Keys

09/03/2017

Housing White Paper and Legal Update – Small Sites, CIL and Section 106

Anticipated to be the greatest reform since the National Planning Policy Framework of 2012 (“NPPF”), the Housing White Paper (“HWP”) was finally published on 7 February 2017. With the primary aim of addressing Britain’s “housing crisis”, the HWP is focussed on the delivery of new homes and meeting the very clear need for more housing across the country. 

In this article I focus on perhaps some of the more subtle measures in the HWP or those that could lead to dramatic reform, but are deferred until the Autumn Budget. In particular this article focuses on the HWP’s encouragement towards small and rural exception sites; new permitted development rights; and the proposed reform to Community Infrastructure Levy (“CIL”) and section 106 planning obligations. Reforms concerning habitats and environmental impact assessment are also briefly covered below. 

Small Sites, Affordable Housing and West Berkshire

West Berkshire 

The HWP quite rightly acknowledges that small sites and developers are a vital part of the development industry and a contributor for growth and that the provision of affordable housing may render small schemes unviable. This was the very clear mantra of the previous housing minister Brandon Lewis, which culminated in the Written Ministerial Statement of 2014 (“WMS”). The WMS advised decision makers not to seek affordable housing obligations on schemes of fewer than 10 units (or 5 in designated rural areas), subject to a 1,000 square metres of floor space threshold. 

The WMS was initially overturned in the High Court following a legal challenge brought by West Berkshire and Reading Councils, but this was ultimately upheld by the Court of Appeal in May last year. This resulted in the reinstatement of the NPPG to reflect the thresholds and guidance of the WMS. Many expected this to be the end of the debate, with the certainty for developers that so long as the thresholds are met, no affordable housing may be sought. Unfortunately not... 

By way of a reminder, the effect of the Court of Appeal’s decision was: 

  • the WMS was considered lawful; 
  • the WMS is therefore an up to date material planning consideration, supported and emphasised in the NPPG; 
  • it is a matter for the Local Planning Authority (or Inspector on appeal) as to what weight should be attached to the WMS. 

It is the final point that formed the battleground for developers and local planning authorities (“LPAs”) over the past year, namely how much weight should be attached to the WMS / NPPG and in what circumstances LPAs may afford more weight to their local affordable housing policies. 

Eagerly awaited appeal decisions have materialised recently but, much to my disappointment and the frustration of many, inspectors have offered conflicting views. This is best emphasised through no less than five conflicting appeal decisions involving Richmond Borough Council (“RBC”) during 2016. 

In some decisions, the inspector afforded automatically less weight to the local plan policy requirements for affordable housing and held that the WMS / NPPG effectively “trumped” the local plan policies and found that no affordable housing provision was required to make the development acceptable in planning terms. Other inspectors found that the chronic need for affordable housing outweighed the WMS / NPPG and refused permission for lack of affordable housing provision. 

RBC has since written to the Planning Inspectorate and, quite understandably, raised concern as to the lack of consistency in approach. In its response this month, the Inspectorate apologised for “errors in judgment” in respect of the two appeal decisions where the inspector automatically applied less weight to the local plan policies. The Inspectorate most importantly endorsed the correct approach to applying local affordable housing policies and the WMS / NPPG, i.e. that decision makers should a) decide the application in accordance with the adopted local affordable housing policies); b) decide the weight to be attached to the WMS / NPPG as a material consideration; and then c) decide whether the WMS / NPPG outweighs the local policy requirement for affordable housing. 

Whilst the Inspectorate’s letter is a useful reminder of how the WMS / NPPG should be applied, it is hardly ground-breaking and simply reminds us of the section 38 (6) duty when determining planning applications affording primacy to the development plan policies unless material considerations indicate otherwise. 

The uncertainty will therefore continue as the weight to be attached to the WMS / NPPG will be left to the decision maker and will inevitably vary from LPA to LPA and indeed from inspector to inspector. Further, as the HWP provides no clarity on the application of the WMS or NPPG, further clarification may be left for Government through further policy or the Courts. In the meantime, developers will inevitably be seeking to bolster their applications with a range of material considerations to support the grant of planning permission to justify why the local affordable housing policies should not be complied with. This may include viability issues amongst many others. 

