Agree and Close
Planning for the Future: Government publishes White Paper on reforms
Criticising what they call “an outdated and ineffective planning system”, the Government claims that the proposed new system will be easier for the public to access, transform the way communities are shaped and build the homes the country needs. It is further claimed the changes will mean more good quality, attractive affordable homes can be built faster. In addition the preparation of local housing plans will be speeded up, valued areas will be protected, there will be a clearer rules based system and a fast-tracked system for the delivery of beautiful buildings will be created. However, will the proposed changes deliver this ambitious agenda?
Many of us recognise the inherent problems with our current planning system. We are supposed to have a plan led system with a presumption in favour of the adopted development plan unless material considerations indicate otherwise. However, some parts of the country still do not have a development plan and if there is one, it is often years out of date. This frequently means that the residential and commercial development this country so desperately needs is not supported by development plans which in turn has led to a raft of applications on unallocated sites. In the case of residential development, such applications are frequently underpinned by five year housing land arguments and politicised decision making can force schemes to appeal, delaying determination for many months or even years.
Those of us dealing with planning obligations will also recognise the huge delays, post a resolution to grant planning permission, in completing Section 106 Agreements. None of us would argue with an ambition which seeks to reduce those delays. The legislation and regulations underpinning Community Infrastructure Levy are complex and sometimes impenetrable and as with most taxes, the law can be inflexible.
Delay is a massive issue generally but how much of that is down to problems with the system? In our experience, and as recognised by Government in its White Paper, resourcing remains a fundamental issue. Put simply, there are not enough high-quality officers and planning inspectors to cope with the demands that are put on their time. A simple, immediate solution would be to properly resource over-stretched planning departments and PINS, and if possible statutory consultees who are equally stretched and can struggle to provide comments on applications in a timely manner. That does not need a wholesale review of the planning system – new law, regulations and policy carries with it the inherent risk of more delay in delivery of much needed development. Action is needed now – the changes advocated are unlikely to deliver results for years.
It is almost impossible to do justice to the number of recommendations contained in the White Paper in an article of this length. The White Paper is not untypical of what Government’s publish these days. Long on ambition and short on detail!. Instead we focus on what we regard as the most eye catching proposed changes relating to proposed changes to the Local Plan system and infrastructure delivery and ask if the Government’s agenda is more likely to be delivered as a consequence of the changes.
The key concerns identified in the White Paper relate to the process leading to adoption, their length, the amount of detail, accessibility and the raft of evidence underpinning production. These are not unfair concerns.
In response the Government proposes to change the form of Local Plans with the primary component being a map supported by a key and text (which will be reduced in size by two thirds). The Local Plan will be a web based document to improve accessibility.
Only three broad designations will now be made:
Growth areas (essentially land allocated for new development with broad categories of development identified as being appropriate – indeed, very similar to the current Local Plan system);
Renewal areas (built-up and urban areas and small sites on edge of villages); and
Protected areas (e.g. Areas of Outstanding Natural Beauty, Green Belt, open countryside and conservation areas).
In order to maintain quality it is proposed that Design Codes will be produced at a local level, potentially through the Local Plan, Neighbourhood Plans or specific to a major allocation. Maps and/or text would specify appropriate uses in growth or renewal areas, broad parameters for development and sub-areas such as areas earmarked for self-build.
A welcome change will be that the general development management policies will be in national policy, not the Local Plan. This means that there will be standardised policy across the country rather than a local authority’s interpretation of what the policy should mean for their area. This should significantly reduce the length of Local Plans and scope for debate through the Local Plan process.
The enhanced focus on the allocation process and effective engagement with communities will also mean that an allocation as a growth area will be the equivalent of an outline planning permission, obviating the need to then go and secure a separate outline planning permission. The allocation of land as a renewal area will give that land a permission in principle. Detailed permission may be obtained through either a new streamlined application process, or a prior approval mechanism (similar to that currently for permitted development rights), or a Local or Neighbourhood Development Order. How this will all work in practice is unclear but we do not think that the issue is changing the status of the allocation. The key issue is ensuring that local authorities properly apply the presumption in favour of the development plan when deciding whether to grant planning permission. Where outline permission or permission in principle is obtained, it is proposed that agreement of details could be left for officers and kept away from Council members, which could helpfully remove some political uncertainty. On large scale sites, the securing of an outline planning permission also provides very considerable comfort that development can be carried out for years to come. It is difficult to see how an allocation can have the same effect, particularly if they are reviewed every 5 years which means a risk of de-allocation.
