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Putting the Neighbourhood Plan cart before the Local Plan horse

newickThe Court of Appeal has granted permission for the first Neighbourhood Plan case to be heard by it on appeal. The appeal is brought by DLA Delivery Limited, who applied for planning permission for 63 houses on the edge of the village of Newick, East Sussex.  DLA promoted its site as part of both the Local Plan, and the Neighbourhood Plan process, which have been running concurrently.  Although DLA’s land was identified as a suitable reserve housing site in the emerging Local Plan, the Neighbourhood Plan did not allocate it.

Accordance with what?

While the Local Plan is still emerging, the Neighbourhood Plan has been progressed. DLA sought permission to judicially review the local planning authority’s decision to hold a referendum on the draft Neighbourhood Plan (which has subsequently been formally made, becoming part of the local development plan).  In addition to environmental grounds, DLA claimed that the Neighbourhood Plan was not in conformity with the appropriate strategic policies.  The Neighbourhood Plan had been prepared in accordance with the policies of the emerging Local Plan.  However, as the Local Plan had not yet been adopted,  the plan currently in force covered the period to 2011.  DLA argued that the Neighbourhood Plan could not be in accordance with the strategic policies, and therefore meet the basic conditions to be made, as the plan it related to was not yet in force.

Court of Appeal prepared to look again

The claim was dismissed in the High Court by Foskett J, but granted permission to appeal on one of eight grounds – the need for the Neighbourhood Plan to be in ‘general’ conformity with strategic policies.  Permission to appeal on the other grounds has subsequently been granted by Lord Justice Lindblom in the Court of Appeal.

The case raises interesting points at a time where neighbourhood planning is a political priority, with measures to speed the process included in the Housing and Planning Bill.  Meanwhile, Local Plans with their need for a vast evidence base, may lag behind.  It remains to be seen how the following issues, addressed in the High Court in Woodcock Holdings, will be dealt with by the Court of Appeal.

  • Where Local and Neighbourhood Plans come forward at the same time, should the Neighbourhood Plan look back to the existing plan, or forward to the emerging plan?
  • How can a Neighbourhood Plan, in general conformity with an out of date Local Plan, meet the needs of the community going forward?
  • Should a Local Plan be able to override a Neighbourhood Plan once it has measured its objectively assessed need, if more homes are needed?

Independence day?

A further point of interest raised by the appeal is the appointment of Neighbourhood Plan Examiners. While Local Plans are examined by inspectors appointed by the Planning Inspectorate, Neighbourhood Plan examiners are appointed by the relevant Neighbourhood Plan steering group.  Whilst the claimant emphasised that they made no criticism of the examiner personally, they did suggest that the appointment of the examiner by the parish council gave rise to an appearance of bias.  It will be interesting to see what the Court of Appeal make of this “apparent bias” in the appointment of examiners – should it be another job for the Planning Inspectorate?

The risk of flooding

GLASDIR_2415520bA spate of major floods across the UK, warnings that global warming will lead to more frequent heavy rainfall events and increased risks of flooding have put the topic back at the top of the pile for planners. Recent appeal decisions have highlighted the conflict between planning policy preventing development in high risk areas and the need to build more housing, as well as the importance of mitigation strategies and conditions in securing consent.

Read the full article

This article was first published in Property Law Journal (May 2016) and is also available at http://www.lawjournals.co.uk/

 

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.

A return to local authority housebuilding?

Between the late 1940s and the early 1980s, over a 100,000 social housing units were built each year in England, with the vast majority being built by local authorities. In recent years, English local authorities have built around 1,500-2,000 dwellings per year.

Although this is not a like-for-like comparison (social housing vs all dwellings), the figures paint a clear picture of local authorities’ withdrawal from the business of house building.

A number of initiatives suggest that this might be about to change, and one model for local authority housing delivery may be particularly attractive to local authorities looking to get back into house building without the rigmarole of OJEU procurement.

man building a brick wallCouncils as housing developers

The Government’s One Public Estate programme (delivered in partnership with the Local Government Association) has the ambition of delivering collaborative property focussed projects involving local and central government.  The ambitions go beyond simply enabling house building, and extend to rationalising Council’s land holdings and improving local government efficiency and promoting jobs.  However it is one of the house building projects which will be of particular interest to local government (and perhaps of concern to the local house builders).

