the other CIL exemptions including:

  • the failure to give the commencement notice before starting development will no longer (from 1 September 2019 assuming the amendment regulations take effect) result in the loss of charitable relief or social housing relief exemption; and
  • the failure to give the commencement notice before starting development will no longer result in the loss of the exemption for residential annexes and residential extensions (from 1 September 2019 assuming the amendment regulations take effect).

However, as for the self-build exemption, the failure to give the commencement notice in advance of starting development will for each of the abovementioned scenarios give rise to a mandatory surcharge of no more than £2,500 (although the draft amendment regulations do not explicitly refer to residential extensions being subject to this penalty).

Unfortunately, the proposed amendments are not to have retrospective effect, so will not address or undo any previous injustices.  Part 4 of this Series will address this and what more is needed.


[1] Regulation 6 of the Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019

[2] Regulation 7 of Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019 proposes a new regulation 58ZA


Self-build series Part 2: Options for retrofitting the exemption to future permissions

Following on from Part 1 of the Self-Build series, the precarious position for future self-builders should be improved later this year, given the Government’s response to their Developer Contributions consultation.  However, the proposed amendments will only come into effect from 1 September 2019, arriving too late to fix the predicament of many existing self-builders.

Therefore, if works have started but deviated from what was originally approved and a s73 application or new application is made (instead of a s96a application) but not determined, to try to avoid a CIL liability under the new permission the self-build should consider and discuss one or more of the following options with the LPA:

Option 1 – Agree to extend the determination date for the s73 application until after 1 September 2019 when the proposed amendments have taken effect to allow a transfer of the self-build exemption. 

Option 2 – Agree that commencement under the original permission does not disqualify the new permission from the self-build exemption.

It is not uncommon for LPAs to claim that commencement under the original permission constitutes commencement for the purposes of the new permission and that this disqualifies the new permission from the self-build exemption.  Whether or not the LPAs position is legally correct depends on how far advanced the works are under the original permission, as there will need to be a material operation that could be undertaken as part of the new permission to implement it. If the LPA can be convinced that that works have not commenced for the purposes of the new permission and that they are still capable of granting the self-build exemption for it, the self-builder ought to (as soon as possible and before the new application is determined):

  1. submit an application for the self-build exemption;
  2. cease development under the original permission in advance of the new permission being granted, and not recommence development under the new permission until:
    • the self build exemption has been granted; and
    • a completed assumption of liability notice and commencement notice is submitted to the LPA for the new permission (noting a future commencement date);
  3. document their development activities as clearly as possible (i.e. document/photograph when and where the works stopped on site, what works were the material operation under the new permission, obtain written statements from contractors, etc.) so this evidence can be provided to a LPA, if needed to corroborate their position. 

Option 3 – If the LPA will not agree that commencement under the original permission does not disqualify the new permission from the self-build exemption

  1. write to the LPA to ask that the s73 application be determined as a s73A application, with the self-build exemption to be granted on the same day as the permission. If this is not agreed by the LPA or the application is not a s73 application, the application should be withdrawn and a new application submitted as a s73A application;
  2. submit an application for the self-build exemption in advance of the application being granted permission; and
  3. submit with the self-build exemption application a completed assumption of liability notice and commencement notice which states that the date of commencement is the date of the grant of the new permission and the self-build exemption.

All of the options carry large risk and require the cooperation/‘blessing’ of the LPA. Option 1 is the preferred approach as it carries the least risk and should be the easiest to secure LPA agreement to.

If a self-builder has made a new application and is unable to agree one of the above approaches with a LPA, quickly, it should consider withdrawing its application before it is granted and the potential CIL liability is crystallised. 

Given the Government’s response to the Developer Contributions consultation, it is unlikely that a LPA would seek to take enforcement action where a self-builder withdrew or delayed the making of their s73 application, on the understanding that the self-builder would submit a s73 application as soon as the proposed amendments to the CIL regulations take effect. 

The proposed changes to the CIL regulations do not relate to s73A applications. Therefore, it is critical that the LPA is comfortable that a s73 and not a s73A application can be used to correct works deviating on site from what was originally approved. This will be more of an issue for those s73 applications that are made late in the development process and there is very little work remaining. 

Part 3 and 4 of this Series will address the Government’s response to reforming developer contributions and the changes that will be made to the CIL regulations to help make the self-build exemption process a little easier, fairer and more forgiving in the future. 

Until at least 1 September 2019, self-builders need to remain alert to the risks outlined in Parts 1 and 2 of this Self-Build series.