Another interesting recommendation relates to the proposed abandonment of a five year housing land supply requirement in national policy. A new standard method for calculating housing need is proposed (and the subject of a separate consultation) which will deliver a figure, appropriately allocated across the country, of over 300,000 houses to meet Government policy objectives. The distribution of housing will be based on a range of factors including affordability, settlement sizes and environmental constraints. Central Government will have to gather and consider local data whereas previously this was dealt with by local authorities. The current duty to cooperate will be abolished. We support these changes. For too long the duty to cooperate has worked poorly meaning conflicts between local authority areas have got in the way of delivering much needed housing. However, it is fanciful to think that the imposition of top down housing targets will not be politically contentious and even now there are numerous examples of local planning authorities arguing that the current standard methodology should not be applied in calculating housing need due to particular constraints or issues within that local authority area. We must remember that in 2010 Eric Pickles abolished regional strategies with top down targets due to lack of democratic process, so how this will now be reconciled less than a decade later remains to be seen.
The Government is confident that this new approach will deliver the new housing development the Country needs without a need for a five year housing land supply requirement in national policy. This remains to be seen. The allocation of land to meet housing need does not in and of itself guarantee delivery. In recent years, changes to policy have been introduced to put deliverability and viability at the heart of the plan-making process to seek to ensure that allocations deliver what is promised through the Local Plan process. To deal with this concern, the Government is proposing the retention of a Housing Delivery Test with some form of “penalty” if housing delivery falls below requirements. This could conceivably mean the retention of the tilted balance in some guise, but it is questionable whether engagement of the titled balance via the Housing Delivery Test alone is sufficient. We must remember that HDT is published only yearly in arrears, and considers past delivery. The beauty of five year housing land supply is that it is prospective and assesses those sites that should deliver the following five years’ need for a particular authority. It could be argued therefore that only through a combination of HDT and 5YHLS may an accurate picture of housing delivery in an authority area be provided, and without both measures the necessary checks and balances cannot be achieved.
The Government wants all Local Plans to be in place within 30 months of starting the process. They must be reviewed after 5 years. The industry will welcome these timescales, but only if they are subject to robust enforcement measures if breached. Government already has the power to intervene for those authorities that are failing to prepare an up to date Local Plan. This power is rarely used and even today many parts of the country do not have an up to date development plan. How will Government combat this and ensure authorities perform?
The “soundness” test will be abolished and replace with a “sustainability” test. Sustainability appraisals will be no more (although that does not seem to us to be particularly ground breaking given the introduction of a sustainability test!) and there will be a simplified process to assess environmental impact so it appears that strategic environmental assessment will, in some guise, remain.
The White Paper continues to endorse Neighbourhood Plans. However, what will Neighbourhood Plans do now? It seems to us inevitable that with the new system proposed, the scope and role of Neighbourhood Plans will be restricted perhaps confined to design matters only.
So, in essence, the Government wants to move towards more of a rule based system where there is an enhanced focus on quantitative analysis, not qualitative analysis. The latter approach does of course make outcomes less predictable. However, at the heart of decision making for many schemes will presumably remain a democratic process with an officer making a recommendation and elected councillors making decisions. The scope to determine applications against officer recommendations will remain and unless and until local planning authorities are penalised through costs awards on appeal on a much more regular basis, the greatest element of unpredictability in the system is the final decision, not the process leading to that point.
The Government also wants to introduce stricter time limits for the determination of planning applications. This would be welcome were it not for unintended consequences. We know where strict time limits apply now they do not act as incentives to grant permission or approvals within those time limits. In fact local planning authorities frequently refuse such applications to ensure a decision is made within the time limits. Neither does the White Paper say anything about condition discharges. Given there is no deemed discharge provision for anything other than a few types of condition, it is a massive issue for developers who are desperate to start on site that pre-commencement condition discharges are not prioritised by local planning authorities. Given the need to discharge pre-commencement conditions to ensure a planning permission is lawfully implemented, this situation is wholly unacceptable. The Government’s belief that these changes will lead to few appeals has to be regarded at this stage as at best unproven.
The Government is proposing the abolition of both Community Infrastructure Levy and Section 106 Agreements and Undertakings. Their belief is that the current system is too complicated and uncertain, negotiations are uneven with different levels of skill from authority to authority. From our perspective, far too much time is spent discussing planning obligations at inquiries and hearings and negotiating documents which should be in a standard form. As indicated above, we regard the Community Infrastructure Levy system as on occasion impenetrable and too complex.
We share the Government’s concerns about delays in getting planning obligations in place. However, we do not understand why abolition is the only route. We must remember that Section 106 Agreements are contractual documents entered into prior to the grant of permission. These Agreements can therefore offer an extremely flexible way to secure planning obligations at a time when precise details of the scheme, how it will be developed, or by whom, remains unknown, e.g. liability can be properly ring-fenced to phases; it can secure mortgagee protections; it can secure pooling of obligations to fund cross scheme infrastructure; it can secure options for either construction of infrastructure or financial contribution and cascade mechanisms so that affordable housing or land provision may revert to market housing or other uses if there is no demand; it can secure clear obligations as to how contributions are to be spent and repayment provisions if the monies are unused; and much more. Instead of abolition, a standard template Section 106 Agreement which is used across the country and whose use is enforced through legislation would make a huge difference. There is nothing more frustrating than a local planning authority fundamentally changing its approach to a type of planning obligation or taking a different position on two different developments for Section 106 Agreements being negotiated at the same time. There are many instances where drafting insisted upon by an authority because it is “standard wording” could have untended consequences for purchasers, viability or delivery. In addition, in our experience the issues are frequently related to resourcing. Local authority solicitors are hard-pressed and cannot always cope with the demands placed on them. This is not just about skill levels but capacity and we do not understand why more authorities don’t use the private sector to provide support. Developers are less concerned about cost than delivery.