Croydon Council, as part of the One Public Estate programme, has created a wholly-owned development company, called Brick-by-Brick.  It will benefit from a pipeline of potential sites currently owned by either the NHS or the Council, and has the objective of delivering 1,200 homes by 2018.

Legal issues: OJEU Exit?

It has some innovative legal features too.

It has been reported that the Council considers that the local housing company will not be subject to the EU procurement rules – and thus will be able to engage suppliers without having to comply with the Public Contracts Regulations 2015 – a major advantage.

From a procurement law standpoint, this is completely correct, provided that the company has a commercial character, and is not predominantly a vehicle to deliver public policy objectives. To maintain this position it will also need to operate as an independent commercial undertaking (albeit one that is owned and control by the Council). However certain features, such as a Council guarantee for the liabilities of the company would fatally undermine this independence, and call into question its status as an entity outside of the reach of the public procurement rules.

Certainly the information that is currently available about Brick-by-Brick suggests that it will be a commercial entity – it is aiming to provide a return on the Council’s investment in order to fund wider council services (amongst other things).

Councils looking to establish similar companies will also have had to take advice on issues such as local government trading powers and the General Power of Competence under the Localism Act.

A further consideration is the price that such companies obtain land from the public sector. EU State aid rules mean that, if the entity is to be genuinely financially independent, it would need to pay a market price for the land it receives from the public sector.  Noting the premiums paid for residential sites in London, this could require considerable upfront capital within the company.

Conclusion

Despite the challenges (none of which are insurmountable) the Brick-by-Brick model will be of great interest to many Councils who are keen to deliver new housing (and to be seen to be doing all they can to achieve this objective) within their areas.

Local house builders may have concerns about perceived advantages enjoyed by development companies established, particularly around valuations for the purchase of public sector land – time will tell whether they are well founded.

Neighbourhood planning: full steam ahead?

The Housing and Planning Bill seeks to further the Government’s localism agenda, by speeding up the neighbourhood planning process.  The Bill includes provisions to automatically designate neighbourhood areas where Local Planning Authorities (LPAs) do not make a decision in time, and will impose a timetable on the consideration of neighbourhood plans.

The Government is now undertaking a consultation on the contents of regulations to be made under the Bill once it becomes law.  The consultations suggests a range of measures which will further increase the pressure on LPAs to progress neighbourhood plan applications.

Neighbourhood-planNoting that 90% of applications are from Parish Councils, and 90% of those applications are for the whole parish, the consultation suggests removing the ability of local planning authorities to amend the area applied for in these circumstances, unless part of the area was designated for another plan. Rather than having eight weeks to consider this type of application, the LPA would have to approve it as soon as possible.

The consultation suggests a limit of 13 weeks for LPAs to consider applications for neighbourhood forums, where applications are to a single LPA, or 20 weeks where two must be involved, and an exception where part of the area has already been designated.

The consultation also asks whether an LPA should be given five weeks from receiving an examiner’s report to decide whether to call a referendum, unless they disagree with the examiner, or agree more time is needed with the neighbourhood group. The consultation suggests a procedure to notify interested parties where they disagree with the examiner.

The consultation suggests that referenda should be held within ten weeks of the decision to call a referendum, or 14 weeks in a designated business area. It also suggests that following a referendum, the LPA should be required to bring the plan into force within eight weeks.

The process by which the Secretary of State may intervene when requested by the neighbourhood planning group is also suggested.

The consultation also proposes that designated neighbourhood forums be added to the list of bodies consulted by LPAs when they are preparing local plans. Alongside the provision in the Bill which allows neighbourhood forums to request that they be notified when planning applications are made, this increases the sway neighbourhood forums will have as part of the wider planning process.

These measures all emphasise the importance to the Government of neighbourhood plans, and increase the pressure on LPAs to progress applications. While there is clear political intent to involve people in planning decisions at a local level, this comes at a time when LPAs may be struggling with the volume of planning applications and have limited capacity available for the work associated with neighbourhood planning.

