Small sites’ affordable housing exemption reinstated

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In August 2015, two councils enjoyed success in the High Court following their challenge of the government’s exemption for affordable housing requirements on small development sites of ten units or less (the Exemption) and introduction of a vacant building credit (VBC). The High Court’s decision led to information detailing the policies being removed from the National Planning Practice Guidance (PPG) and developers facing considerable uncertainty regarding affordable housing obligations. However, the Court of Appeal has now found in favour of the government’s approach and backed the controversial policies.

The policies

A Ministerial Statement issued by Brandon Lewis in November 2014 introduced the Exemption and VBC, reflecting the government’s aims “to support small scale developers and help hard-working people get the home they want by reducing disproportionate burdens on developer contributions”. The new policies essentially:

  • introduced an exemption from affordable housing and tariff style contributions for sites of ten units or less, and with a maximum combined gross floor space of 1,000 square metres;
  • introduced a comparable exemption applying to all residential annexes and extensions;
  • allowed local authorities to choose to implement a lower threshold of five units or less for the exemption for designated rural areas (such as National Parks and AONBs);
  • (in areas where the lower five-unit threshold had been implemented) provided for the payment of affordable housing / tariff style contributions on sites of six to ten units as cash payments only, commuted until after completion of all units in the development; and
  • established that a financial credit should be deducted from the calculation of any affordable housing contributions on development schemes where vacant buildings were being brought back into lawful use or demolished for the re-development – although not in instances where the vacant buildings had been abandoned.

High Court challenge

However, Reading Borough Council and West Berkshire District Council subsequently decided to challenge the Exemption in the High Court. The two councils claimed that the new policy would drastically diminish the level of affordable housing provision across the country. They estimated that a reduction in affordable housing contributions of over 20% would arise, with particular impact in their areas and resultantly providing a ‘windfall’ for landowners and developers. Agreeing with their position, Mr Justice Holgate quashed the Exemption policy and found it to be “incompatible” with the statutory planning framework. In the High Court’s judgment, the government was ordered to pay the councils’ £35,000 legal costs for taking the case to court.

Following this, the Department for Communities and Local Government (DCLG) removed relevant paragraphs relating to the Exemption and VBC from its online PPG. DCLG also appealed the ruling.

Court of Appeal decision

In the Court of Appeal judgment (11 May 2016) LJ Laws and LJ Treacy – with the Master of the Rolls agreeing – have found that all of DCLG’s four grounds of appeal succeed and the appeal must be allowed. The court stated that the statutory planning context does serve to constrain the Secretary of State to a certain extent, but ultimately “his policy choices are for him…The planning legislation establishes a framework for the making of planning decisions; it does not lay down merits criteria for planning policy, or establish what the policy-maker should or should not regard as relevant to the exercise of policy-making”.

In light of the decision, Housing Minister Brandon Lewis has stated that this “restores common sense to the system” and will ensure builders developing smaller sites do not face costs that threaten viability and disincentivise development.  He noted that the “uncertainty the case created amongst house builders [had] stalled new development from coming through”.

DCLG have subsequently announced that the November 2014 Ministerial Statement still represents national policy. In turn, the relevant elements of PPG have now been reinstated and reinforce provisions that were included as last-minute amendments to the new Housing & Planning Act 2016.   Affordable housing requirements obviously remain (and have done so throughout) for large development sites. However, the ruling is welcome news for many developers and will no doubt encourage progression of a number of small residential projects that have otherwise suffered amidst the uncertainty. However, for now it must be remembered that the possibility of a further appeal by the councils to the Supreme Court exists.

For more information and advice, contact the Planning & Environment Team at Walker Morris.