I suspect that many LPAs will also be growing in confidence to disregard the WMS and NPPG in favour of their local policies based on, for example, the need for affordable housing. Developers may therefore be required - in the short term at least - to have one eye on an appeal when progressing smaller sites and seeking to avoid affordable housing obligations.

The HWP on small and rural sites 

With the intention of promoting a “good mix of sites” and “meeting rural housing needs” the HWP proposes a range of amendments to the NPPF. The key measures include: 

  • an expectation that LPAs will have policies that support development of small “windfall sites”, i.e. those sites not allocated in plans but which come forward on an ad hoc basis; 
  • an indication that “great weight” should be given to developing “small” undeveloped sites within settlement for homes where appropriate i.e. sites of fewer than 10 units or smaller than 0.5 hectares. The HWP makes clear - much to the disappointment of many - that LPAs will still be able to protect valued areas and “stop unwanted garden grabbing”
  • highlighting the opportunities in neighbourhood plans to identify and allocate small sites for housing; 
  • providing stronger support for “rural exception sites” to provide affordable homes for local people; 
  • making it clear that at least 10% of the sites allocated for residential development in local plans should be on sites of 0.5 hectare or less. This is in addition to the windfall allowance. 

The above support would be welcomed by developers of small sites, although the challenge will be the practical and administrative burdens of allocating small sites. In addition - as with much of the HWP - the devil will be in the detail when the draft amendments to the NPPF are published. 

Permitted Development Rights (“PD Rights”) 

PD Rights are an extremely useful tool to allow certain developments to be undertaken without the need for express planning permission, or subject to a more streamline prior approval process. The most successful and popular permitted development rights have been those that allowed office or agricultural buildings to be converted to residential dwellings subject to certain criteria being met. The beauty with these rights is that, in most cases, no affordable housing or CIL contributions would be required. 

Further measures are mooted in the Government’s response to the “Rural Planning Review” of February 2016. These are briefly summarised below, which shall be subject to further consultation and regulations in due course: 

  • expanding existing agricultural PD Rights and thresholds; 
  • new agricultural to residential PD Right to allow conversion of up to 750sqm for a maximum of 5 dwellings, each with a maximum of 150sqm. These must meet local need for rural workers; 
  • the existing threshold in the Class Q PD Right allowing agricultural buildings to be converted to dwellings will be increased from 450sqm to 465sqm; and 
  • various rights to permit development of state funded schools.  

Most disappointingly however, the Government is not currently proposing to introduce new PD Rights allowing “upward extensions” in London, that allow a limited number of additional storeys on existing buildings. This could have been an important tool to boost housing delivery in the City of arguably the most need and I consider it - perhaps similar to many other measures in the HWP - a missed opportunity. 

Community Infrastructure Levy

Developers have mixed feelings towards CIL. One cannot deny it is a clear tax on development, with the benefits of certainty having to be balanced against the inflexibility of an over-complicated and inflexible CIL regime. 

Since its adoption in 2010, less than 40% of LPAs have adopted CIL. A third of LPAs do not even have a draft charging schedule. The “pooling restrictions” that came into force in April 2015 were aimed to encourage LPAs to adopt charging schedules or otherwise run the risk of not being able to insist upon infrastructure contributions from more than 5 developments for the same project. Needless to say, there are many ways around this poor drafting of legislation by Government. Consequently, such measures have not had the desired effect. 

The HWP has frustratingly parked the issue and consideration of CIL until the Autumn Budget. It is however recognised that the current system does require change and there is a need to offer greater flexibility to developers that is more readily available through the section 106 regime, e.g. the ability to recover unspent payments and more appropriately secure phased payments of contributions to assist with cash flow and avoid significant up front contributions. Many LPAs have also understandably found the CIL regime “incredibly resource intensive” with “the wealth of regulatory changes has made it complicated to administer”. 