It remains to be seen whether these measures will boost the number of neighbourhood plans being made, or whether they will increase pressure on (already) stretched LPAs without significant results.

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?

CILly season over? CIL review promises another chance to get it right

We hosted the British Property Federation’s seminar on CIL reform at the end of 2015.  The new year offers a chance to address some of the unintended quirks of the Community Infrastructure Levy that have undermined the originally stated intention when adopting the CIL Regulations in 2010 of a “faster, fairer, more certain and transparent means of collecting developer contributions to infrastructure“.

cilWay of the future?

The Community Infrastructure Levy (“CIL”) was introduced in April 2010, with a promise of a ‘comprehensive review in 2015’. The Review was announced in late 2015 and will conclude in the in the Spring, with the expert group tasked to assess “the extent to which CIL does or can provide an effective mechanism for funding infrastructure, and to recommend changes that would improve its operation in support of the Government’s wider housing and growth objectives“.  Our commentary for Planning Magazine is here.

Better than the rest

The CIL emerged from Kate Barker’s Reviews of Housing Supply (2004) and Land Use Planning (2006). Quicker and more transparent approaches to infrastructure funding and delivery remain at least as important 10 years on. The fundamental objectives of CIL remain right:

  • using a part of the unearned increment on land value growth to deliver infrastructure to support planned growth;
  • underpinning the legitimacy of development.

The Review is therefore intended to refine CIL, not rub it out. It is flawed, but as noted at the BPF’s session, arguably the best alternative to other land value taxes – none of which can claim the same distinction of having lasted between two political terms. Improvement will take place, but the development industry needs to engage with the Review.

The call for representations closes on 15 January. Our next blog will set out our thoughts on reforms that could be delivered this year.

Inspector’s decisions and the kitchen sink

The recent decision in Villages Action Group v Secretary of State for Communities and Local Government highlights the need to handle early stage Neighbourhood Plans carefully on appeal.

The Aldingbourne and Westergate Villages Action Group challenged the Secretary of State’s grant of permission for a residential development in Aldingbourne, West Sussex on appeal, on the basis that his inspector had failed to consider the emerging Aldingbourne Neighbourhood plan (or give adequate reasons for dismissing concerns about restricting the expansion of a neighbouring school). The appeal site was earmarked for a school expansion in the emerging Neighbourhood Plan (NP). The NP was at a very early stage – having only been published in first draft after the Inquiry (and so well short of even the start of the local authority publicity period referred to in the PPG).  Reference to the NP by the local authority in its statement of case accepted that it was material but of minimal weight.

The Limit of Reason(s)

Mrs Justice Lang held that the Inspector was not obliged to refer to the draft NP in her decision letter, because it was at a very early stage and attracted little weight, the school expansion idea was hopeless, the documents were not provided to her and little reliance was placed on it at the Inquiry (or afterwards). She also refused to accept that the Inspector had overlooked the NP as a material consideration (despite making no comment on it in the decision).

NPThere are some points to bear in mind on appeal:

  • Unlike planning authorities, the Inspectorate/ Secretary of State have a statutory duty to give reasons.
  • Only ‘main issues’ must be referred to in decision letters.
  • There is no general duty of inquiry on appeal – absent a statutory duty to consider issues, parties must raise issues and evidence sufficiently clearly.
  • The challenge was dismissed, with no error by the Inspector established.

Prematurity vs Conflict of Policies

The judgment implies that prematurity (as opposed to simple conflict with emerging policies) will not be a ‘main/ principal important controversial issue’ worthy of freestanding inquiry or even a real consideration unless the plan is at an advanced stage.  The PPG arguably sets the bar in a different way – preventing prematurity refusal, not consideration per se, where the NP is still embryonic.

As in the Court of Appeal’s decision in the Shinfield Glebe challenge (1), the question could be asked and answered differently – was the early stage NP (and any prematurity effect) genuinely material in the sense that it might have led the Inspector to reach a different conclusion (or was otherwise fundamental)? If so – which is perhaps doubtful on the facts described in the judgment – could it sensibly have resulted in anything other than permission? The PPG suggests not.

(1) where the Planning for Growth ministerial statement, issued after the Inquiry, was held not to have been considered because it was not included in the decision letter.