In addition, it is not immediately clear how the myriad of matters set out in a Section 106 Agreement can be adequately dealt with by condition. If, instead, a condition requiring a range of details to be agreed before commencement is the preferred route, all the use of conditions will achieve is a delay in what can be complex negotiations which would take place in the context of a condition discharge, not negotiations on a Section 106 Agreement. Neither is it clear how mitigation required to address the impacts of development will be addressed. Presumably a condition will require delivery which again suggests complex negotiations post the grant of a planning permission. Finally, if the mitigation comprises payment of sums of money, a further change of law would be needed to enable such payments to be made pursuant to condition.
The Government also proposed the replacement of Community Infrastructure Levy with a new Infrastructure Levy which is explicitly described as a planning tax. A flat rate (or rates) will be set nationally and there will be a threshold below which it will not be paid. It is not clear if there will be area specific rates. The amount will be based on the final value of development which the Government believes will allow development to respond to market conditions as viability changes as development progresses. A payment at the end of the development will also allow management of cash flow. The payment will in principle apply to all changes of use too (including changes authorised by permitted development rights) and existing exemptions (eg for custom and self-build) will be retained.
It is not entirely clear how payment will be enforced. The option mooted is a restriction on occupation until payment but there are some inherent challenges here. Prevention of occupation will be problematic given the purchaser has no role in assessing viability – will payment be made on occupation of a block, phase or whole development? In addition, it should not be assumed that there is always an incentive on a developer to complete a development or development on a phase. What if the threshold for payment is never reached? What does the Government do if the development is being undertaken by a special purpose vehicle which has limited assets at the point of payment? The assessment of the payment due will also involve a full development appraisal which brings with it a whole raft of complexity and opportunity for conflict and dispute. In addition it will be possible to build, for example, affordable housing and use that cost to offset against the levy. However, calculating the market value of the on site provision will itself involve the dark arts of development appraisals. We do not anticipate that those negotiations will be anything other than contentious and complex in many instances. Government is also proposing the ability for authorities to “flip” affordable units back to market units (where the levy is greater than the amount of off-site affordable housing provision). A standardised legal agreement is proposed by Government to deal with this risk sharing – so one may question why we do not simply retain Section106 Agreements if some form of legal agreement will be required under the proposed new system in any event!
Local authorities will be given more freedom about how they use the new levy. Indeed it is implicit that they can use it for anything and there will be no clawback in favour of the developer. The approach is completely transparent – it is a development land tax in all but name. Any pretence that the money will be used to mitigate the impacts of development is in effect abandoned. It also seems clear that some areas will get more than others. We know that the Conservative Party owes a debt of gratitude to many areas which supported them in securing a Commons majority. This appears to be a relatively early manifestation of some sort of payback and appears more about central Government wanting to take control over planning tax and infrastructure spending!
The major concern that developers, landowners and promoters will have is around the valuation of land in the context of options, conditional contracts and promotion agreements and the uncertainty any changes will bring. In respect of agreements already negotiated, most will not have made sufficient allowance for the introduction of a new tax. For new agreements, given that at the point of land sale there will be no certainty of how much will be due under the proposed new tax and there could will be a greater use of overage payments and deferred consideration to allow for price adjustment once the level of tax is known. What will happen if the profit generated from a development is less than anticipated, or woes less than the tax due? Will a landowner be expected to repay money to the developer? The White Paper sells the idea that the levy will improve cash flow for developers but could it equally bankrupt some if viability is not properly accounted for? If viability is accounted for, doesn’t that remove one of the White Paper’s arguments about remove the delay caused by viability negotiations? Will land deals be completely restructured so that payments for land are themselves deferred until there is greater certainty on what the amount of the new levy might be? It is not unheard of for CIL definitions to include words like “and includes any similar or analogous tax or levy” or “and any similar or replacement development land tax” but on the whole, so much more certainty is needed to enable the market to properly respond to and address the changes in contractual negotiations.
It has been striking that, on the whole, the proposed changes have been welcomed by those in the development industry. There does appear to be a general acknowledgement that change is needed to speed up the development process. However, although many of the proposed changes are to be welcomed, our view is that a less radical approach could have the same impact by working within the existing system rather than seeking to tear it up and start from scratch. Every time even relatively modest changes are introduced, a raft of appeals and legal challenges are almost inevitable. Is there really any reason to be believe that this will be any different?”
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