To tackle these concerns, and in consideration that the complete abolition of CIL is impracticable, Government has proposed replacing CIL with the introduction of the “Local Infrastructure Tariff” (“LIT”). LIT is essentially CIL but at a considerably lower rate, calculated using a national formula based on local market value on a per sqm basis. Government has suggested that LIT would apply to larger sites and only usually be required for smaller developments of 10 units or less which would have no other planning obligations. 

Government is also proposing to remove the “pooling restrictions” under Regulation 123 and make the Regulation 122 tests much stronger to ensure only those contributions really necessary to make a development acceptable may be sought. This is clearly welcomed as compliance with the Regulation 122 tests continues to be a point of contention during applications and appeals. 

It is anticipated that section 106 agreements will therefore play a much wider role for major applications and, similar to the position prior to CIL, secure the majority of contributions that are required to make development acceptable in planning terms, including any environmental mitigation that cannot be sensibly conditioned. This is, after all, a system that worked extremely well for many years. The devil will again be in the detail and we shall have to await final CIL proposals through the Autumn Budget. 

Section 106 Agreements 

One of the largest frustrations for developers and promoters is the time taken to conclude section 106 agreements following a resolution to grant planning permission. Ultimately until the section 106 agreement is completed, the planning permission should not be issued. 

Whilst I often advise developers to take a view on many points in a section 106 agreement so long as the agreement works, protects their position and is commercially sound, many LPAs and their solicitors use the negotiation of section 106 agreements as an academic exercise or to create a piece of literary art! 

The time taken to conclude these agreements is not assisted by each LPA having different preferred templates and - in many instances - not necessarily willing to deviate from precedent drafting. Government has for some time proposed the standardisation of section 106 agreements to have a precedent form of drafting that may be utilised and adapted nationally and for all development projects. This will inevitably be welcomed as often the delays and costs are caused not by agreement on the commercial terms, but the drafting of the agreement itself. 

The HWP has also parked these section 106 reforms until the Autumn Budget, which includes the proposed dispute resolution mechanism provided for in the Housing and Planning Act 2016. In summary, this procedure is aimed to allow either the LPA or developer to refer the negotiation of the section 106 agreement to a third party arbitrator if terms cannot be agreed in a timely manner. Proposals are also suggested to require heads of terms to be submitted with the planning application to increase transparency. 

In the meantime, I consider it crucial for applicants to engage in the section 106 process as soon as possible. Heads of terms may be sensibly agreed shortly after the end of the consultation period once the likely contributions and mitigation are known and the parties may begin negotiating the draft agreement thereafter; ideally with a view to having a completed agreement (or advanced draft) by the time of planning committee. Whilst there is a cost risk involved with such early engagement in the event of a refusal, this would ensure that the planning permission may be issued with minimal delay following resolution to grant. 

Habitats and Environmental Impact Assessment (“EIA”) 

Worth a brief mention is the HWP’s proposal to streamline the licensing system for managing great crested newts; a protected species that is recognised to significantly delay new developments whilst site specific surveys, mitigation and licensing are secured with the involvement of Natural England. The proposals include the implementation of the pilot scheme of Woking Borough Council to replace the site licencing approach with a more plan level approach, whereby surveys, habitats compensation and licensing can be undertaken at the District level. This is aimed to significantly reduce cost and delay, and will inevitably be welcomed. 

Developers will also be aware of the new Environmental Impact Assessment Regulations coming in force in May this year. An article summarising the implications of the new legislation may be found at: http://www.howespercival.com/resources-and-events/news/breaking-news-the-new-environmental-impact-assessment-regulations--a-complete-overhaul-of-eia

The Wait Begins… 

Government’s detailed proposals contained in the HWP are now eagerly awaited, and in the meantime it will be business as usual. 

Howes Percival’s planning team are running a series of planning update seminars in Leicester (14 March 2017), Cambridge (15 March 2017) and Norwich (16 March 2017) which shall include a summary on the implications of the HWP, supporting consultations and recent case law. Please contact Victoria Wozencroft - Leicester (victoria.wozencroft@howespercival.com), Harriet Green – Cambridge (harriet.green@howespercival.com) or Katrina Tipler - Norwich (katrina.tipler@howespercival.com) to book a place at either of these seminars.